#1
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Balance Sheet
ExplanationSummarizes assets, liabilities, and equity at a given moment.
#2
What does the term 'ROI' stand for in finance?
Return on Investment
ExplanationMeasures profitability relative to investment cost.
#3
What is the role of the 'Federal Reserve' in the United States financial system?
Issuing currency
ExplanationControls monetary policy and currency issuance.
#4
What is the purpose of a '401(k)' retirement savings plan?
Saving for retirement through pre-tax contributions
ExplanationTax-advantaged retirement savings.
#5
What does the term 'Capital Gains' refer to in the context of investments?
Profits earned from selling an asset at a higher price than its purchase cost
ExplanationGains realized from asset appreciation.
#6
What is the purpose of a 'credit score' in the context of personal finance?
To assess an individual's creditworthiness
ExplanationDetermines the likelihood of timely loan repayment.
#7
What does the term 'Amortization' refer to in the context of loans?
Paying off a loan over time with regular payments
ExplanationGradual reduction of loan principal through scheduled payments.
#8
What is the primary purpose of a 'hedging' strategy in finance?
Minimizing risks
ExplanationProtects against adverse price movements.
#9
Which of the following is considered a long-term liability on a company's balance sheet?
Notes Payable
ExplanationObligations due beyond one year.
#10
What is the significance of the 'Prime Rate' in the banking sector?
It is the interest rate charged by banks to their best customers
ExplanationBenchmark for interest rates on loans.
#11
In finance, what does the term 'Liquidity' represent?
Ability to convert assets into cash quickly
ExplanationEase of converting assets into cash without significant loss.
#12
What is the formula for calculating 'Earnings Per Share (EPS)'?
(Net Income - Dividends) / Average Outstanding Shares
ExplanationProfit allocated to each outstanding share.
#13
In the context of personal finance, what does the term 'Diversification' aim to achieve?
Reducing risk by spreading investments
ExplanationMinimizing risk by investing in various assets.
#14
What does the term 'Net Present Value (NPV)' measure in the context of financial analysis?
Current value of future cash flows
ExplanationValue of future cash flows discounted to present.
#15
What is the concept of 'Time Value of Money' in finance?
The idea that a sum of money has different values at different points in time
ExplanationValue of money changes due to interest or inflation.