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 6 of 49
- A. 260
- B. 560
- C. 40
- D. 300
Explanation: For a call option, intrinsic value is the amount by which the stock price exceeds the exercise price: $300 − $260 = $40.
Correct answer: 40- A. counted liability
- B. invested liability
- C. unlimited liability
- D. limited liability
Explanation: Limited liability restricts shareholders' maximum loss to the amount they invested in the company.
Correct answer: limited liability- A. cumulative voting
- B. non-cumulative voting
- C. dual class voting
- D. limited voting
Explanation: Cumulative voting is used when shareholders vote in an election involving the full set of board positions, with votes capable of being…
Correct answer: cumulative voting- A. sub class voter
- B. preferred stockholder
- C. common stock holder
- D. cumulative voter
Explanation: Preferred stock commonly carries priority dividends and liquidation claims but no ordinary voting rights.
Correct answer: preferred stockholder- A. traders gathered auction
- B. close outcry auction
- C. specified auction
- D. open outcry auction
Explanation: In an open outcry auction, traders communicate bids and offers vocally on the trading floor.
Correct answer: open outcry auction- A. preferred stock
- B. voted stock
- C. cumulative stock
- D. fundamental stockBusiness Finance
Explanation: Preferred stock combines features of common stock and bonds: it usually pays a fixed dividend like a bond, while representing ownership…
Correct answer: preferred stock- A. weak form of market efficiency
- B. strong form of market efficiency
- C. semi-strong form market efficiency
- D. expensive form market efficiency
Explanation: Strong-form efficiency holds that stock prices reflect both publicly available and private information.
Correct answer: strong form of market efficiency- A. non participating preferred stock
- B. participating preferred stock
- C. non-cumulative preferred stock
- D. cumulative preferred stockAccounting & Auditing
Explanation: Cumulative preferred stock carries unpaid dividends forward when they are missed, and those arrears must be settled before common-stock…
Correct answer: cumulative preferred stockAccounting & Auditing- A. red herring prospectus
- B. white herring prospectus
- C. preemptive prospectus
- D. securitized prospectus
Explanation: A red herring prospectus is a preliminary prospectus circulated before securities receive final registration or approval, so it may still…
Correct answer: red herring prospectus- A. currency swaps
- B. notion swaps
- C. floating swaps
- D. fixed swaps
Explanation: Currency swaps are generally long-term agreements in which parties exchange cash flows denominated in different currencies.
Correct answer: currency swaps- A. return
- B. equity
- C. spot rate contracts
- D. forward rate contractsStocks & Bonds
Explanation: An investor’s total return from stock consists of capital gains plus dividends or other periodic income.
Correct answer: return- A. shares offering
- B. price offering
- C. rights offering
- D. stock offering
Explanation: A rights offering gives existing shareholders the right to buy additional shares, usually at a price below the current market price.
Correct answer: rights offering- A. characteristics of fundamental stock
- B. characteristics of claimed stock
- C. characteristics of common stock
- D. characteristics of preferred stock
Explanation: Common stockholders have residual claims after creditors and preferred shareholders, limited liability, and dividends that are not…
Correct answer: characteristics of common stock- A. initial margin
- B. futures margin
- C. conditional margin
- D. non-conditional margin
Explanation: Initial margin is the deposit posted when a futures position is opened to guarantee contractual performance.
Correct answer: initial margin- A. gain on spot contract
- B. loss on spot contract
- C. gain on capital
- D. loss on capitalAccounting & Auditing
Explanation: Total stock return consists of dividend income plus capital gain, so subtracting dividends from the return leaves the gain on capital.
Correct answer: gain on capital- A. spot price of asset
- B. exercise price and exercise date of option
- C. price volatility
- D. all of the above
Explanation: Black-Scholes uses the asset’s spot price, exercise price, time to expiration, and price volatility, along with interest rate assumptions.
Correct answer: all of the above- A. floor
- B. cap
- C. swaps multiplier
- D. notion multiplier
Explanation: A cap is an interest-rate call arrangement made up of multiple caplets, each applying on a different reset date.
Correct answer: cap- A. low potential of losses
- B. high potential of losses
- C. high potential of profit
- D. low potential of profit
Explanation: A call option gives the right to buy at a fixed exercise price, so a rise in the stock price increases its potential payoff.
Correct answer: high potential of profit- A. originating house
- B. non originating house
- C. investment house
- D. non securitize houseCommodities & Futures Trading
Explanation: The originating house is the lead institution that initiates and negotiates the issue with the issuing bank for the underwriting…
Correct answer: originating house- A. semi-strong form market efficiency
- B. expensive form market efficiency
- C. weak form of market efficiency
- D. strong form of market efficiency
Explanation: Semi-strong efficiency means share prices quickly incorporate all publicly available information.
Correct answer: semi-strong form market efficiency