Banking Financial Awareness · Economics

Financial Markets and Instruments

1,955 Questions

Financial markets and instruments cover mutual funds, risk management, portfolio optimization, and investment strategies. These topics are critical for banking and financial awareness sections in competitive exams. Practice these questions to understand operational risk, asset valuation, and market regulations.

Portfolio optimizationOperational risk managementMutual funds valuationInvestment income typesHedging strategies

Financial Markets and Instruments Questions

Multiple choice commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

Equity shares are suitable for investors who are willing to assume risk for ________ returns.

  1. Lower

  2. Higher

  3. Medium

  4. Equal
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Equity shares represent the ownership of the company. Equity share holders do not get a fixed dividend but are paid on the basis of earnings by the company.  They enjoy the rewards as well as bear the risks of theownership. Hence, Equity shares are suitable for investors who are willing to assume risk for higher returns.

Multiple choice commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

Investors who need steady income may not prefer equity shares as they get ___________ returns.

  1. Fixed

  2. Fluctuating

  3. Higher

  4. Lower
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Investors who need steady or fixed dividend from the capital invested may not prefer equity shares as they fluctuating returns on the basis of the earnings of the company and receive all the leftovers after all the other claims are delt with.

Multiple choice book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

Reserve created for maintaining a stable rate of dividend is termed as dividend equalisation fund.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This Statement is true. 

Dividend Equalization reserve is a distributable reserve which is specifically set up to  ensure that dividends remain stable for despite being changes in earnings.Stability in dividend helps in maintaining trust among shareholders. So in the year of higher profit companies transfer some part of profit to this fund and in year of less profit dividend is paid out of this profit. 

Multiple choice book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

Which of the following is not an example of reserves?

  1. General Reserve

  2. Revenue Reserve

  3. Dividend Equalization Reserve

  4. Securities Premium
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Reserves are appropriations against profits , they are created from profits for future applications, securities premium is collected when share are issued over its face value hence its not a reserve.

Multiple choice organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

Debentures are preferred by investors who want _______ income at __________ risk.

  1. fluctuating, lesser

  2. fixed, lesser

  3. fixed, higher

  4. fluctuating, higher
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
The difference between the face value of the debenture and its purchase price is the return to the investor. Hence it is preferred by investors who want fixed income at lesser risk. There is a greater risk when the earnings of the company fluctuate.
Multiple choice organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

A company can raise funds through issue of debentures, which bear a ________ rate of interest.

  1. fixed

  2. fluctuating

  3. higher

  4. lower
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Debentures can be issued by a company to raise funds as long term debt capital, which the company promises to return back on a fixed rate of interest. 

Multiple choice business studies insurance - introduction and importance concept, scope and social security in india concept of social security industrial relations, trade unions and social security

PPF means __________________.

  1. Pension Planning Funds

  2. Person having Pension Facilities

  3. Public Provident Fund

  4. Permanent Practitioners Forum
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Public provident fund is a type of after retirement payment to the retired employees of the business which is contributed by the employees as well as the employers to create a separate fund which is availed by the retired employees on their retirement. 

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

Financial statements provide information to _________ in taking important decision related to the value of investment.

  1. owners

  2. managers

  3. shareholders

  4. directors
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Shareholders of companies are interested in knowing the status, safety and return on their investment. 

They may also need information to take decision about continuation or discontinuation of their investment in the business. Financial statements provide information to the shareholders in taking such important decisions.

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

The gaps between the management performance and ownership expectations are understood through _________.

  1. cash flow statements

  2. financial statements

  3. fund flow statement

  4. income statement
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The financial statements show the financial position of an organisation, thereby telling if the policies, procedures and methods used by the management were useful or not. They show the gap between the actual performance by the management and the owner's expectation.  

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

 Following are limitations of financial information ________________.

  1. Helps stock exchanges

  2. Report on stewardship function

  3. Assets may not realise

  4. Aids trade associations in helping their members
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Financial statements have a lot of limitations one being that the financial statements show the assets at the historical cost and not the current market price. They do not record the fluctuations in the price, there by the profit or loss from the same is not taken into account. 

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

Which of the following is a limitation of financial statements?

  1. Does not reflect current situation

  2. Assets may not realise

  3. Bias

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Financial Statements are the collective name given to Income Statement and Positional Statement of an enterprise which show the financial position of business concern in an organised manner.

Some of limitations of financial statements are as follows

Accounting information is sometimes based on estimates which may be unrealistic.

Window dressing may lead to faulty results. Window dressing means manipulation of accounts and Show easy picture of financial statements

Accounting ignores the effect of price level changes. Transactions recorded on historical cost. Examples, fixed assets recorded at historical cost.

Accounting information can be manipulated and thus cannot be considered as the true test of performance.

Accounting information may be Biased accounting information is not without personal influences or bias of accountant.

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

Which of the following is not an use and importance of financial statements?

  1. Report on stewardship function

  2. Basic for prospective investors

  3. Bias

  4. Basis for granting of credit
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Financial statements aim to provide a true and fair view of a company's financial position. Bias is a negative trait that undermines the reliability and utility of these statements.

Multiple choice organisation of commerce and management micro, medium and small enterprises (msmes) nabard and kvic funding and assistance to small businesses privileges and other promotional measures for msmes world bank

NABARD provides refinance for investment in the following activities.
I. Minor irrigation
II. Land development
III. Soil Conservation
IV. Dairy development
Which of the following are correct?

  1. I, II and III are correct

  2. II, III and IV are correct

  3. I, II and IV are correct

  4. All are correct
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All the mentioned activities contribute to the economical and agricultural development of rural areas. This helps the rural community to earn their livelihood leading to greater standard of living. NABARD provides refinance for the investment in such activities. 

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

Which one of the following concepts is used as fund in the preparation of Funds Flow Statements?

  1. Current Assets

  2. Working Capital

  3. Cash

  4. All Financial Resources
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to working capital concept, the term 'funds' refers to net working capital (current assets-current liabilities). In the funds statement, inflow and outflow of net working capital is displayed.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ______ while dividends and interest received should be started as cash flow from ______.

  1. Operating activities, Financing activities

  2. Financing activities, Investing activities

  3. Investing activities, Operating activities

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest paid and interest and dividends received are usually classified as operating cash flows for a financial enterprises. However, there is no consensus on the classification of these cash flows for other enterprises. It is more appropriate that interest paid and interest and dividends received are classified as financing cash flows and investing cash flows respectively, because they are cost of obtaining financial resources or returns on investments.