Free Business Finance MCQs with Answers
975 Business Finance MCQs from Management Sciences, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
Last updated
975 questions · page 12 of 49
- A. indirect certificate
- B. direct certificate
- C. negotiable certificate
- D. deposit certificate
Explanation: A bank deposit that is negotiable, carries a stated interest rate, and has a fixed maturity is a negotiable certificate of deposit.
Correct answer: negotiable certificate- A. serious damage to economy
- B. problems for investors
- C. pulling of funds
- D. soundness of institutesCurrencies & Foreign Exchange
Explanation: A financial panic can trigger widespread withdrawals, falling asset values, and disruption of credit, extending beyond individual…
Correct answer: serious damage to economy- A. money and security brokers
- B. capital brokers
- C. mortgage brokers
- D. expansionary brokers
Explanation: Financial-market intermediaries include dealers and brokers, including money brokers and securities brokers.
Correct answer: money and security brokers- A. 0.35
- B. 0.3
- C. 0.25
- D. 0.2
Explanation: In a Treasury auction, a single bidder is generally restricted from receiving more than 35% of the amount offered.
Correct answer: 0.35- A. unsecured notes
- B. debt paper
- C. term paper
- D. commercial paper
Explanation: Commercial paper consists of unsecured promissory notes issued by companies to obtain short-term financing.
Correct answer: commercial paper- A. commercial banks
- B. Swiss banks
- C. agriculture banks
- D. functional banksBanking
Explanation: A banker’s acceptance is a time draft accepted and guaranteed for payment by a commercial bank.
Correct answer: commercial banks- A. selling Swiss bills
- B. buying Swiss bills
- C. selling treasury bills
- D. buying treasury billsCurrencies & Foreign Exchange
Explanation: When the Federal Reserve sells treasury bills, buyers pay for them and funds move out of the banking system, reducing reserves and the…
Correct answer: selling treasury bills- A. 0.2
- B. 0.13
- C. 0.14
- D. 0.15
Explanation: The discount is $750, or 7.5% of the $10,000 face value. Annualising this 180-day discount yield gives 0.075 × 360/180 = 0.15, so the…
Correct answer: 0.15- A. increase in LIBOR
- B. decrease in LIBOR
- C. increase in KIBOR
- D. decrease in KIBOR
Explanation: Eurodollar demand and LIBOR are positively related because LIBOR reflects the rate at which major banks lend these deposits.
Correct answer: increase in LIBOR- A. liquid markets
- B. money markets
- C. transaction markets
- D. functional markets
Explanation: The Federal Reserve, dealers, mutual funds and the Treasury participate in the money market, where short-term debt instruments and funds…
Correct answer: money markets- A. firstly basis
- B. preferential basis
- C. federal basis
- D. last basis
Explanation: Preferential bidding gives priority to noncompetitive bids before the remaining securities are allocated among competitive bidders.
Correct answer: preferential basis- A. letter of confirmation
- B. letter of transfer
- C. letter of credits
- D. letter of buying
Explanation: An international banker’s acceptance is commonly created when a bank accepts a time draft drawn under a letter of credit.
Correct answer: letter of credits- A. increase information available to investor
- B. ensure the soundness of financial system
- C. create a sound atmosphere
- D. Both A and B
Explanation: Financial-market regulation protects investors by improving the information available to them and protects the economy by maintaining the…
Correct answer: Both A and B- A. US treasury
- B. Australian treasury
- C. Swiss treasury
- D. functional treasury
Explanation: Treasury bills are short-term government securities issued by the U.S. Treasury to raise funds for government financing needs.
Correct answer: US treasury- A. correspondent banks
- B. non-correspondent banks
- C. reciprocal transactions
- D. functional banks
Explanation: Correspondent banks maintain reciprocal accounts and banking arrangements with one another, often to facilitate international payments and…
Correct answer: correspondent banks- A. single payment basis
- B. monthly payment basis
- C. semiannual payment basis
- D. annual payment basis
Explanation: Federal funds are generally very short-term interbank loans, often overnight, that are settled as a single repayment rather than through…
Correct answer: single payment basis- A. federal basis
- B. last basis
- C. firstly basis
- D. preferential basis
Explanation: Non-competitive bidders do not specify a yield or price, so their applications receive preferential allocation at the auction-determined…
Correct answer: preferential basis- A. London intra bank offered rate
- B. London interbank offered rate
- C. Euro interbank offered rate
- D. Demand intra bank rateCompare Business Loans
Explanation: The standard name for the interest rate associated with interbank borrowing in the London market is the London Interbank Offered Rate…
Correct answer: London interbank offered rate- A. competitive bids
- B. non-competitive bids
- C. treasury bids
- D. both A and B
Explanation: Treasury-bill auctions accept both competitive bids, which state the desired yield or price, and non-competitive bids, which accept the…
Correct answer: both A and B- A. treasury trading auction
- B. treasury fund auction
- C. treasury bills auction
- D. treasury bills transferHire An Accountant
Explanation: The formal process through which treasury bills are offered and allocated to investors is called a treasury-bills auction.
Correct answer: treasury bills auction