#1
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Balance Sheet
ExplanationIt shows a company's assets, liabilities, and equity at a given moment.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationIt measures the profitability of an investment relative to its cost.
#3
In options trading, what does the term 'In-the-Money' (ITM) refer to?
The option has intrinsic value
ExplanationIt means the option's strike price is favorable compared to the current market price.
#4
What does the term 'Liquidity' refer to in the context of financial markets?
The ease of converting assets into cash
ExplanationIt denotes how easily an asset can be converted into cash without affecting its market price.
#5
What does the term 'Market Capitalization' (Market Cap) represent?
The total market value of a company's outstanding shares of stock
ExplanationIt reflects the aggregate value of a company's outstanding shares in the market.
#6
Which of the following is a measure of a stock's volatility in relation to the market?
Beta
ExplanationIt indicates how much a stock's price moves with the market.
#7
What is the time value of money principle in finance?
Money loses value over time due to inflation
ExplanationIt asserts that money available now is worth more than the same amount in the future due to its potential earning capacity.
#8
What is the primary purpose of a stock dividend?
To increase the number of outstanding shares
ExplanationIt distributes additional shares to existing shareholders rather than cash.
#9
Which financial ratio measures a company's ability to cover its short-term liabilities with its short-term assets?
Current Ratio
ExplanationIt assesses a company's liquidity and ability to meet short-term obligations with its short-term assets.
#10
What is the purpose of the Sharpe Ratio in finance?
To measure a portfolio's risk-adjusted return
ExplanationIt assesses the return of an investment relative to its risk.
#11
In the context of bonds, what does the term 'Yield to Maturity' (YTM) represent?
The total return anticipated on the bond if it is held until it matures
ExplanationIt calculates the total return an investor can expect if they hold a bond until it matures.
#12
What is the formula for calculating the Net Present Value (NPV) of an investment?
NPV = Cash Inflows - Initial Investment
ExplanationIt determines the present value of future cash flows minus the initial investment.
#13
What does the Efficient Market Hypothesis (EMH) suggest about stock prices?
Stock prices reflect all available information
ExplanationIt posits that stock prices instantly incorporate all available information, making it impossible to outperform the market consistently.
#14
In the Capital Asset Pricing Model (CAPM), what does the beta coefficient measure?
The market risk of an investment relative to the overall market
ExplanationIt gauges an asset's volatility compared to the entire market.
#15
In finance, what is the 'Black-Scholes Model' used for?
Calculating the value of a call or put option
ExplanationIt estimates the fair price of options, considering factors such as volatility and time to expiration.