Business Finance - Pre Test
  • 1. It is a financial intermediary handling individual savings. It receives premium payments placed in loans or investments to accumulate funds to cover future benefits.
A) savings bank
B) life insurance company
C) credit union
D) commercial bank
  • 2. Which of the following is NOT a financial institution?
A) An insurance company
B) A newspaper publisher
C) A pension fund
D) A commercial bank
  • 3. It is a set up so that employees of corporations or governments can receive income after retirement.
A) savings bank
B) life insurance company
C) pension fund
D) credit union
  • 4. It is a type of financial intermediary that pools savings of individuals and makes them available to business and government users. Funds obtained through the sale of shares.
A) Commercial banks
B) Savings and loans
C) Credit Union
D) Mutual Funds
  • 5. Most businesses raise money by selling their securities in a
A) private placement
B) stock exchange
C) direct placement
D) public offering
  • 6. Which of the following is NOT a service provided by financial institutions?
A) Paying savers’ interest on deposit
B) Buying the businesses of customers
C) Lending money to customers
D) Investing customers’ savings in stocks and bonds
  • 7. By definition, the money market involves the buying and selling of
A) flows of funds.
B) stocks and bonds.
C) short-term funds
D) funds that mature in more than one year.
  • 8. It creates financial relationship between suppliers and users of short-term funds.
A) financial market
B) capital market
C) stock market
D) money market
  • 9. Firms that require funds from external sources can obtain them from
A) financial markets
B) financial institutions
C) All of the above.
D) private placement
  • 10. The science and art of managing money
A) Personal Finance
B) Finance
C) Financial Management
D) Management
  • 11. What are the two management functions reinforce each other for the success of an organization?
A) Organizing and Planning
B) Planning and Controlling
C) Staffing and Planning
D) Controlling and Directing
  • 12. Which of the following is NOT part of financial planning process?
A) Identify goal related task
B) Set goals/Objectives
C) Establish strong Management
D) Identify resources
  • 13. A plan expresses in quantitative terms, which emphasizes the resource use and resource allocation of an entity over a specified period of time?
A) Cash Budget
B) Sales
C) Sales Budget
D) Budget
  • 14. Which of the process to closely monitoring of in and out of cash in the business?
A) Cash flow statement
B) Statement of financial Position
C) Income statement
D) Budgeting
  • 15. It is a tool of the company to set an overall goal of what the company’s performance and position will be for and as of the end of the year.
A) Budgeting
B) Inventory
C) Forecasting
D) Projected Financial Statement
  • 16. Components of a firm’s cash conversion cycle include:
A) average payment, average collection period
B) average collection period, average age of inventory
C) average age of inventory and average payment period
D) average age of inventory, average collection period and average payment
  • 17. Which of the following statements is true regarding working capital management?
A) All statements are true
B) A firm’s working capital is not essential in managing its operations
C) There is a risk and profitability tradeoff in working capital management
D) Cash, inventory and long-term receivables are common working capital components
  • 18. Which of the following is NOT a common collection technique for accounts receivables?
A) sending letter of demands
B) sending legal notices
C) writing off customer’s accounts
D) making phone calls
  • 19. It is a technique used in granting credit to customers.
A) All of the above
B) Credit limit
C) Credit score
D) Credit standards
  • 20. It represents assets of the entity that expected to be collected and thus, converted to cash.
A) Marketable Securities Management
B) Inventory Management
C) Accounts Receivable Management
D) Cash Management
  • 21. In a loan amortization schedule, interest payments for each period would most probably
A) There are no interest payments in the schedule
B) Decrease overtime
C) Increase overtime
D) Remain the same
  • 22. The formula (1 + i)n is also called
A) future value factor for lump-sum payment
B) present value factor for ordinary annuity
C) present value factor for lump-sum payment
D) future value factor for ordinary annuity
  • 23. An increase in the present value may be caused by
A) discount rate does not affect the present value
B) none of the above
C) decrease in the discount rate
D) increase in the discount rate
  • 24. Interest payments that are based on the original principal and previous interest recognized is based on
A) future value
B) simple interest rate
C) present value
D) compound interest rate
  • 25. The time value of money suggest that a peso received today is worth
    a peso received in the future.
A) the same as
B) less than
C) none of the above
D) more than
  • 26. What is a bond?
