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 25 of 49
- A. general obligation bonds
- B. general obligation notes
- C. general obligation tax
- D. general obligation savingsAccounting & Auditing
Explanation: General obligation bonds are backed by the issuer’s taxing power rather than by a particular asset or revenue stream.
Correct answer: general obligation bonds482. The financial institutions having loans swapped for bonds can sell all the bonds in ___________?
- A. under-developed markets
- B. developed markets
- C. primary markets
- D. secondary markets
Explanation: Bonds that have already been issued can be resold by financial institutions in the secondary market.
Correct answer: secondary markets- A. tax equivalent rate of return
- B. local rate of return
- C. withholding tax rate
- D. general sales tax rate
Explanation: The tax-equivalent rate of return converts tax-exempt municipal-bond interest into the taxable return needed for a fair comparison.
Correct answer: tax equivalent rate of return- A. STRIP
- B. separated security
- C. inflated security
- D. coupon paid security
Explanation: A STRIP separates a Treasury security’s principal from its periodic interest payments, allowing each cash flow to be traded separately.
Correct answer: STRIP- A. local markets
- B. state markets
- C. international markets
- D. national markets
Explanation: Foreign bonds, sovereign bonds issued across borders, and Eurobonds are instruments of international markets.
Correct answer: international markets- A. interbank bonds
- B. intrabank bonds
- C. Australian bonds
- D. EurobondsBonds
Explanation: Eurobonds are issued in a country other than the country whose currency denominates the bond.
Correct answer: EurobondsBonds- A. 12.65
- B. 15.65
- C. 17.65
- D. 20.65
Explanation: The stock’s current market price is found by dividing conversion value by the conversion ratio: $9,500 ÷ 460 = approximately $20.65.
Correct answer: 20.65- A. position in industry
- B. overall financial strength
- C. issuer's profitability and liquidity
- D. all of the above
Explanation: Rating agencies assess several aspects of the issuer, including its industry position, overall financial strength, profitability and…
Correct answer: all of the above- A. lower federal rate
- B. higher federal rate
- C. higher risk
- D. lower risk
Explanation: A bond indenture specifies protective covenants, repayment terms and restrictions on the issuer.
Correct answer: lower risk- A. bull dog bonds
- B. bull cat bonds
- C. Yankee bonds
- D. samurai bonds
Explanation: A foreign bond issued in Japan is called a Samurai bond. Yankee bonds are issued in the United States, so they are the common distractor.
Correct answer: samurai bonds- A. relatively lower
- B. relatively higher
- C. quantifiable
- D. not be quantifiable
Explanation: With other conditions unchanged, a bond's premium generally declines as its maturity approaches because there is less time for its…
Correct answer: relatively lower- A. unregistered bonds
- B. indenture bonds
- C. trustee bonds
- D. registered bonds
Explanation: In a registered bond, the issuer keeps the owner's name on record and sends coupon payments directly to that registered holder.
Correct answer: registered bonds- A. avoid taxes
- B. avoid interest hike
- C. avoid high floating rate
- D. avoid portfolio issues
Explanation: Eurobonds are issued outside the jurisdiction of the currency in which they are denominated, often allowing issuers to avoid certain…
Correct answer: avoid taxes- A. currency of denomination
- B. currency of home country
- C. currency of Australia
- D. currency of local market
Explanation: Eurobonds are issued in a currency different from the borrower’s domestic currency, and their interest and principal are paid in the…
Correct answer: currency of denomination495. The type of rating which all the credit rating agencies do not consider is classified as __________?
- A. split rating
- B. sinking rating
- C. automated rating
- D. floating rating
Explanation: A split rating occurs when different credit-rating agencies assign different ratings to the same debt issue, so the agencies do not reach…
Correct answer: split rating496. The default risk is measured by large traders, managers and investors with the help of _________?
- A. sinking analysis
- B. analyzing financial ratios
- C. portfolio scenario value
- D. automated machine analysis
Explanation: Default risk is commonly assessed by examining financial ratios such as leverage, interest coverage, liquidity, and profitability.
Correct answer: analyzing financial ratios- A. secured debt issues
- B. unsecured debt issues
- C. volatile debt issues
- D. collateral debt issues
Explanation: Mortgage bonds are backed by specific real-estate assets that can serve as security for the debt, giving bondholders a claim on the…
Correct answer: secured debt issues498. The bonds that are considered as junk bonds and termed as higher yield are classified as ________?
- A. expansion debentures
- B. premium debentures
- C. subordinated debentures
- D. ordinate debentures
Explanation: Subordinated debentures rank below senior debt for repayment and therefore carry greater risk, commonly requiring a higher yield and…
Correct answer: subordinated debentures- A. trustee
- B. trust department
- C. monitoring department
- D. indenture department
Explanation: A bond trustee represents and protects bondholders by monitoring the issuer’s compliance with the bond indenture and taking action in case…
Correct answer: trustee500. In best efforts offering, the price offered by investment banks is originally set by __________?
- A. municipality
- B. insurance companies
- C. negotiable transactions
- D. global placement
Explanation: In a best-efforts offering, the investment bank acts as an agent and does not guarantee that all securities will be sold; for a municipal…
Correct answer: municipality