#1
What is the basic principle behind compound interest?
Interest is calculated on both the initial principal and the accumulated interest
ExplanationInterest compounds over time.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationMeasure of profitability.
#3
What is the purpose of diversification in investment?
To spread investment across different assets to reduce risk
ExplanationRisk management strategy.
#4
Which of the following represents a liability?
Accounts Payable
ExplanationObligation to pay.
#5
What is the purpose of a balance sheet?
To provide a snapshot of a company's financial position at a specific point in time
ExplanationFinancial health assessment.
#6
Which of the following is an example of a liquid asset?
Stocks
ExplanationEasily convertible to cash.
#7
What is the formula to calculate Earnings Per Share (EPS)?
Net Income / Number of Shares Outstanding
ExplanationProfit attributable to each share.
#8
What is the time value of money principle?
Money loses value over time due to inflation
ExplanationConcept of opportunity cost.
#9
What is the formula to calculate the present value of a future sum of money?
Future Value * (1 / (1 + Interest Rate)^Number of Periods)
ExplanationDiscounting future cash flows.
#10
What does the term 'Amortization' mean in finance?
The process of allocating the cost of intangible assets over their useful life
ExplanationExpense allocation.
#11
What does the Debt-to-Equity ratio measure?
The proportion of debt a company uses relative to its equity
ExplanationFinancial leverage.
#12
What is the Capital Asset Pricing Model (CAPM) used for?
To estimate the expected return on an investment
ExplanationQuantifying risk.
#13
Which of the following is not a measure of liquidity?
Debt-to-Equity Ratio
ExplanationIndication of financial leverage.
#14
What is the purpose of a 401(k) retirement plan?
To offer tax-deferred retirement savings
ExplanationLong-term savings vehicle.
#15
What is the purpose of the Securities and Exchange Commission (SEC) in the United States?
To regulate the stock exchanges
ExplanationMarket oversight.