Business Degree Business Finance 3

Question 1

What is 'leverage' in financial terms?

Accepted Answer

Using borrowed capital to increase potential return on investment

Answer

The ability to negotiate supplier discounts

Answer

The process of diversifying a portfolio

Answer

Setting prices above market rate

Question 2

What is the breakeven point for a business?

Accepted Answer

The point where revenue equals total costs

Answer

The maximum profit level achievable

Answer

The point of highest sales volume

Answer

The minimum acceptable profit margin

Question 3

Which valuation method calculates the present value of expected future cash flows?

Accepted Answer

Discounted cash flow (DCF) analysis

Answer

Book value method

Answer

Comparable company analysis

Answer

Asset-based valuation

Question 4

What does 'gross profit margin' indicate?

Accepted Answer

The percentage of revenue remaining after subtracting cost of goods sold

Answer

The percentage of revenue retained after all expenses

Answer

The ratio of operating income to total revenue

Answer

Net income as a percentage of total assets

Question 5

What is an 'initial public offering' (IPO)?

Accepted Answer

The first time a private company offers shares to the public

Answer

A company's first bond issuance to the public

Answer

A government auction of treasury bills

Answer

A merger between two private companies

Question 6

What is 'diversification' in investment terms?

Accepted Answer

Spreading investments across different assets to reduce risk

Answer

Investing all funds in the highest-yield asset

Answer

Focusing on a single industry for expertise

Answer

Using leverage to maximize returns