Finance in Small Business MCQs
Finance in Small Business MCQs
Try to answer these 60+ Finance in Small Business MCQs and check your understanding of the Finance in Small Business subject. Scroll down and let's begin!
1: Angel is a _____ who loans money to help new businesses.
A. Lender
B. Successful entrepreneur
C. Creditor
D. All of these
2: _____ is a loan that requires the borrower to make small monthly payments with the balance of the loan due at maturity.
A. Balloon note
B. Demand Note
C. Both a and b
D. None of these
E. None of these
3: Balloon note is a loan that requires the borrower to make _____ payments with the balance of the loan due at maturity.
A. Small monthly
B. Large monthly
C. Small yearly
D. Large Yearly
4: Certified development company is a profit organization sponsored either by private interests or by state or local governments.
A. True
B. False
5: The use of borrowed funds to finance a business is called?
A. Debt Financing
B. Equity Financing
C. Credit Financing
D. All of these
6: Demand note is a _____ loan that must be repaid in a lump sum at maturity.
A. Short-term
B. Long-term
C. Mid-term
D. None of these
7: Payments based on the _____ of the business and made to the providers of equity capital are known as Dividends.
A. Net profits
B. Gross Profit
C. Net income
D. None of these
8: _____ is the sale of common stock or the use of retained earnings to provide long-term financing.
A. Debt Financing
B. Equity Financing
C. Credit Financing
D. All of these
9: Equity financing is the sale of common stock or the use of retained earnings to provide _____ financing.
A. Long-term
B. Short-term
C. Mid-term
D. All of the above
10: Factoring is the practice of raising funds for a business through the sale of accounts receivable.
A. True
B. False
11: Fixed rate loan is a loan whose interest rate remains _____.
A. Constant
B. Inconstant
C. Unstable
D. Fluctuating
12: Floor planning is a type of business loan generally made for _____ items.
A. “Big-ticket”
B. “Small-ticket”
C. Both a and b
D. None of these
13: The first sale of stock of a business made available to private investors is known as Initial public offering.
A. True
B. False
14: Installment loans is a loan made to a business for the purchase of fixed assets such as ?
A. Equipment
B. Real estate
C. Tools
D. All of these
15: Interest rate is the amount of money paid for the use of borrowed funds.
A. True
B. False
16: Leverage is the ability to finance an investment through _____.
A. Borrowed funds
B. Increasing potential for return
C. Increasing level of risk
D. All of the above
17: Line of credit is an agreement that makes a specific amount of _____ funding available to a business as it is needed.
A. Short-term
B. Long-term
C. Mid-term
D. None of these
18: Loan security is an assurance to a _____ that a loan will be repaid.
A. Debtor
B. Lender
C. Mortgagor
D. All of the above
19: Long-term assets are the assets that will be converted into cash within one year.
A. True
B. False
20: Long-term assets are the assets that will be converted into cash within _____.
A. One week
B. One month
C. Six month
D. One year
21: Maturity is the length of time in which a loan must be repaid.
A. True
B. False
22: A loan made to a business by an _____ using the business’s insurance policy as collateral.
A. Insurance company
B. Lender
C. Banker
D. None of these
23: Principal is an amount of money borrowed from a _____.
A. Lender
B. Insurance company
C. Debtor
D. All of these
24: A small business may qualify for loans through a commercial bank where a portion of the loan is guaranteed by the Small Business Administration. This loan is known as ______.
A. An SBA loan
B. A government loan
C. A direct loan
D. A 504 loan
25: Wilma is ecstatic about the purchase of her first house. She has taken out a 30-year mortgage at a 5.25 percent interest rate, and her mortgage broker has informed her that the interest rate will not change for the life of the loan. What type of loan did Wilma take out?
A. Fixed-rate loan
B. Variable-rate loan
C. Equity loan
D. Long loan
26: The practice of raising funds for a business through the sale of accounts receivable is known as which of the following?
A. Leasing
B. Floor planning
C. Balloon notes
D. Factoring accounts receivable
27: The rate of interest charged to a bank’s “best” customers is referred to as ______.
A. Fixed rate
B. Dividend rate
C. Grade A rate
D. Prime rate
28: Loans that are granted by commercial banks to entrepreneurs that are then guaranteed at up to 90 percent of the loan value by the SBA as part of the 7(a) program are called which of the following?
