#1
Which of the following is an example of a financial transaction?
Buying groceries with cash
ExplanationA financial transaction involves the exchange of money for goods or services.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationROI measures the profitability of an investment, showing the return relative to its cost.
#3
Which financial statement provides a snapshot of a company's financial position?
Balance sheet
ExplanationThe balance sheet displays a company's assets, liabilities, and equity at a specific point in time.
#4
What is the primary purpose of double-entry bookkeeping?
To ensure accuracy and prevent errors in recording transactions
ExplanationDouble-entry bookkeeping records each transaction with equal debits and credits, minimizing errors.
#5
What is the purpose of a stock split?
To increase the number of shares outstanding
ExplanationA stock split increases the quantity of shares while proportionally reducing their individual value.
#6
What does the term 'liquidity' refer to in finance?
Ability to convert assets into cash quickly without significant loss of value
ExplanationLiquidity measures how easily an asset can be converted to cash without a substantial loss.
#7
What is the purpose of a stop-loss order in trading?
To limit losses by automatically selling a security when its price falls below a specified level
ExplanationA stop-loss order protects investors by automatically selling a security if its price drops to a predetermined level.
#8
Which of the following is an example of a derivative financial instrument?
Option contract
ExplanationOptions are derivatives, representing a contract whose value is derived from an underlying asset.
#9
What is the concept of 'time value of money'?
The idea that money has a different value depending on the time at which it is received or spent
ExplanationThe time value of money recognizes that the timing of cash flows affects their value.
#10
What is the purpose of the Federal Reserve System in the United States?
All of the above
ExplanationThe Federal Reserve regulates monetary policy, supervises banks, and aims to maintain economic stability.