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 elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

Which of the following ratios is termed as 'acid test ratio' or 'quick ratio'?

  1. Fixed assets Ratio

  2. Current Ratio

  3. Liquidity ratio

  4. Debt-Equity ratio
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Liquidity ratio measures the company's ability to pay debt obligations and its margin of safety through the calculation of metrics including the current ratio and quick ratio. It also indicates cash flow positioning. It is also called as acid test ratio and quick ratio.

Multiple choice elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

Liquidity ratio is also known as :-
a. Quick ratio
b. Acid test ratio
c. Working capital ratio
d. Stock turnover ratio

  1. A and B

  2. A and C

  3. B and C

  4. C and D
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A liquidity ratio is an indicator of whether a company's current assets will be sufficient to meet the company's obligations when they become due. The liquidity ratios include the current ratio and the acid test or quick ratio. The current ratio and quick ratio are also referred to as solvency ratios.

Multiple choice elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

Consider the following :
i)Basic defensive and interval ratio
ii)Current ratio
iii)Superquick ratio
iv)Quick ratio
Arrange these ratios in sequence to reflect the liquidity in descending order.

  1. (ii), (iv), (iii) and (i)

  2. (i), (ii), (iv) and (iii)

  3. (iv), (ii), (iii) and (i)

  4. (iii), (iv),(i) and (ii)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

  1. Current ratio = Current assets/Current liabilities
  2. Quick ratio = [Current assets minus inventory]/ Current liabilities
  3. Super quick ratio = [Cash + Marketable securities]/ Current liabilities
  4. Basic defensive and interval ratio = [Cash + Marketable securities + Trade receivables] / Average daily expenditures
 As we move from ratio number $1$ to ratio number $4$ we are calculating the liquidity on more and more conservative basis as it can be seen that as we move from ratios $1$ to $3$ we are considering few and fewer assets  and in the $4$th  ratio we are considering average daily expenditures instead of the whole of current liabilities as this ratio helps us to understand that for how many days can the company survive without having to liquidate its long term assets.

Multiple choice elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

Which one of the following is correct?
i) A ratio is an arithmetical relationship of one number to another number.
ii) Quick ratio is also known as acid test ratio.
iii) Rule of thumb for current ratio is $2:1$.
iv) Debt equity ratio is the relationship between outsiders fund and shareholders fund.

  1. All (i), (ii), (iii) and (iv) are correct.

  2. Only (i), (ii) and (iii) are correct.

  3. Only (ii), (iii) and (iv) are correct.

  4. Only (ii) and (iii) are correct.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  1.  A ratio is an arithmetical relationship of one number to another number. in terms of accountancy, an accountancy ratio would be the relationship between two figures obtained from the account statement. For example Net profit ratio is the ratio of Net profit to the Net sales made.
  2. Quick ratio is also known as acid test ratio because it measures the ability of the company to meet unexpected liabilities without having to depend on the sale of inventories.
  3. The rule of thumb for current ratio is $2:1$, this is not a constant rule but rather relative. Whether or not the current ratio is satisfactory completely depends on the nature of business, current assets and current liabilities
  4. Debt equity ratio is calculated as Total outside liabilities/ Shareholders equity and so it can be said that it is the relationship between outsiders fund and shareholders funds. 
Multiple choice economics basic concepts of national income macroeconomic theories some basic concepts of macroeconomics introduction to macroeconomics

Expected rate of return on investment is called_______ of capital.

  1. marginal efficiency

  2. average efficiency

  3. opportunity cost

  4. rate of interest
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Marginal efficiency of capital refers to the rate of return that is expected from an additional unit of investment made or capital utilised. The marginal efficiency of capital, thus, precisely represents the expected rate of return on investment.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

Interest on capital is calculated on _____________.

  1. Opening capital

  2. Additional Capital

  3. Closing capital

  4. Both A & B
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest on capital is to be calculated on the capitals at the beginning for the relevant period. If there is any additional capital introduced or capital withdrawn during the year, it will cause change in the capitals and interest is to be calculated proportionately on the changed capitals for the relevant period.

Interest on capital = Amount of capital x Rate of interest per annum x Period of interest

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

Which of the following policies of the financial sector is basically designed to transfer local financial assets into foreign financial assets freely and at market determined exchange rates?
Policy of

  1. Capital Account Convertibility

  2. Financial Deficit Management

  3. Minimum Support Price

  4. Restrictive Trade practices
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital account convertibility refers to the freedom to convert local financial assets into foreign financial assets and vice versa at market-determined rates.

Multiple choice business organisation and correspondence sole trade meaning, features and merits of sole proprietorship sole proprietorship - meaning & features formation, characteristics, merits & demerits and objectives of sole proprietorship

Identify the limitation of sole trading concern from the following.

  1. Sense of accomplishment

  2. Ease of formation and closure

  3. Limited liability

  4. Decision making may not be balanced in all the cases.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The main disadvantages to being a sole proprietorship are: Unlimited liability: Your small business, in the form of a sole proprietorship, is personally liable for all debts and actions of the company. Unlike a corporation or an LLC, your business doesn't exist as a separate legal entity.

Multiple choice commerce securities exchange board of india (sebi) objectives of sebi significance, functions of stock exchange, bse & nse stock exchanges functions of sebi sebi securities and exchange board of india (sebi)

The fund manager always invests in more than one asset class (equities, debts, money market instruments etc.) to spread the risks. It is called ______.

  1. diversification

  2. liquidity

  3. expert management

  4. all of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The fund manager always invests in more than one asset class (equities, debts, money market instruments etc.) to spread the risks. It is called diversification. In terms of finance, diversification can be defined as a process of allocating capital in such a way that the exposure to any particular asset gets reduced. It helps to reduce risk and volatility by investing in variety of assets.

Multiple choice commerce securities exchange board of india (sebi) objectives of sebi significance, functions of stock exchange, bse & nse stock exchanges functions of sebi sebi securities and exchange board of india (sebi)

Expense ratio is the fee for managing fund.

  1. True

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

Expense ratio is the fee for managing fund- this is a true statement. Expense ratio can be defined as a ratio which indicates how much the fund charges in terms of percentage annually  in order to manage the investor's total investment portfolio. Expanse ratio covers various types of cost and it is disclosed to investors once in a 6-months.