A) None of the above.
B) It is a security that represents the debt of a government or a business that promises to pay a fixed amount.
C) It is a security that represents partial ownership in a business.
D) It is a security that represents the equity of a government or a business that promises to pay a fixed interest.
  • 27. A business owned by two or more people and operated for profit.
A) Partnership
B) Cooperative
C) Corporation
D) Sole Proprietorship
  • 28. An entity created by law owned by shareholders. Overall objective of a shareholder should be wealth maximization
A) Cooperative
B) Sole Proprietorship
C) Corporation
D) Partnersip
  • 29. Rational investors will seek efficient portfolios because these portfolios are optimal based on:
A) Expected return
B) Transaction cost
C) Expected return and risk
D) Risk
  • 30. Most investors are assumed ________.
A) Risk averse
B) Risk neutral
C) Risk seekers
D) Risk moderators
  • 31. Who will decide on the declaration of dividends in a corporation?
A) The stock exchange on which the stock is listed
B) The president of the company
C) The board of directors of the firm
D) The shareholders of the corporation
  • 32. What is the difference between shares and bonds?
A) Bonds represent ownership whereas shares do not.
B) Shares and bonds both represent liabilities
C) Shares and bonds both represent equity
D) Shares represent ownership whereas bonds do not.
  • 33. How should one think of stocks?
A) One should think of stocks as pieces of businesses.
B) One should think of stocks as chips in the casino.
C) Both A and B
D) One should not think of stocks as being synonymous with a good business.
  • 34. Why do different investors estimate inputs differently? Because _____
A) every investor has access to different information about securities
B) there is a random selection process used by individual investors
C) every investor has his/her own risk/return preferences
D) there is an inherent uncertainty in security analysis
  • 35. Of the following four investments, which is considered the safest?
A) corporate bonds
B) Commercial papers
C) Treasury bills
D) Treasury bonds
  • 36. Shares and bonds are floated in _________
A) Money market
B) Commercial bank
C) Capital market
D) Equity market
  • 37. If you want to deposit money in a bank, which will be a wise choice?
A) Compounding annually
B) Compounding daily
C) Compounding monthly
D) Compounding semi-annually
  • 38. Which of the following help determine risk tolerance?
A) Expected return and risk
B) Assets and liabilities
C) Net worth and risk capital
D) Net worth and net earnings
  • 39. Which of the following assets are considered medium risk investments?
A) High income bonds
B) Government bonds
C) Bank deposits
D) Money market
  • 40. Which are NOT considered as key participants in the investment process?
A) Government
B) Individuals
C) Charitable institutions
D) Business
  • 41. Saving money means giving up the opportunity cost to
A) apply for credit cards
B) spend in the present
C) have money in the future
D) save money
  • 42. What is term for the money you earn?
A) Income
B) Expense
C) Savings
D) Interest
  • 43. In order to effectively manage money, you need a:
A) High paying job
B) Budget
C) Computer
D) Online checking account
  • 44. Which of the following money management principles describe frugality?
A) You are the boss of you.
B) The perfect is the enemy of good.
C) Large amounts matter more.
D) Small amounts matter.
  • 45. Practice thrift, but always be looking for Big Wins, best illustrates what principle of saving?
A) Large amounts matter more.
B) You are the boss of you.
C) Small amounts matter.
D) The perfect is the enemy of good.
  • 46. To make the most of your income and savings it is important to become:
A) Smart
B) Proactive
C) All of these
D) Financial Literate
  • 47. The expenses listed below all reduce the amount of cash an individual has available for saving and investing EXCEPT
A) Entertainment
B) Travel
C) Food
D) Stocks
  • 48. This relates to the purchase of assets that are expected to generate a rate of return, with the hope that over time the individual will receive back more money than they originally invested.
A) Investing
B) Saving
C) Income
D) Protection
  • 49. These sources of income all generate cash that an individual can use to either spend, save, or invest EXCEPT
A) Hourly wages
B) Mutual funds
C) Bonuses
D) Taxes
  • 50. This refers to a source of cash inflow that an individual receives and then uses to support themselves and their family.
A) Saving
B) Spending
C) Income
D) Investing
Students who took this test also took :

Created with That Quiz — a math test site for students of all grade levels.