A. SBA loans
B. Guaranteed loans
C. Direct loans
D. 504 loans
29: Upon obtaining a $100,000 business loan from his local bank, Arthur was informed that he must keep at least $10,000 on deposit with the bank. This is referred to as a/an ______.
A. Effective rate of interest
B. Compensating balance
C. Required dividend
D. Maturity requirement
30: An insurance company will frequently lend up to ______ of a policy’s cash surrender value.
A. 10 percent
B. 30 percent
C. 59 percent
D. 95 percent
31: ______ are made to small business owners based on the amount of money paid in premiums on an insurance policy that has a cash surrender value.
A. Floor planning loans
B. Leases
C. Installment loans
D. Policy loans
32: A finance company will generally purchase the accounts receivable or lend small businesses somewhere between ______ percent of the face value of the accounts receivable being factored.
A. 40 and 60
B. 45 and 70
C. 55 and 80
D. 70 and 90
33: The two types of loan endorsers are ______.
A. Borrowers and guarantors
B. Guarantors and comakers
C. Borrowers and lenders
D. Comakers and borrowers
34: ______ refers to the intervals at which interest is paid.
A. Collateral
B. Liquidity
C. Compounding
D. Securing
35: The general economic climate at the time of the loan application is which of the following five C’s of credit?
A. Capacity
B. Capital
C. Conditions
D. Character
36: Each year, Alexandra receives a payment for the stock she owns within the company where she is employed. The amount of the annual payment fluctuates based on the company’s net profits. This is referred to as ______.
A. An asset
B. A liability
C. A dividend
D. Equity
37: Which of the following involves the sale of stock to a selected group of individuals where the stock cannot be purchased by the general public?
A. Venture capitalists
B. Small business investment companies
C. Angels
D. Private placement
38: ______ security refers to the borrower’s assurance to lenders that loans will be repaid.
A. Loan
B. Note
C. Debt
D. Equity
39: ________ is the amount of money a company actually receives and spends over a specific period.
A. Inventory
B. Gross profit
C. Cash flow
D. Net income
40: ____ is a benefit of borrowing.
A. All of the above
B. All of these are benefits
C. Consumer finance companies.
D. Inform the issuer in writing
41: The difference between a secured loan and an unsecured loan is _____.
A. Secured loan requires a collateral and an unsecured loan does not.
B. Secured loan does not requires a collateral and an unsecured loan does.
C. Secured loan requires and an unsecured loan does not require collateral.
D. None of the above
42: ______________ in interest rates are associated with stock market declines.
A. Anticipated increases
B. Unanticipated increases
C. Anticipated decreases
D. Unanticipated decreases
43: ______________ occurs when a company is broken up into smaller divisions and sold for a profit.
A. Liquidation
B. Internal reorganization
C. Bankruptcy
D. Restructuring
44: A ________ is an exchange rate quoted today for settlement at some time in the future.
A. Spot rate
B. Forward rate
C. Currency rate
D. Yield curve
45: A firm's annual stockholders' report ________.
A. Summarizes and documents the firm's financial activities during the past year
B. Is only accessible to the shareholders of the firm
C. Documents the list of all investors who bought the firm's shares during the past year
D. Summarizes and documents the firm's financial plan and budgets during the past year
46: A hedge ratio of .70 implies that a hedged portfolio should consist of ________.
A. Long 0.70 calls for each short stock
B. Short 0.70 calls for each long stock
C. Long 0.70 shares for each short call
D. Long 0.70 shares for each long call
E. None of these
47: An implication of the efficient market hypothesis is that __________.
A. High-beta stocks are consistently overpriced
B. Nonzero beta will quickly disappear
C. Low-beta stocks are consistently overpriced
D. Stocks are consistently fairly priced
48: If a stock is correctly priced, then you know that ____________.
A. The dividend payout ratio is optimal
B. The stock's required return is equal to the growth rate in earnings and dividends
C. The sum of the stock's expected capital gain and dividend yield is equal to the stock's required rate of return
D. The present value of growth opportunities is equal to the value of assets in place
49: If an asset price declines, the investor with a _______ is exposed to the largest potential loss.
A. Long call option
B. Short futures contract
C. Long futures contract
D. Long put option
50: If you were looking through a microscope at a normal sperm cell, you should see ____ chromosomes.
A. 2
B. 22
C. 23
D. 27
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