Fundamentals of Finance Quiz

Test your financial knowledge with these 15 questions covering ROI, liquidity, present value, diversification, profitability, and more!

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What does ROI stand for in finance?

Return on Investment

Rate of Interest

Revenue of Investment

Risk of Investment

Which of the following is a measure of a company's liquidity?

EBITDA

EPS

Current Ratio

ROE

Which financial statement shows a company's revenues and expenses over a specific period?

Balance Sheet

Income Statement

Statement of Cash Flows

Statement of Retained Earnings

What is the primary purpose of financial ratio analysis?

To compare a company's performance with its competitors

To determine a company's market share

To calculate a company's revenue

To assess a company's financial health and performance

What does the term 'Working Capital' represent?

The difference between current assets and current liabilities

The difference between total assets and total liabilities

The total assets of a company

The total liabilities of a company

What is the formula for calculating the present value of a future cash flow?

PV = FV / (1 + r)^n

PV = FV * (1 + r)^n

PV = FV / r

PV = FV * r

What is the concept of 'Diversification' in investment?

Investing in a single asset class

Investing in multiple assets with similar characteristics

Investing in a variety of assets to reduce risk

Investing in high-risk assets

What does the term 'Blue Chip Stocks' refer to in finance?

Stocks of newly established companies

Stocks of companies with high growth potential

Stocks of well-established companies with a history of stable earnings

Stocks of companies with low market capitalization

What is the primary purpose of financial leverage?

To increase the risk of investment

To decrease the return on investment

To increase the potential return on investment

To decrease the liquidity of an investment

#10

What is the formula for calculating the debt-to-equity ratio?

Debt-to-Equity Ratio = Total Debt / Total Equity

Debt-to-Equity Ratio = Total Equity / Total Assets

Debt-to-Equity Ratio = Total Assets / Total Debt

Debt-to-Equity Ratio = Total Equity / Total Debt

#11

Which of the following is a measure of a company's profitability?

P/E Ratio

Current Ratio

Debt-to-Equity Ratio

Net Profit Margin

#12

What does the Efficient Market Hypothesis (EMH) suggest?

Markets are always perfectly efficient

Markets are perfectly predictable

Market prices reflect all available information

Market prices are driven solely by supply and demand

#13

Which of the following measures the volatility of a stock?

Sharpe Ratio

Standard Deviation

Price-to-Earnings Ratio

Return on Assets

#14

What does the term 'Alpha' represent in finance?

A measure of market risk

The return generated by an investment relative to the overall market return

The return of a portfolio compared to a benchmark index

The correlation coefficient between two assets

#15

What does the term 'Beta' represent in finance?