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.
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975 questions · page 13 of 49
241. The funds transferred usually for a day between financial institutions are classified as __________?
- A. federal funds
- B. banker's funds
- C. debt funds
- D. secured fundsTry Prep Courses
Explanation: Federal funds are generally short-term, often overnight, funds transferred between financial institutions, especially through balances…
Correct answer: federal funds- A. banks
- B. financial market
- C. stock exchange
- D. business corporationsCompare Credit Cards
Explanation: Negotiable certificates of deposit are issued mainly by banks as time deposits that can be traded before maturity.
Correct answer: banks- A. liability on balance sheet
- B. assets on balance sheet
- C. income in income statement
- D. expense on income statement
Explanation: An institution lending federal funds has a claim against the borrowing institution, so the loan is recorded as an asset on its balance…
Correct answer: assets on balance sheet- A. treasury notes
- B. repurchase agreements
- C. commercial payable notes
- D. commercial receivable notes
Explanation: The Federal Reserve uses repurchase agreements to influence short-term liquidity, money supply, and interest rates by temporarily buying…
Correct answer: repurchase agreements- A. repurchasing commercial notes
- B. repurchase bills
- C. purchase agreement
- D. reverse repurchase agreement
Explanation: In a reverse repurchase agreement, one party buys a security and agrees to resell it to the other party at a specified future date.
Correct answer: reverse repurchase agreement- A. assets and liability
- B. cost and marketing
- C. supply and demand
- D. income and expense
Explanation: The federal funds rate is determined by the interaction of banks’ willingness to lend funds and other banks’ need to borrow them.
Correct answer: supply and demand- A. payables rating
- B. commercial rating
- C. poor credit rating
- D. better credit ratingAccounting & Auditing
Explanation: Commercial paper is normally issued by financially sound companies, so it can attract investors at a lower interest rate.
Correct answer: better credit ratingAccounting & Auditing- A. highest price
- B. lowest price
- C. zero price
- D. peak price
Explanation: In a uniform-price auction, the lowest price among the accepted bids becomes the price paid by all successful bidders.
Correct answer: lowest price- A. bank and COD buyer
- B. bank and stock market
- C. stock market and COD buyer
- D. indirect negotiations of buyers
Explanation: A certificate of deposit is issued by a bank to a buyer or depositor, and its rate is negotiated between these two parties.
Correct answer: bank and COD buyer- A. extensive secondary markets
- B. extensive primary markets
- C. premium money markets
- D. discounted money marketsEconomics
Explanation: Treasury bills can be quickly converted into cash because they are actively traded after issuance.
Correct answer: extensive secondary markets251. The markets which reallocate liquid funds in relatively fixed amounts are classified as ___________?
- A. capital markets
- B. debt markets
- C. secondary markets
- D. primary markets
Explanation: Secondary markets trade previously issued securities and therefore reallocate funds among investors while providing liquidity.
Correct answer: secondary markets- A. term instrument
- B. interim instrument
- C. primary instrument
- D. bearer instrument
Explanation: A bearer instrument belongs to whoever physically holds it, so the holder is entitled to receive its interest and principal.
Correct answer: bearer instrument- A. 250 days a year
- B. 150 days a year
- C. 365 day a year
- D. 360 day a year
Explanation: Certificates of deposit are money-market instruments, and their interest rates are conventionally quoted on a 360-day year.
Correct answer: 360 day a year- A. brokerage market
- B. contraction market
- C. expansion market
- D. Eurodollar market
Explanation: Eurodollars are US-dollar deposits held outside the United States, and the market in which they are borrowed and lent is called the…
Correct answer: Eurodollar market- A. security liability
- B. security buyer
- C. security seller
- D. security function
Explanation: A reverse repo is named from the security buyer's viewpoint: the buyer purchases the security and agrees to sell it back later.
Correct answer: security buyer- A. federal acceptance bid
- B. bankers' acceptance bid
- C. non-competitive bids
- D. competitive bids
Explanation: A non-competitive bid states the quantity of Treasury bills the bidder wants and accepts the yield determined at auction.
Correct answer: non-competitive bids- A. issuance to maturity
- B. within 1 to 2 days
- C. within 3 to 4 days
- D. within 4 to 5 days
Explanation: Commercial paper is normally a short-term investment held by investors from its issuance until its maturity date.
Correct answer: issuance to maturity- A. London intra bank offered rate
- B. London interbank offered rate
- C. euro interbank offered rate
- D. demand intra bank rate
Explanation: LIBOR stands for London Interbank Offered Rate and was widely used as a benchmark for short-term commercial and industrial lending.
Correct answer: London interbank offered rate- A. security seller
- B. security buyer
- C. security function
- D. security function
Explanation: A repo is described from the security seller's viewpoint: the seller receives cash now and promises to repurchase the security later.
Correct answer: security seller260. The repurchase agreements having maturity of one week or lesser have denominations of ____________?
- A. $10 million or more
- B. $20 million or more
- C. $25 million or more
- D. $15 million or more
Explanation: Short-term repurchase agreements with maturities of one week or less are commonly issued in large denominations of $25 million or more.
Correct answer: $25 million or more