Do You Have Basic Idea Of Business Finance?

24 Questions | By MSalmons | Updated: Mar 22, 2022 | Attempts: 579

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Do You Have Basic Idea Of Business Finance? - Quiz

Business finance refers to money and credit utilized in the business. It's the crucial part of a business where a firm has to purchase assets, goods, raw materials. It's a multiple choice business Finance test with 25 questions. Let's try out the quiz. All the best!

Questions and Answers

1.

Anything generally accepted as a means for paying for goods and services is known as _____________.
- A.
  
  A federal reserve note
- B.
  
  Barter
- C.
  
  Legal tender
- D.
  
  Money
2.

Chi-Chung recently took a trip to Uruguay. He was struck by the fact that Uruguayan coins were so large and heavy that his pockets simply couldn't accommodate an ordinary day's supply. In Chi-Chung's opinion, Uruguayan coins could be more ________.
- A.
  
  Divisible
- B.
  
  Stable
- C.
  
  Portable
- D.
  
  Durable
3.

Pham traded 15 acres of undeveloped property for a new home on a one-acre lot. This exchange can be considered a(n) _________.
- A.
  
  Highly liquid store of value
- B.
  
  Example of barter
- C.
  
  Easily divisible form of money
- D.
  
  A good form of money
4.

Which of the following financial assets is most liquid?
- A.
  
  Mutual fund shares
- B.
  
  Shares of common stock
- C.
  
  Corporate bonds
- D.
  
  Checking account
5.

All of the following are included in M1 with the exception of ___.
- A.
  
  Money market mutual funds
- B.
  
  NOW accounts
- C.
  
  Checking accounts
- D.
  
  Traveler's checks
6.

In order to be included in M1, a financial asset _____.
- A.
  
  Must be a bank account
- B.
  
  Cannot pay any interest
- C.
  
  Must serve as a medium of exchange
- D.
  
  Must be government insured
7.

All of the following financial assets are included in M2 EXCEPT ___.
- A.
  
  Bank savings accounts
- B.
  
  Share draft accounts
- C.
  
  Money market mutual funds
- D.
  
  Common stock mutual funds
8.

All of the following are reasons why organizations need funds EXCEPT __.
- A.
  
  To finance inventories
- B.
  
  To make interest payments on loans
- C.
  
  To add to owner's equity
- D.
  
  To meet day-to-day cash needs
9.

Which of the following investments would be considered closest to cash?
- A.
  
  A Treasury bill
- B.
  
  Shares of common stock
- C.
  
  Bond issued by a small city
- D.
  
  Farmland
10.

Abdul is the financial manager for Watertown Software. He needs to raise funds for his company and should probably consider ________.
- A.
  
  Debt capital only
- B.
  
  Equity capital only
- C.
  
  The most beneficial combination of debt and equity capital
- D.
  
  A government loan
11.

All of the following would add equity capital to a business EXCEPT ___.
- A.
  
  Payment of dividends to shareholders
- B.
  
  Venture capital investments
- C.
  
  Company profits
- D.
  
  Exercise of employee stock options
12.

All of the following statements concerning debt capital are correct EXCEPT ________.
- A.
  
  All forms of debt eventually mature
- B.
  
  Lenders have a prior claim to assets
- C.
  
  Lenders have a prior claim to interest payments
- D.
  
  Lenders have voting rights in the election of a firm's board of directors
13.

All of the following are sources of short-term funds EXCEPT ______.
- A.
  
  Trade credit
- B.
  
  Bank loans
- C.
  
  Commercial paper
- D.
  
  Privately placed bonds
14.

A firm would most likely finance _______ using short-term sources.
- A.
  
  Inventory
- B.
  
  Buildings
- C.
  
  Another company
- D.
  
  Machinery
15.

Mitch raises money from wealthy individuals and institutional investors for a variety of promising new companies. In exchange, he will become part owner of those businesses. Mitch is a(n) _____________.
- A.
  
  Underwriter
- B.
  
  Venture capitalist
- C.
  
  Entrepreneur
- D.
  
  Angel investor
16.

Which of the following is a depository financial institution?
- A.
  
  A credit union
- B.
  
  A life insurance company
- C.
  
  A pension fund
- D.
  
  A mutual fund
17.

All of the following statements are correct EXCEPT _______.
- A.
  
  The number of commercial banks is declining each year
- B.
  
  Commercial banks are prohibited from selling securities or insurance
- C.
  
  Commercial banks are the most important financial institution
- D.
  
  Banks offer the widest range of services of any financial institution
18.

Commercial banks obtain most of their funds from_________.
- A.
  
  The government
- B.
  
  The sale of securities
- C.
  
  Stockholders
- D.
  
  Depositors
19.

Banks use most of their funds to _________.
- A.
  
  Buy securities
- B.
  
  Buy physical assets
- C.
  
  Make loans
- D.
  
  Buy other banks
20.

Omar made a purchase at his local Walmart. Instead of writing a check, Omar used a special card issued by his bank. The card has a Vista logo on the front. He entered his PIN and the purchase was automatically deducted from his checking account. Omar used his _____.
- A.
  
  Debit card
- B.
  
  Credit card
- C.
  
  ATM card
- D.
  
  Point-of-sale card
21.

Deposit insurance shifts most of the financial risk of bank failures from depositors to ________.
- A.
  
  The federal government
- B.
  
  The bank's stockholders
- C.
  
  Borrowers
- D.
  
  The bank's creditors
22.

If the Fed reduced reserve requirements, ___________.
- A.
  
  Banks would have less money to lend businesses and consumers
- B.
  
  Interest rates would fall
- C.
  
  Inflation would decline
- D.
  
  Economic growth would decline
23.

Which of the following actions would have the effect of increasing the supply of money and credit and lowering interest rates?
- A.
  
  The Fed buying government securities
- B.
  
  The Fed raising the margin requirement
- C.
  
  The Fed raising the reserve requirement
- D.
  
  The Fed raising the discount rate
24.

Alexis purchased numerous shares of Google when the company first went public, and now she is looking to sell them at a considerable profit. What would be the main concern for Alexis at the moment she sells?
- A.
  
  Tax on income
- B.
  
  Stability of principal
- C.
  
  Liquidity
- D.
  
  Tax on capital gains