#1
Which financial instrument represents ownership in a company?
Stocks
ExplanationStocks represent ownership in a company, entitling shareholders to a portion of its assets and profits.
#2
What is the purpose of a financial derivative?
To provide insurance against financial risks
ExplanationFinancial derivatives serve to hedge against financial risks, allowing investors to protect themselves from adverse price movements in underlying assets.
#3
What is the primary purpose of issuing bonds by a company?
To borrow money
ExplanationCompanies issue bonds primarily to raise funds by borrowing from investors, promising to repay the principal along with interest.
#4
Which financial statement reflects a company's financial position at a specific point in time?
Balance Sheet
ExplanationA Balance Sheet provides a snapshot of a company's financial position, detailing its assets, liabilities, and shareholders' equity at a specific moment.
#5
What does the term 'WACC' stand for in corporate finance?
Weighted Average Cost of Capital
ExplanationWACC is the Weighted Average Cost of Capital, representing the average rate of return a company expects to pay to all its security holders.
#6
In financial markets, what does the term 'Liquidity' refer to?
The ease of buying or selling an asset without affecting its price
ExplanationLiquidity in financial markets indicates the ease of buying or selling an asset without significantly impacting its price, reflecting the market's depth and efficiency.