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) commercial bank
B) credit union
C) life insurance company
D) savings bank
  • 2. Which of the following is NOT a financial institution?
A) A pension fund
B) An insurance company
C) A commercial bank
D) A newspaper publisher
  • 3. It is a set up so that employees of corporations or governments can receive income after retirement.
A) savings bank
B) credit union
C) life insurance company
D) pension fund
  • 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) Mutual Funds
D) Credit Union
  • 5. Most businesses raise money by selling their securities in a
A) stock exchange
B) direct placement
C) public offering
D) private placement
  • 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) Investing customers’ savings in stocks and bonds
D) Lending money to customers
  • 7. By definition, the money market involves the buying and selling of
A) funds that mature in more than one year.
B) short-term funds
C) flows of funds.
D) stocks and bonds.
  • 8. It creates financial relationship between suppliers and users of short-term funds.
A) financial market
B) money market
C) capital market
D) stock market
  • 9. Firms that require funds from external sources can obtain them from
A) financial institutions
B) private placement
C) All of the above.
D) financial markets
  • 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) Controlling and Directing
B) Organizing and Planning
C) Planning and Controlling
D) Staffing and Planning
  • 12. Which of the following is NOT part of financial planning process?
A) Identify goal related task
B) Establish strong Management
C) Identify resources
D) Set goals/Objectives
  • 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) Budget
B) Cash Budget
C) Sales Budget
D) Sales
  • 14. Which of the process to closely monitoring of in and out of cash in the business?
A) Budgeting
B) Cash flow statement
C) Income statement
D) Statement of financial Position
  • 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) Projected Financial Statement
D) Forecasting
  • 16. Components of a firm’s cash conversion cycle include:
A) average age of inventory, average collection period and average payment
B) average age of inventory and average payment period
C) average payment, average collection period
D) average collection period, average age of inventory
  • 17. Which of the following statements is true regarding working capital management?
A) A firm’s working capital is not essential in managing its operations
B) There is a risk and profitability tradeoff in working capital management
C) Cash, inventory and long-term receivables are common working capital components
D) All statements are true
  • 18. Which of the following is NOT a common collection technique for accounts receivables?
A) sending letter of demands
B) sending legal notices
C) making phone calls
D) writing off customer’s accounts
  • 19. It is a technique used in granting credit to customers.
A) All of the above
B) Credit score
C) Credit standards
D) Credit limit
  • 20. It represents assets of the entity that expected to be collected and thus, converted to cash.
A) Accounts Receivable Management
B) Inventory Management
C) Cash Management
D) Marketable Securities 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) Remain the same
D) Increase overtime
  • 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) none of the above
B) discount rate does not affect the present value
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) compound interest rate
C) present value
D) simple 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) It is a security that represents the debt of a government or a business that promises to pay a fixed amount.
B) It is a security that represents partial ownership in a business.
C) None of the above.
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) Corporation
B) Sole Proprietorship
C) Partnership
D) Cooperative
  • 28. An entity created by law owned by shareholders. Overall objective of a shareholder should be wealth maximization
A) Cooperative
B) Corporation
C) Sole Proprietorship
D) Partnersip
  • 29. Rational investors will seek efficient portfolios because these portfolios are optimal based on:
A) Expected return and risk
B) Transaction cost
C) Expected return
D) Risk
  • 30. Most investors are assumed ________.
A) Risk neutral
B) Risk moderators
C) Risk seekers
D) Risk averse
  • 31. Who will decide on the declaration of dividends in a corporation?
A) The shareholders of the corporation
B) The stock exchange on which the stock is listed
C) The president of the company
D) The board of directors of the firm
  • 32. What is the difference between shares and bonds?
A) Shares and bonds both represent equity
B) Shares and bonds both represent liabilities
C) Shares represent ownership whereas bonds do not.
D) Bonds represent ownership whereas shares do not.
  • 33. How should one think of stocks?
A) One should think of stocks as chips in the casino.
B) One should not think of stocks as being synonymous with a good business.
C) One should think of stocks as pieces of businesses.
D) Both A and B
  • 34. Why do different investors estimate inputs differently? Because _____
A) every investor has access to different information about securities
B) every investor has his/her own risk/return preferences
C) there is a random selection process used by individual investors
D) there is an inherent uncertainty in security analysis
  • 35. Of the following four investments, which is considered the safest?
A) Commercial papers
B) corporate bonds
C) Treasury bills
D) Treasury bonds
  • 36. Shares and bonds are floated in _________
A) Commercial bank
B) Money market
C) Capital market
D) Equity market
  • 37. If you want to deposit money in a bank, which will be a wise choice?
A) Compounding semi-annually
B) Compounding monthly
C) Compounding daily
D) Compounding annually
  • 38. Which of the following help determine risk tolerance?
A) Expected return and risk
B) Net worth and net earnings
C) Assets and liabilities
D) Net worth and risk capital
  • 39. Which of the following assets are considered medium risk investments?
A) High income bonds
B) Bank deposits
C) Government bonds
D) Money market
  • 40. Which are NOT considered as key participants in the investment process?
A) Individuals
B) Business
C) Government
D) Charitable institutions
  • 41. Saving money means giving up the opportunity cost to
A) have money in the future
B) save money
C) spend in the present
D) apply for credit cards
  • 42. What is term for the money you earn?
A) Income
B) Interest
C) Savings
D) Expense
  • 43. In order to effectively manage money, you need a:
A) Budget
B) Online checking account
C) High paying job
D) Computer
  • 44. Which of the following money management principles describe frugality?
A) Large amounts matter more.
B) The perfect is the enemy of good.
C) You are the boss of you.
D) Small amounts matter.
  • 45. Practice thrift, but always be looking for Big Wins, best illustrates what principle of saving?
A) The perfect is the enemy of good.
B) Large amounts matter more.
C) Small amounts matter.
D) You are the boss of you.
  • 46. To make the most of your income and savings it is important to become:
A) Smart
B) All of these
C) Proactive
D) Financial Literate
  • 47. The expenses listed below all reduce the amount of cash an individual has available for saving and investing EXCEPT
A) Stocks
B) Travel
C) Food
D) Entertainment
  • 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) Saving
B) Investing
C) Protection
D) Income
  • 49. These sources of income all generate cash that an individual can use to either spend, save, or invest EXCEPT
A) Bonuses
B) Taxes
C) Hourly wages
D) Mutual funds
  • 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) Investing
C) Spending
D) Income
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