Business Degree Business Finance 1

Question 1

What does the term 'liquidity' refer to in business finance?

Accepted Answer

The ability to quickly convert assets to cash

Answer

Liquidity refers to how easily an asset can be converted into cash without significantly affecting its price.

Question 2

Which financial statement shows a company's revenues and expenses over a period of time?

Accepted Answer

Income statement

Answer

The income statement (also called profit and loss statement) summarizes revenues, costs, and expenses during a specific period.

Question 3

What is the formula for calculating Return on Investment (ROI)?

Accepted Answer

(Net Profit / Cost of Investment) × 100

Answer

ROI is calculated by dividing net profit by the cost of the investment and multiplying by 100 to get a percentage.

Question 4

What is a 'bond' in the context of business finance?

Accepted Answer

A debt instrument issued to raise capital

Answer

A bond is a fixed-income debt instrument where the issuer borrows funds from investors and promises to repay with interest.

Question 5

What does 'working capital' measure?

Accepted Answer

A company's short-term operational liquidity

Answer

Working capital is current assets minus current liabilities, measuring a company's ability to meet short-term obligations.

Business Degree Practice Test