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

In a statement of cash flows, a company investing in short-term financing investments and in fixed assets results in ______________.

  1. Increased cash

  2. Decreased cash

  3. Increased liability

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

Investing activities related to purchase and sale of long-term and short-term assets or fixed assets such as machinery, furniture, land and building etc.

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

According to the financial accounting board (FASB), which of the following is a cash flow from a "financing" activity?

  1. Cash outflow to the government for taxes

  2. Cash outflow to shareholders as dividend

  3. Cash outflow to lenders as interest

  4. Cash outflow to purchase bonds issued by another company
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As per AS-3, financing activities are the activities that result in changes in the size and composition of the owners' capital and borrowings of the enterprises. Separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds to the enterprise.

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

A company who issue bonds or stocks in result raised funds which finally ____________.

  1. Increases liabilities

  2. Increases equity

  3. Increases cash

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

Companies may increase cash levels through financing and investing activities. 

Financing activities include proceeds from bank loans and from issuing stocks or bonds to investors.

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

Which of the following change(s) does / do not appear in a cash flow statement?

  1. Issue of equity shares

  2. Conversion of all FCDs into equity shares

  3. Bonus issue of equity shares

  4. All of the above

  5. Both (B) and (C)
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

A cash flow statement only tracks actual cash movements. Conversion of debentures into equity shares and the issuance of bonus shares are non-cash transactions; therefore, they do not appear in the cash flow statement.

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

Purchase of fixed assets is classified as ______________.

  1. Cash flow from operating activity

  2. Cash flow from investing activity

  3. Cash flow from financing activity

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

The purchase of fixed assets involves the outflow of cash for long-term assets, which is categorized under investing activities in a cash flow statement.

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

Cash from investing activities arise from _____________________.

  1. Cash flows on account of dealing in fixed assets and long term investments

  2. Cash flows on account of purchase and sale of goods

  3. Cash flows on account of short term investments

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

Investing activities in a cash flow statement specifically relate to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

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

Dividend paid, under AS-$3$, is _______________.

  1. Cash flow from financing activity

  2. Cash flow from operating activity

  3. Cash flow from investing activities

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

Under AS-3, dividends paid are classified as cash flows from financing activities because they represent the cost of obtaining financial resources (equity).

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

The term 'funds' as used in fund flow statement means ________________.

  1. Cash

  2. Current assets

  3. Current liabilities

  4. Current assets and liabilities
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fund flow statement is a statement of cash inflows and cash outflows. There are persons who feel that the funds are cash or working capital which represent the excess of current assets over current liabilities. The term flow means movement and includes both inflows and outflows of resources.And the funds used in the flow statement is a current assets.

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

Decrease in working capital appear in fund flow statement in _________ side.

  1. Sources

  2. Application

  3. Both (A) and (B)

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

Working capital is current assets less current liabilities. A decrease in the net current assets leads to increase in fund flow which needs to be included. Hence, It appear in sources.

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

Which of the following is the limitation of the cash flow statement?

  1. Historical in nature.

  2. Discloses Success or Failure of Cash Planning.

  3. Reasons for Cash positions.

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

A cash flow statement is based on past data (historical), which means it does not necessarily reflect the future cash position or current financial health, making it historical in nature.

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

Short-term Investments and Marketable Securities are included in Cash and Cash Equivalent.

  1. True

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

According to accounting standards, cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

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

Cash Flow Statement helps in understanding liquidity and solvency.

  1. True

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

The cash flow statement provides information about the cash generated and used by an enterprise, which is essential for assessing its liquidity (ability to pay short-term debts) and solvency (ability to meet long-term obligations).

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

Investing Activities are the acquisition and disposal of long-term assets and other investments included in cash equivalents.

  1. True

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

Investing activities involve the acquisition and disposal of long-term assets. Cash equivalents are specifically excluded from investing activities as they are part of the cash balance itself.

Multiple choice trend analysis tools for financial analysis analysis of financial statements financial statement analysis accountancy

Financial Analysis does not help the users of the financial statements to understand the complicated matters in simplified manner.

  1. True

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

False. Financial Analysis helps the users of the financial statements to understand the complicated matters in a simplified manner. Financial analysis is reviewing and analyzing of financial data, understand the past, present and future projected data. 

It gives a useful insight to the users as to what is the condition of the company.