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

What factors increase the riskiness of  a Capital budgeting Project?

  1. Industry specific risk factors

  2. Competition risk factors

  3. Project specific risk factors

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

The factors that increase riskiness of a capital budgeting project are industry specific risk, competition risk and project risk. Industry specific risk/market risk are the risks that might occur due to change in the industry, competition risks are the risk that can occur because of the competitors strategy and lastlyt project risk are the risk that are associated with the project as whether or not the project will be profitable or not. 

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

Risk-aversion of an investor can be measured by______________.

  1. Market Rate of Return

  2. Risk-free Rate of Return

  3. Portfolio Return

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

Risk aversion means the tendency of a person to avoid a decision/investment when there is risk involved. Risk aversion is a personal trait of a person. Risk-aversion of an investor cannot be measured by market rate of return, risk free rate of return or portfolio profit. 

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

The most commonly used tools for financial analysis are _______________.

  1. Horizontal analysis

  2. Vertical analysis

  3. Ratio analysis

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

Commonly used tools of financial analysis are: Comparative statements, Common size statements, trend analysis, ratio analysis, funds flow analysis, and cash flow analysis.

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

Which of the following statements are false?
A) When all the figures in a balance sheet are stated as percentage of the total, it is termed as horizontal analysis. 
B) When financial statements of several years are analyzed, it is termed as vertical analysis. 
C) Vertical Analysis is also termed as dynamic analysis. 

  1. Both A and B

  2. Both A and C

  3. Both B and C

  4. A, B and C
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Statements are A and C are false. 
A) False. When all figures in the balance sheet are stated as percentage of the total, its termed as vertical or common-size analysis. 
C) False. Horizontal analysis is termed as dynamic analysis. Vertical analysis is done to review and analysis the financial statements for a year only and therefore it is also called static analysis.
Multiple choice business organisation stock exchange meaning and functions of capital market capital markets listing of securities, stock market players

Betas that are constantly adjusted to reflect changes in capital structure and firms operations are classified as _________________.

  1. fundamental structure

  2. fundamental adjustment

  3. fundamental betas

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

Betas that are constantly adjusted to reflect changes in capital structure and firms operations are classified as fundamental betas. Fundamental betas can be defined as a measure which helps to determine the potential risk of a security using current and future predicted fundamental information of the company. It includes market related and financial data.

Multiple choice business organisation stock exchange meaning and functions of capital market capital markets listing of securities, stock market players

The term _____ refers to facilities and institutional arrangements through which long-term funds, both debt and equity are raised and invested.

  1. Capital market

  2. Money market

  3. Discounted market

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

The term capital market refers to facilities and institutional arrangements through which long-term funds, both debt and equity are raised and invested. Capital market can be defined as a market for long and medium term funds. It refers to the organizations or institutions which provide funds for more than one year time period.

Multiple choice business organisation stock exchange meaning and functions of capital market capital markets listing of securities, stock market players

 The capital market should also be efficient in respect of ______________.

  1. minimizing transaction costs

  2. the information that it delivers

  3. allocating capital most productively

  4. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Capital market can be defined as a market for long and medium term funds. It refers to the organizations or institutions which provide funds for more than one year time period. The capital market should also be efficient in respect of:
a) minimizing transaction costs b) the information that it delivers
c) allocating capital most productively.
Multiple choice business organisation stock exchange meaning and functions of capital market capital markets listing of securities, stock market players

Money market arranges for ____________ and capital market provides for ____________ funds. 

  1. long-term, short-term

  2. long-term, short to medium-term

  3. short-term, medium to long-term

  4. medium-term, short to long-term
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The financial market is a platform where investors deal in financial instruments. Money market and capital market are part of the financial market.

In the money market, extremely liquid financial instruments are traded, i.e. monetary instruments of short expiry are dealt with.
On the the other hand, the capital market is for medium to long term finance.

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

Which of the following is not a correct statement?

  1. The terms capitalisation factor and multiplier are not synonymous terms

  2. Divisible profits do not includes profits on revaluation of assets

  3. Managerial remuneration is to be calculated before providing for taxation

  4. A company may purchase its own debentures
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capitalisation factor is the reciprocal of the multiplier. They are mathematically related but distinct concepts in valuation, making the statement that they are not synonymous correct.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

Price earning ratio and price by cash flow ratio are classified as ________________.

  1. Marginal ratios

  2. Equity ratios

  3. Return ratios

  4. Market value ratios
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The price-to-cash flow (P/CF) ratio is a stock valuation indicator or multiple that measures the value of a stock's price relative to its operating cash flow per share. The ratio uses operating cash flow which adds back non-cash expenses such as depreciation and amortization to net income.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

The meaning of 'fund' in funds flow statement is ___________.

  1. Cash

  2. Net working capital

  3. Gross working capital

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

Fund flow statement shows that the flow of funds during the year. The meaning of funf in fund flow statement is net working capital.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

Which of the following is not a motive for holding cash?

  1. Transaction purposes

  2. Precaution against unexpected expenses

  3. Extending loans to group comanies

  4. Speculation purposes

  5. Mismatch between cash inflows and outflows.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The following points highlight the five main motives for holding cash balances in a firm. The motives are: 1. Transaction Motive 

2. Precautionary Motive 
3. Speculative Motive 
4. Future Requirements 
5. Compensating Balances.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

Incremental cash flows in relation to capital budgeting decisions refer to the ____________.

  1. Cash flows which are increasing over a period of time

  2. Incremental change in cash flows if the project is extended one year beyond its life period

  3. Cash flows which are directly attributable to the investment

  4. Difference between cash inflow streams and the initial outflow

  5. Comparision between any two cash outflows in a project's life period
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Incremental cash flows are the net additional cash flows generated by a company by undertaking a project. Capital budgeting decisions are based on comparison of a project's initial investment outlay to the future incremental cash flows of the project and its terminal cash flow.

Multiple choice geography ideas of development study of population in tamil nadu population and migration human geography in tamil nadu

Which of the following about strategy of balanced growth is right?

  1. Simultaneous investment in all sectors

  2. All sectors are independent

  3. Both A and B

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • Balanced growth doctrine advocates simultaneous investment in a number of industries. 
  • The balanced growth aims at the development of all sectors simultaneously but unbalanced growth recommends that the investment should be made only in leading sectors of the economy.
Multiple choice maths banking and taxation types of accounts banks introduction, recurring deposit accounts and calculation of interest on a fixed deposit account

Which deposit will give assure of return for your investment?

  1. saving deposit

  2. fixed deposit

  3. current deposit

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

Fixed Deposits (FD) are investment instruments offered by banks and non-banking financial companies, where one can deposit money for a higher rate of interest than savings accounts. One can deposit a lump sum of money in fixed deposits for a specific period, ranging from 7 days to 10 years. 


Fixed Deposits guarantee a return on investment.