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 14 of 49
- A. excess funds for banks
- B. deficiencies for banks
- C. organized reservation
- D. competitive reservations
Explanation: Heavy loan demand uses up a bank's available lendable funds and can create a deficiency or shortage of funds.
Correct answer: deficiencies for banks- A. 170 days
- B. 270 days
- C. 120 days
- D. 5 days
Explanation: Commercial paper in the United States traditionally has a maximum maturity of 270 days, allowing it to avoid registration as a long-term…
Correct answer: 270 days263. The liquidity status of certificate of deposit which is more negotiable is considered as __________?
- A. certified liquidity
- B. term liquidity
- C. more liquid
- D. less liquid
Explanation: A negotiable certificate of deposit can be sold in the secondary market, so greater negotiability gives it greater liquidity.
Correct answer: more liquid- A. secondary markets
- B. primary markets
- C. direct markets
- D. indirect markets
Explanation: Negotiable certificates of deposit can be resold before maturity, so they are traded in secondary markets.
Correct answer: secondary markets- A. selling treasury bills
- B. buying treasury bills
- C. selling Swiss bills
- D. buying Swiss bills
Explanation: When the Federal Reserve buys Treasury bills, it pays sellers by creating bank reserves, which increases the money supply.
Correct answer: buying treasury bills- A. bankers treasury
- B. treasury bills
- C. treasury funds
- D. secured treasury
Explanation: Treasury bills are short-term debt obligations issued by the U.S. Treasury, normally maturing within one year.
Correct answer: treasury bills- A. directly
- B. with brokers or dealers
- C. functional buyers
- D. both A and B
Explanation: Repos may be arranged directly between counterparties or through brokers and dealers. Therefore, both listed methods are possible.
Correct answer: both A and B- A. markets bid
- B. bankers bid
- C. competitive bids
- D. non-competitive bids
Explanation: A competitive bid specifies both the amount desired and the price or yield offered.
Correct answer: competitive bids- A. notes payable
- B. notes receivable
- C. commercial paper
- D. commercial notes
Explanation: Commercial paper consists of short-term, unsecured promissory notes issued mainly by financially sound corporations to meet short-term…
Correct answer: commercial paper- A. commercial paper
- B. commercial notes
- C. notes payable
- D. notes receivable
Explanation: Commercial paper is an unsecured short-term instrument commonly issued by corporations to finance working-capital requirements such as…
Correct answer: commercial paper- A. 250000
- B. 100000
- C. 150000
- D. 200000
Explanation: Retail CDs are generally nonnegotiable and are issued in denominations of $100,000 or less, unlike negotiable CDs, which commonly use…
Correct answer: 100000- A. primary instrument
- B. bearer instrument
- C. term instrument
- D. interim instrument
Explanation: Negotiable certificates of deposit are normally bearer instruments, meaning ownership passes through possession rather than registration…
Correct answer: bearer instrument- A. annual funds transaction
- B. liable funds transactions
- C. federal funds transaction
- D. functional funds transaction
Explanation: Federal funds transactions occur when banks lend or borrow excess reserve balances, usually overnight, among themselves.
Correct answer: federal funds transaction- A. mutual certificate of deposit
- B. euro dollar certificate of deposit
- C. expansionary certificate of deposit
- D. euro dollar contraction deposit
Explanation: Eurodollar certificates of deposit are dollar-denominated deposits issued by banks outside the United States.
Correct answer: euro dollar certificate of deposit- A. banker acceptance
- B. secured acceptance
- C. unsecured acceptance
- D. economic acceptanceAccounting & Auditing
Explanation: A banker’s acceptance is a time draft accepted and guaranteed by a bank, making it payable to the seller or beneficiary in a trade…
Correct answer: banker acceptance- A. $40 million
- B. $10 million
- C. $20 million
- D. $30 million
Explanation: Longer-term repurchase agreements, or term repos, commonly involve denominations of about $10 million.
Correct answer: $10 million- A. premium basis
- B. discount basis
- C. competitive basis
- D. federal basis
Explanation: Treasury bills do not pay periodic interest; instead, they are sold below face value and redeemed at face value.
Correct answer: discount basis- A. organized secondary markets
- B. organized primary market
- C. organized interest markets
- D. organized money marketsEconomics
Explanation: Commercial paper is generally difficult to resell quickly because it lacks a well-organized secondary market.
Correct answer: organized secondary markets- A. income in income statement
- B. expense on income statement
- C. liability on balance sheet
- D. assets on balance sheet
Explanation: Federal funds are borrowed reserves, so the borrowing institution records an obligation to repay them.
Correct answer: liability on balance sheet- A. functional time line
- B. contract timing
- C. contraction period
- D. expansionary periods
Explanation: During a contraction, loan demand and economic activity generally weaken, leaving banks with comparatively excess funds.
Correct answer: contraction period