Free Basic Finance Questions and Answers

Question 1

What determines the greatest number in a series of numbers?

Accepted Answer

MAX(B1:B3)

Answer

In spreadsheet software like Microsoft Excel, the `MAX` function is specifically designed to find the largest numerical value within a specified range of cells. The syntax `MAX(B1:B3)` correctly identifies the highest number among the cells B1, B2, and B3. Other options like `MAXIMUM` or `HIGHEST` are not standard Excel functions for this purpose.

Question 2

The cash method of accounting disregards.

Accepted Answer

payables

Answer

The cash method of accounting recognizes revenues only when cash is received and expenses only when cash is paid out. It disregards non-cash transactions, meaning items like accounts payable (money owed to suppliers) and accounts receivable (money owed by customers) are not recorded until the actual cash exchange occurs. Therefore, payables are disregarded until settled in cash.

Question 3

Regular interest payment to bondholders is termed coupon interest

Accepted Answer

coupon

Answer

The regular interest payment made by a bond issuer to its bondholders is known as the coupon payment. This term originated from physical bond certificates that historically had detachable coupons, each representing an interest payment. The coupon rate is the annual interest rate paid on a bond, expressed as a percentage of its face value.

Question 4

The money an investor receives for assuming a risk is known as return.

Accepted Answer

risk premium

Answer

A risk premium is the additional return an investor expects to receive, or actually receives, for taking on a higher level of risk compared to a risk-free investment. It serves as compensation for bearing the uncertainty associated with a riskier asset. Investors demand this premium to justify investing in assets with greater potential for loss.

Question 5

What is the purpose of financial markets?

Accepted Answer

Allocate savings effeciently

Answer

Financial markets serve as crucial intermediaries that facilitate the efficient allocation of capital from savers (those with surplus funds) to borrowers (those who need funds for investment). They enable businesses to raise capital for growth and individuals to invest their savings, thereby channeling resources to their most productive uses in the economy. This efficient allocation drives economic growth and development.

Finance for Non-Finance Managers Practice Test

Finance for Non-Finance Managers Practice Test

Free Basic Finance Questions and Answers