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Categories / Accounting / Finance / Finance - Part 7

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Finance - Part 7

Question 1 of 25 Hints left: 3

Q1

The efficient market hypothesis (EMH) suggests that:

A Stock prices are random
B Stock prices reflect all available information
C Insider trading is always profitable
D Investors can consistently outperform the market

Q2

What is the main difference between preferred stock and common stock?

A Preferred stockholders are last to be paid, common stockholders are first
B Preferred stock pays fixed dividends, common stock dividends vary
C Preferred stock has voting rights, common stock does not
D Preferred stockholders have more ownership control

Q3

What is 'return on assets' (ROA)?

A The interest paid on company debt
B The dividends paid to shareholders
C The percentage of total assets invested in the stock market
D The net income returned as a percentage of total assets

Q4

The term 'diversification' in investment refers to:

A Investing only in high-risk assets
B Investing in a single asset class
C Spreading investments across different assets
D Concentrating investments in one sector

Q5

What is the purpose of the 'capital asset pricing model' (CAPM)?

A To estimate the return of an asset based on its risk
B To calculate the future value of an investment
C To determine the best time to sell an asset
D To calculate the market value of a stock

Q6

What does 'yield to maturity' (YTM) refer to?

A The total return expected on a bond if held until it matures
B The coupon rate of a bond
C The interest rate of a bond
D The difference between purchase price and face value

Q7

Which of the following is an example of an indirect tax?

A VAT
B Property tax
C Corporate tax
D Income tax

Q8

What is 'quantitative easing'?

A The sale of government bonds to reduce money supply
B The process of increasing interest rates to control inflation
C A monetary policy where a central bank buys financial assets to increase money supply and lower interest rates
D A strategy to reduce government debt through higher taxes

Q9

What is 'yield curve'?

A A measure of stock price volatility
B The rate of return on equity investments
C A graph showing the relationship between interest rates and the time to maturity of debt securities
D The relationship between inflation and unemployment rates

Q10

What is 'liquidity risk'?

A The risk of losing money in a volatile market
B The risk of an investment defaulting
C The risk of not being able to sell an asset quickly without a loss
D The risk of changes in interest rates

Q11

What is a 'share buyback'?

A A company distributing dividends
B A company purchasing its own shares from the market
C A company issuing new shares
D A company merging with another company

Q12

What is the 'quick ratio' used to measure?

A The liquidity of a company
B The profitability of a company
C The debt levels of a company
D The growth rate of a company

Q13

Which of the following is considered a source of long-term finance?

A Creditors
B Trade credit
C Debentures
D Commercial paper

Q14

What is 'fiscal policy'?

A The management of monetary supply by central banks
B Government policies related to taxation and spending
C The regulation of stock market activities
D Policies related to international trade

Q15

Which type of risk is associated with changes in interest rates?

A Market risk
B Credit risk
C Liquidity risk
D Interest rate risk

Q16

What is 'systematic risk'?

A The risk of the overall market declining
B Risk associated with a single asset or company
C Risk that can be eliminated through diversification
D Risk specific to an industry

Q17

What is the 'face value' of a bond?

A The amount paid by the issuer at maturity
B The market value of the bond
C The amount the bond is sold for
D The interest rate of the bond

Q18

What is the primary function of the capital market?

A Short-term borrowing
B Ensuring liquidity
C Issuance and trading of long-term securities
D Facilitating foreign exchange

Q19

What is 'working capital'?

A The funds available to cover day-to-day operations
B The value of a company's assets
C The funds used for long-term investments
D The amount of debt a company has

Q20

What is 'financial engineering'?

A Designing stock exchanges
B Calculating interest rates
C Developing new financial products
D Building physical financial institutions

Q21

What is a 'junk bond'?

A A government bond with low interest rates
B A corporate bond with high credit ratings
C A bond issued by a start-up company
D A bond with a low credit rating, offering high returns but higher risk

Q22

What is a 'stock dividend'?

A A special one-time dividend
B A dividend paid to bondholders
C A dividend paid in cash
D A dividend paid in additional shares of stock

Q23

What is 'fundamental analysis'?

A The analysis of historical stock prices
B The study of market trends
C The evaluation of a company's financial health, performance, and intrinsic value
D The assessment of economic conditions

Q24

What is 'cost of debt'?

A The total expense of running a business
B The cost of capital expenditures
C The effective rate that a company pays on its borrowed funds
D The cost of equity financing

Q25

The formula for calculating the debt-to-equity ratio is:

A Total equity / Total assets
B Total liabilities / Total equity
C Total liabilities / Total assets
D Current liabilities / Total equity

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