Financial Decision Making Questions with
verified Answers.
What is finance concerned with? - Correct Answer Future cash flows and what affects them
What are the main elements of finance? - Correct Answer Time, money, uncertainty/risk, information
and taxation
What example involves all the elements of finance? - Correct Answer Investing in the stock market
What are the different perspectives of finance? - Correct Answer Individual investors, financial
intermediaries (like banks, pension funds, etc) corporate finance and governments
What is corporate finance concerned with? - Correct Answer The operation of a firm/company and is
mainly from the company's perspective
What are the individual investors concerned with? - Correct Answer Various ways in which individuals
invest long term savings
How do individual investors invest? - Correct Answer Through intermediaries
How do governments affect finance? - Correct Answer By issuing bonds, taxation and regulatory bodies
What are the advantages of a unincorporated business? - Correct Answer Easy and cheap to setup,
ownership and control is concentrated, financial accounts don't have to be made public
What are the dis-advantages of unincorporated businesses? - Correct Answer Difficult transfer of
ownership, no legal distinction between business and owner, limits on raising funds and growth
What are the dis-advantages of a limited (Ltd) business? - Correct Answer Difficult and expensive setup,
possible tax dis-advantages, separation of management and ownership can cause problems
, What are money markets concerned with? - Correct Answer Securities whose future cash flows occur
within one year
What are capital markets concerned with? - Correct Answer Cash flows which occur beyond one year
What does a stock markets primary function allow? - Correct Answer Quoted or first time companies to
raise new equity capital by issuing new shares
What does a stock markets secondary function allow for? - Correct Answer Investors to buy/sell shares
that company have previously issued
What are the advantages of having a secondary market? - Correct Answer Allows time-horizon of
investor's lending to be separated from the time-horizon company's borrowing, increases
liquidity/marketability of securities, encourages active market for securities
What is a first time company anting a quotation on stock market called? - Correct Answer An IPO (Initial
Public Offering)
What changed dealings of LSE and when did it occur? - Correct Answer The 'Big Bang' on 27th October
1986 and the second one on the same date 11 years later (1997)
How was the LSE handled before the 'Big Bang'? - Correct Answer Members acted in single capacity,
stock jobbers or stockbrokers, few jobbing firms dominated the market, fixed brokerage commissions,
restricted memberships
How was the LSE handled post 'Big Bang'? - Correct Answer Dual capacity system, broker/dealer could
trade directly with public, highly computerised (relied on SEAQ)
What is meant by future value? - Correct Answer The amount a sum of money grows aa it earns interest
over a period
What is discounting and what does it produce? - Correct Answer It's the opposite of discounting and
gives the present value
verified Answers.
What is finance concerned with? - Correct Answer Future cash flows and what affects them
What are the main elements of finance? - Correct Answer Time, money, uncertainty/risk, information
and taxation
What example involves all the elements of finance? - Correct Answer Investing in the stock market
What are the different perspectives of finance? - Correct Answer Individual investors, financial
intermediaries (like banks, pension funds, etc) corporate finance and governments
What is corporate finance concerned with? - Correct Answer The operation of a firm/company and is
mainly from the company's perspective
What are the individual investors concerned with? - Correct Answer Various ways in which individuals
invest long term savings
How do individual investors invest? - Correct Answer Through intermediaries
How do governments affect finance? - Correct Answer By issuing bonds, taxation and regulatory bodies
What are the advantages of a unincorporated business? - Correct Answer Easy and cheap to setup,
ownership and control is concentrated, financial accounts don't have to be made public
What are the dis-advantages of unincorporated businesses? - Correct Answer Difficult transfer of
ownership, no legal distinction between business and owner, limits on raising funds and growth
What are the dis-advantages of a limited (Ltd) business? - Correct Answer Difficult and expensive setup,
possible tax dis-advantages, separation of management and ownership can cause problems
, What are money markets concerned with? - Correct Answer Securities whose future cash flows occur
within one year
What are capital markets concerned with? - Correct Answer Cash flows which occur beyond one year
What does a stock markets primary function allow? - Correct Answer Quoted or first time companies to
raise new equity capital by issuing new shares
What does a stock markets secondary function allow for? - Correct Answer Investors to buy/sell shares
that company have previously issued
What are the advantages of having a secondary market? - Correct Answer Allows time-horizon of
investor's lending to be separated from the time-horizon company's borrowing, increases
liquidity/marketability of securities, encourages active market for securities
What is a first time company anting a quotation on stock market called? - Correct Answer An IPO (Initial
Public Offering)
What changed dealings of LSE and when did it occur? - Correct Answer The 'Big Bang' on 27th October
1986 and the second one on the same date 11 years later (1997)
How was the LSE handled before the 'Big Bang'? - Correct Answer Members acted in single capacity,
stock jobbers or stockbrokers, few jobbing firms dominated the market, fixed brokerage commissions,
restricted memberships
How was the LSE handled post 'Big Bang'? - Correct Answer Dual capacity system, broker/dealer could
trade directly with public, highly computerised (relied on SEAQ)
What is meant by future value? - Correct Answer The amount a sum of money grows aa it earns interest
over a period
What is discounting and what does it produce? - Correct Answer It's the opposite of discounting and
gives the present value
