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 15 of 49
- A. direct price of security
- B. repurchase price of securities
- C. purchase price of security
- D. transaction price of securityInvesting
Explanation: In a repurchase agreement, the repurchase price equals the original selling price plus the agreed repo interest.
Correct answer: repurchase price of securities- A. economic rates
- B. foreign exchange risk
- C. selling rate
- D. buying rates
Explanation: Foreign exchange risk is the possibility that exchange-rate movements will change the value of assets, liabilities, or cash flows…
Correct answer: foreign exchange risk- A. money market instruments
- B. capital market instruments
- C. counter instruments
- D. long term instrumentsEconomics
Explanation: Government securities issued to raise funds for short periods, such as Treasury bills, are money-market instruments.
Correct answer: money market instruments- A. mutual funds
- B. commercial banks and thrifts
- C. savings banks
- D. credit unions
Explanation: Depository institutions accept deposits and lend a large portion of those funds; the main categories are commercial banks and thrifts.
Correct answer: commercial banks and thrifts285. The market value size of outstanding instruments of capital markets depends on factors ____________?
- A. primary cash flows
- B. number of issued securities
- C. market prices of securities
- D. both B and CFinancial Planning & Management
Explanation: The market value of outstanding capital-market instruments is calculated from the number of securities issued and their current market…
Correct answer: both B and CFinancial Planning & Management- A. supplier monitor
- B. funds monitor
- C. delegated monitor
- D. allocation monitor
Explanation: A financial intermediary is a delegated monitor when funds suppliers appoint it to monitor borrowers on their behalf.
Correct answer: delegated monitor- A. savings risk
- B. advance risk
- C. cost risk
- D. technology riskAccounting & Auditing
Explanation: Technology risk arises when technological advancement fails to generate the expected cost savings, leaving an institution at a cost…
Correct answer: technology riskAccounting & Auditing- A. insolvency risk
- B. solvency risk
- C. balanced risk
- D. unbalanced risk
Explanation: Insolvency risk occurs when an institution lacks sufficient capital to absorb a sudden fall in the value of its assets.
Correct answer: insolvency risk- A. largest
- B. smallest
- C. never paid
- D. none of the above
Explanation: Corporate equities, or stocks, generally form the largest component of capital-market instruments because corporations issue substantial…
Correct answer: largest290. In commercial banks, the subordinate debentures and subordinate notes are considered as ___________?
- A. stated rates
- B. banks debentures
- C. banks liabilities
- D. banks deposits
Explanation: Subordinated debentures and notes represent borrowed funds that the bank must repay, so they appear as bank liabilities.
Correct answer: banks liabilities- A. activity funds
- B. mutual funds
- C. penalty funds
- D. financing fundsBanking
Explanation: Mutual funds pool money from individuals and companies, then invest it in a diversified portfolio of securities or other assets.
Correct answer: mutual funds- A. demand and supply
- B. increased maturity
- C. decreased maturity
- D. instrument availability
Explanation: Foreign-exchange rates change as demand for a currency and its supply change in the market.
Correct answer: demand and supply- A. commercial banks
- B. commercial mortgages
- C. credit mortgages
- D. credit derivativeFinance
Explanation: Commercial banks are depository institutions whose principal assets are loans and advances made to households, businesses, and…
Correct answer: commercial banks- A. variable securities
- B. convertible securities
- C. liquidity
- D. constant securities
Explanation: Liquidity is the ease and speed with which an asset can be converted into cash without a substantial loss in value.
Correct answer: liquidity- A. London bonds
- B. Eurodollar bonds
- C. central bonds
- D. decentralize bonds
Explanation: Eurodollar bonds are dollar-denominated bonds issued outside the United States, commonly through financial centres such as London and…
Correct answer: Eurodollar bonds- A. asset transformers
- B. liability transformers
- C. issuing transformers
- D. claiming transformers
Explanation: Financial institutions act as asset transformers by issuing their own claims to investors and using the funds to acquire claims issued by…
Correct answer: asset transformers- A. trading institutions
- B. activity institutions
- C. investment banks
- D. mortgage banks
Explanation: Investment banks underwrite securities, arrange their issuance, and may provide brokerage and trading services.
Correct answer: investment banks- A. asset risk
- B. trade risk
- C. market risk
- D. exchange risk
Explanation: Market risk is the possibility of loss caused by changes in market prices, including asset prices, interest rates, and exchange rates.
Correct answer: market risk- A. flow market
- B. primary markets
- C. secondary markets
- D. funding markets
Explanation: Primary markets are where a publicly traded firm issues new shares or debt instruments and receives the funds raised.
Correct answer: primary markets- A. penalty companies
- B. insurance companies
- C. events dealers
- D. protecting companies
Explanation: Insurance companies provide financial protection against specified risks such as accidents, theft, and death in exchange for premiums.
Correct answer: insurance companies