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 7 of 49
- A. non-participating preferred stock
- B. participating preferred stock
- C. non-cumulative preferred stock
- D. cumulative preferred stock
Explanation: Non-cumulative preferred stock does not carry unpaid dividends forward as arrears when a dividend is omitted.
Correct answer: non-cumulative preferred stock- A. common stock
- B. preferred stock
- C. quoted stock
- D. both A and B
Explanation: Both common and preferred shares may be listed and traded on exchange markets, subject to the exchange’s listing requirements.
Correct answer: both A and B- A. 125
- B. 135
- C. 280
- D. 70
Explanation: An option’s time value is the amount paid above its intrinsic value, so it is calculated as $350 minus $280, or $70.
Correct answer: 70- A. notion buyer
- B. notion seller
- C. swap buyer
- D. swap sellerHire An Accountant
Explanation: The swap buyer is conventionally the party that pays the fixed interest rate and receives the floating rate.
Correct answer: swap buyer- A. non-investment traders
- B. professional traders
- C. commercial traders
- D. investment traders
Explanation: Professional traders buy and sell securities for their own accounts, unlike brokers who execute trades on behalf of clients.
Correct answer: professional traders- A. primary markets
- B. secondary markets
- C. Gross markets
- D. proceeds marketsGet Study Guides
Explanation: Primary markets are where corporations issue new securities directly to investors to raise funds.
Correct answer: primary markets- A. herring indexes
- B. group indexes
- C. John indexes
- D. Dow Indexes
Explanation: A Dow index is price-weighted, meaning stock prices are combined and divided by an adjusted divisor.
Correct answer: Dow Indexes- A. non-participating spread
- B. participating spread
- C. under writer spread
- D. over writer spread
Explanation: The underwriter’s spread is the difference between the price paid to the issuing company, or net proceeds, and the price at which the…
Correct answer: under writer spread- A. swaps
- B. interchange
- C. exchange
- D. index
Explanation: A swap is a derivative agreement in which two parties exchange specified future cash flows based on an underlying rate, currency, or other…
Correct answer: swaps- A. non-cumulative preferred stock
- B. cumulative preferred stock
- C. non-participating preferred stock
- D. participating preferred stockTrack Stocks Bonds
Explanation: Non-participating preferred stock pays its stated dividend and does not share in additional profits when the company earns more.
Correct answer: non-participating preferred stock- A. option
- B. contract
- C. obligatory contract
- D. non-obligatory contract
Explanation: An option gives its holder the right to buy or sell an asset at a specified price or time, without imposing an obligation to act.
Correct answer: option- A. return backed security
- B. mortgage backed security
- C. cash flow backed security
- D. interest backed securityAccounting & Auditing
Explanation: A mortgage-backed security derives its value and cash flows from an underlying pool of mortgages, so it is commonly treated as a…
Correct answer: mortgage backed security- A. red herring order
- B. limit order
- C. unlimited order
- D. assets order
Explanation: A limit order instructs the broker to buy or sell only at a stated price or a more favourable one.
Correct answer: limit order- A. market index of an option
- B. depreciated value of option
- C. appreciated value of option
- D. price of an optionCommodities & Futures Trading
Explanation: An option’s price, also called its premium, consists of intrinsic value plus time value.
Correct answer: price of an optionCommodities & Futures Trading- A. common stock
- B. fundamental stock
- C. corporate stock
- D. claimed stockInvesting
Explanation: Common stock represents the basic ownership claim in a corporation and usually carries voting rights and a residual claim on profits.
Correct answer: common stock- A. European option
- B. Canadian option
- C. Australian option
- D. American option
Explanation: A European option may be exercised only on its expiration date. An American option can be exercised at any time up to and including…
Correct answer: European option- A. 0.18
- B. 0.27
- C. 0.25
- D. 0.09
Explanation: Total stock return equals capital gain plus dividend yield, so the dividend return is 18% minus 9%, or 9%. The decimal form is 0.09.
Correct answer: 0.09- A. trading house
- B. guarantee house
- C. clearing house
- D. professional house
Explanation: A clearing house stands between exchange traders and guarantees that buying and selling obligations are properly settled.
Correct answer: clearing house- A. 41000
- B. 7000
- C. 17000
- D. 24000
Explanation: Gross proceeds equal net proceeds plus the underwriter’s spread, which is 24,000 + 17,000 = 41,000 dollars.
Correct answer: 41000- A. non-offered rights
- B. preemptive rights
- C. existing rights
- D. securitize rights
Explanation: Preemptive rights allow existing shareholders to purchase newly issued shares before they are offered to outsiders.
Correct answer: preemptive rights