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 17 of 49
- A. past terms
- B. future terms
- C. long term
- D. short term
Explanation: Money markets transfer funds for short-term needs, normally involving maturities of one year or less.
Correct answer: short term- A. derivative security markets
- B. trading markets
- C. classified markets
- D. non-trading markets
Explanation: Derivative security markets are specifically markets for contracts whose value is derived from an underlying asset, such as futures…
Correct answer: derivative security markets- A. trading funds
- B. penalty funds
- C. pension funds
- D. global funds
Explanation: Pension funds collect savings for retirement and commonly receive tax advantages or exemptions to encourage long-term retirement saving.
Correct answer: pension funds- A. financial institutions
- B. payable institutions
- C. non-financial institutions
- D. derivative institutions
Explanation: Financial institutions channel funds from savers to borrowers and perform related services such as lending, investing, and payment…
Correct answer: financial institutions- A. diversification
- B. selling ability
- C. reduction ability
- D. director ability
Explanation: Diversification reduces unsystematic risk by spreading investment across many securities, so poor performance by one security has less…
Correct answer: diversification- A. secondary markets
- B. central market
- C. traded market
- D. agents market
Explanation: A secondary market allows previously issued securities to be traded among investors, often through an organised and centralised…
Correct answer: secondary markets- A. primary maturity
- B. capital maturity
- C. short term maturity
- D. long term maturity
Explanation: Long-term debt instruments generally show greater price fluctuations because their values are more sensitive to changes in interest rates…
Correct answer: long term maturity- A. non-financial institutions
- B. derivative institutions
- C. financial institutions
- D. payable institutions
Explanation: Saving banks, insurance companies, mutual funds, and commercial banks all collect, manage, or transfer funds within the financial system…
Correct answer: financial institutions- A. past counter market
- B. future counter market
- C. over the counter markets
- D. capital counter market
Explanation: An over-the-counter market has no single physical exchange location; transactions are arranged electronically or by telephone through…
Correct answer: over the counter markets- A. flow market
- B. primary markets
- C. secondary markets
- D. funding markets
Explanation: Primary markets are where corporations issue new shares or bonds and receive fresh funds from investors.
Correct answer: primary markets- A. government and corporations
- B. liquid corporations
- C. instrumental corporations
- D. manufacturing corporationsHire An Accountant
Explanation: Governments and corporations are the main issuers, or suppliers, of securities traded in capital markets.
Correct answer: government and corporations- A. selling intermediation
- B. maturity intermediation
- C. direct intermediation
- D. indirect intermediationGet Study Guides
Explanation: Maturity intermediation occurs when a financial institution accepts liabilities with one maturity pattern and invests in assets with…
Correct answer: maturity intermediation- A. financial markets
- B. non-financial markets
- C. funds market
- D. flow market
Explanation: Financial markets are organized mechanisms through which funds move between savers and users through instruments such as shares and bonds.
Correct answer: financial markets- A. business allocation
- B. sector allocation
- C. economic allocation
- D. credit allocationTry Operations Software
Explanation: Credit allocation refers to directing financing toward particular sectors, such as real estate, agriculture, or industry.
Correct answer: credit allocationTry Operations Software- A. savings in foreign countries
- B. investment opportunities
- C. accessible information
- D. all of the above
Explanation: Foreign financial markets expand when countries offer savings, attractive investment opportunities, and accessible information for…
Correct answer: all of the above- A. shorter term markets
- B. capital markets
- C. counter markets
- D. long-term marketsTrack Market Trends
Explanation: Capital markets deal mainly in long-term financing, generally with maturities exceeding one year, including bonds and equity shares.
Correct answer: capital markets- A. increased liquidity
- B. decreased liquidity
- C. money flow
- D. large funds
Explanation: Newly issued shares need liquidity so investors can sell them readily after purchase, and this property increases their attractiveness in…
Correct answer: increased liquidity- A. direct transfer
- B. indirect transfer
- C. global transfer
- D. pension transferTake Economics Courses
Explanation: A direct transfer occurs when securities move from the issuing company to investors without a financial intermediary arranging the…
Correct answer: direct transfer- A. traded offering
- B. public markets
- C. issuance offering
- D. initial public offering
Explanation: An initial public offering, or IPO, is the first sale of a company's shares to the public through a stock exchange.
Correct answer: initial public offering340. For a foreign exchange of specific currency, the non-hedged position is classified as _____________?
- A. open position
- B. close position
- C. currency long position
- D. currency short position
Explanation: An unhedged foreign-exchange position is called an open position because it remains exposed to changes in exchange rates.
Correct answer: open position