DECA Finance Fundamentals 3

Question 1

Which type of account typically earns the highest interest rate?

Accepted Answer

Certificate of deposit (CD)

Answer

CDs generally offer higher interest rates than checking or savings accounts because funds are locked in for a fixed term.

Question 2

What is 'working capital'?

Accepted Answer

Current assets minus current liabilities

Answer

Working capital = current assets − current liabilities, measuring short-term operational liquidity.

Question 3

A stock paying a $2 annual dividend on a $40 share price has a dividend yield of:

Accepted Answer

5%

Answer

Dividend yield = annual dividend ÷ stock price = $2 ÷ $40 = 5%.

Question 4

Which financing option involves selling ownership stakes in a company?

Accepted Answer

Equity financing

Answer

Equity financing raises capital by issuing shares, giving investors partial ownership of the company.

Question 5

What does a negative net income indicate about a business?

Accepted Answer

The business operated at a loss

Answer

Negative net income means total expenses exceeded total revenues, resulting in a net loss for the period.

(DECA) Distributive Education Clubs of America Practice Test