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 9 of 49
- A. bond price > treasury price
- B. treasury price exercise price
- C. stock price < exercise price
- D. None of These
Explanation: A call option is out of the money when the stock price is below the exercise price, since exercising would require buying at a price…
Correct answer: stock price < exercise price- A. number of cumulative class
- B. number of votes assigned
- C. number of elective candidates
- D. number of common stock shares
Explanation: Under cumulative voting, each shareholder’s shares are multiplied by the number of directors to be elected, giving the shareholder that…
Correct answer: number of votes assigned- A. spot contract
- B. forward contract
- C. future contracts
- D. present contract
Explanation: A futures contract involves a standardized future exchange and is marked to market through daily settlement of gains and losses.
Correct answer: future contracts- A. market future prices
- B. market to market prices
- C. market to invest prices
- D. present market pricesHire An Accountant
Explanation: Mark-to-market prices are adjusted daily to reflect current market conditions and are used for daily settlement of futures positions.
Correct answer: market to market prices- A. 375
- B. 100
- C. 475
- D. 850
Explanation: An option premium equals intrinsic value plus time value, so intrinsic value is $475 minus $375, or $100.
Correct answer: 100- A. Gross proceeds
- B. cumulative proceeds
- C. non-cumulative proceeds
- D. net proceeds
Explanation: The underwriter's spread is the compensation deducted from the amount raised, so gross proceeds minus the spread gives net proceeds.
Correct answer: net proceeds- A. spot value of option
- B. time value of US treasury
- C. time value of option
- D. time value of bondCompare Credit Cards
Explanation: An option premium consists of intrinsic value and time value, so time value is the premium minus intrinsic value.
Correct answer: time value of option- A. Australian option
- B. American option
- C. European option
- D. Canadian option
Explanation: An American option may be exercised at any time up to and including its expiration date.
Correct answer: American option169. The underwriter spread of stock is added to net proceeds to calculate the value of ___________?
- A. over writer spread
- B. Gross proceeds
- C. participation proceeds
- D. non participation proceedsCompare Futures Brokers
Explanation: Underwriting spread is deducted from gross proceeds to obtain net proceeds, so adding it back to net proceeds reconstructs gross proceeds.
Correct answer: Gross proceeds170. The position which occurs because of selling floor and buying cap is classified as ___________?
- A. floating collar
- B. fixed collar
- C. currency collar
- D. collar
Explanation: A collar combines a cap and a floor to limit exposure to changing interest rates; selling a floor and buying a cap is a standard borrower…
Correct answer: collar- A. professional traders
- B. non-investment traders
- C. position traders
- D. future market traders
Explanation: Position traders take futures-market positions based on their expectations about future price movements in the underlying asset.
Correct answer: position traders- A. 0.0265
- B. 0.035
- C. 0.013
- D. 0.043
Explanation: When total return equals dividend return plus capital gain, the capital gain is 15% − 11.5% = 3.5%, expressed as 0.035.
Correct answer: 0.035- A. liquidity will be higher
- B. loss will be higher
- C. profit will be lower
- D. profit will be higher
Explanation: A put option becomes more valuable as the underlying asset's price falls because it gives the buyer the right to sell at the higher…
Correct answer: profit will be higher- A. non-cumulative preferred stock
- B. cumulative preferred stock
- C. non participating preferred stock
- D. participating preferred stock
Explanation: Participating preferred stock can receive dividends above its stated or promised rate when extra distributable earnings are available.
Correct answer: participating preferred stock- A. call option
- B. put option
- C. European option
- D. Australian option
Explanation: A put option gives its buyer the right, but not the obligation, to sell the underlying asset at a specified exercise price.
Correct answer: put option- A. news efficiency
- B. adjusted efficiency
- C. expected efficiency
- D. market efficiency
Explanation: Market efficiency concerns how quickly and accurately security prices incorporate new information, including unexpected interest-rate…
Correct answer: market efficiency- A. extrinsic value of European option
- B. intrinsic value of option
- C. extrinsic value of option
- D. intrinsic value of European option
Explanation: Intrinsic value is the amount an option is immediately in the money, based on the relationship between the underlying asset price and the…
Correct answer: intrinsic value of option- A. secondary market values
- B. current market values
- C. past market values
- D. primary market values
Explanation: Multiplying a company's shares outstanding by its current stock price gives its current market value, also called market capitalization.
Correct answer: current market values- A. value weighted index
- B. herring weighted index
- C. primary market index
- D. stock market index
Explanation: A value-weighted index compares the total current market value of its constituent stocks with their total value on a base date.
Correct answer: value weighted index- A. trading post
- B. issuance post
- C. silence post
- D. sellers post
Explanation: A trading post is the designated location on an exchange where securities transactions are conducted.
Correct answer: trading post