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 34 of 49
- A. Foreign trade
- B. Foreign trade deficits
- C. Foreign trade surplus
- D. Trade surplus
Explanation: When a country imports more than it exports, it has a trade deficit because payments for imports exceed receipts from exports.
Correct answer: Foreign trade deficits- A. Deposit cheque
- B. Distribution cost
- C. Short term treasury bills
- D. Short term capital cost
Explanation: Non-financial corporations commonly hold short-term Treasury bills as liquid financial securities for temporary investment and cash…
Correct answer: Short term treasury bills- A. Financial instruments
- B. Financial asset markets
- C. Physical asset markets
- D. Easy markets
Explanation: Financial asset markets trade claims such as bonds, mortgages, notes and stocks, whereas physical asset markets trade tangible goods and…
Correct answer: Financial asset markets- A. Dollar bonds
- B. Euro deposits
- C. Eurodollar market deposits
- D. Euro bonds
Explanation: Eurodollar market deposits are U.S.-dollar deposits held in banks located outside the United States, regardless of the bank’s home…
Correct answer: Eurodollar market deposits- A. Market price
- B. Intrinsic price
- C. Extrinsic price
- D. Unstable price
Explanation: Intrinsic price or value is estimated from relevant information about a stock’s expected earnings, risk and cash flows, while market price…
Correct answer: Intrinsic price- A. Rate of return
- B. Rate of exchange
- C. Rate of intrinsic stock
- D. Rate of extrinsic stock
Explanation: An investor’s risk tolerance influences the return required for accepting risk: more risk-averse investors generally demand a higher rate…
Correct answer: Rate of return- A. Accrued liabilities
- B. Current liabilities
- C. Accumulated liabilities
- D. Non-current liabilities
Explanation: Accounts payable, accrued expenses and short-term notes payable are obligations normally due within the operating cycle or one year, so…
Correct answer: Current liabilities- A. Debt liabilities
- B. Preferred stock
- C. Hybrid stock
- D. Common liabilities
Explanation: Preferred stock has priority over common stock in receiving assets during liquidation, but it ranks below debt holders.
Correct answer: Preferred stock- A. Market values
- B. Book values
- C. Appreciated values
- D. Depreciated values
Explanation: Market value is the value established by buyers and sellers in the marketplace at a given time.
Correct answer: Market values- A. Accumulated depreciation
- B. Depleted depreciation
- C. Accumulated appreciation
- D. Accumulated appreciation schedule
Explanation: Accumulated depreciation is the total depreciation recorded against a long-term depreciable asset from the date it was placed in service.
Correct answer: Accumulated depreciation- A. Increased cash
- B. Decreased cash
- C. Increased liabilities
- D. Increased equity
Explanation: Purchasing short-term investments and fixed assets uses cash, so both transactions are investing cash outflows and reduce the company’s…
Correct answer: Decreased cash- A. Semiannual discounting
- B. Annual discounting
- C. Annual compounding
- D. Semiannual compounding
Explanation: When interest is calculated twice a year, the annual rate is applied through two compounding periods, which is called semiannual…
Correct answer: Semiannual compounding673. rate which is divided by compounding periods to calculate periodic rate must be___________________?
- A. Annuity return
- B. Deferred annuity return
- C. Nominal rate
- D. Semiannual discount rate
Explanation: The nominal rate is the quoted annual interest rate that is divided by the number of compounding periods to obtain the periodic rate.
Correct answer: Nominal rate- A. Extended life
- B. Perpetuity
- C. Deferred perpetuity
- D. Due perpetuity
Explanation: A perpetuity is an annuity whose payments continue indefinitely, effectively giving it an unlimited life.
Correct answer: Perpetuity- A. Hybrid stock
- B. Common liabilities
- C. Debt liabilities
- D. Preferred stock
Explanation: Preferred stock is a hybrid security because it has equity ownership features but usually provides fixed dividends similar to the fixed…
Correct answer: Preferred stock- A. Increases liabilities
- B. Increases equity
- C. Increases cash
- D. Decreases cash
Explanation: When a company issues bonds or stock for financing, it receives the proceeds in cash.
Correct answer: Increases cash- A. Compounding
- B. Discounting
- C. Money value
- D. Stock valueCompare Business Loans
Explanation: Discounting is the process of converting a future cash flow into its present value by removing the effect of interest over time.
Correct answer: Discounting- A. Number of payment periods
- B. Number of investment
- C. Number of installments
- D. Number of premium received
Explanation: In time-value-of-money formulas, N denotes the total number of compounding or payment periods.
Correct answer: Number of payment periods- A. Future value of perpetuity
- B. Present value of perpetuity
- C. Due perpetuity
- D. Deferred perpetuityHire An Accountant
Explanation: For a level perpetuity, the present value is found by dividing the constant payment by the interest rate, or PV = PMT ÷ r.
Correct answer: Present value of perpetuity- A. Not shown on timeline
- B. Shown on timeline
- C. Multiplied on timeline
- D. Divided on timeline
Explanation: The periodic rate is placed on the timeline for each compounding or payment period, such as a monthly rate on a monthly timeline.
Correct answer: Shown on timeline