Free Business Finance MCQs with Answers

• A. Relieves the firms responsibility towards society
• B. Does not relieve the firm's responsibility towards society
• C. Partially relives the firm's responsibility towards society
• D. None of ThemHire Financial Advisors

Explanation: Maximizing shareholder wealth does not cancel a firm's legal, ethical, or social responsibilities; sustainable wealth creation generally…

• A. Workers
• B. Subordinates
• C. Shareholders
• D. Employees

Explanation: Agency theory focuses on the conflict between managers who control the firm and shareholders who own it.

• A. Particular market
• B. Particular firm
• C. Particular creditor
• D. Particular debtorGet Executive Coaching

Explanation: The stock price reflects investors’ collective assessment of the value and future prospects of the particular firm issuing the shares.

• A. Liabilities
• B. Debts
• C. Loans
• D. Assets

Explanation: Financial management arranges funds to acquire and support the firm’s assets, such as equipment, inventory, and receivables.

• A. Managerial activities
• B. Year-to-Year activities
• C. Day-to-Day activities
• D. Financial activitiesHire An Accountant

Explanation: The board establishes broad policy and provides oversight, while the CEO and senior executives implement those policies through the…

• A. Management System
• B. Strategic System
• C. Corporate Governance
• D. Internal System

Explanation: Corporate governance is the system of rules, relationships, and processes through which a company is directed and controlled.

• A. Shareholders and board of director
• B. Board of directors and senior management
• C. Shareholders and senior management
• D. Shareholders, board of directors and senior managementTry Prep Courses

Explanation: Corporate governance addresses the interconnected relationships among shareholders, the board of directors, and senior management.

• A. Stakeholders
• B. Directors
• C. Chief executives
• D. SubordinatesCompare Business Loans

Explanation: Stakeholders are all individuals or groups with an interest in, or affected by, the company’s performance, including employees, creditors…

• A. Stakeholders
• B. Creditors and customs
• C. Employees and suppliers
• D. All of ThemForm An LLC

Explanation: Creditors, customers, employees, and suppliers are all stakeholders because each can affect or be affected by the company.

• A. Agent
• B. Servant
• C. Subordinate
• D. Assistant

Explanation: An agent is authorized to act on behalf of a principal, who grants the authority.

• A. Before Tax
• B. After Tax
• C. Both A and B
• D. None of ThemFinancial Planning & Management

Explanation: Profit maximization normally means maximizing earnings after tax, because profit is the amount remaining after all expenses, including…

• A. Earning per share ratio
• B. Proposed dividend ratio
• C. Dividend payout ratio
• D. Expected dividend ratio

Explanation: The dividend payout ratio shows what portion of earnings is distributed as dividends: dividends divided by earnings, or DPS divided by…

• A. Value creation
• B. Value addition
• C. Value proposition
• D. Value deletionAccounting & Auditing

Explanation: The investment decision determines which assets and projects the firm undertakes, so it directly affects the creation of firm value.

• A. Acquisition of assets
• B. Financing of assets
• C. Management of assets
• D. All of them

Explanation: Financial management covers the complete cycle of acquiring assets, deciding how to finance them, and managing their use.

• A. Financial management
• B. Profit maximization
• C. Agency theory
• D. Social responsibilityFinance

Explanation: Financial management is defined as the acquisition, financing, and management of assets in pursuit of an overall goal, usually shareholder…

• A. spot contract
• B. forward contract
• C. future contracts
• D. present contractFinancial Planning & Management

Explanation: A spot contract involves the immediate exchange of the asset and payment. Forward and futures contracts arrange delivery for a later date.

• A. stock price ⁄ exercise price
• B. stock price - exercise price
• C. stock price + exercise price
• D. stock price x exercise price

Explanation: A call option has intrinsic value when the stock price exceeds the exercise price, calculated as stock price minus exercise price.

• A. weak form of market efficiency
• B. strong form of market efficiency
• C. semi-strong form market efficiency
• D. expensive form market efficiencyAccounting & Auditing

Explanation: Weak-form efficiency says current stock prices already reflect historical prices and trading-volume information, so technical analysis…

• A. directors voting
• B. half voting
• C. straight voting
• D. owners voting

Explanation: Under straight voting, a shareholder votes separately for each director, allowing a majority shareholder to elect the entire board.

• A. purchase of forward contracts
• B. purchase of future contract
• C. sale of futures contract
• D. sales of forward contracts

Explanation: A long futures position means agreeing to buy the underlying asset at the contract's specified future date and price.