MCQ Collection
Accounting and Finance MCQs
Practice Accounting and Finance questions with answers and explanations.
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A.
A method of cleaning banknotes
B.
A tax collection office
C.
A bank marketing campaign
D.
A mechanism for exchanging and settling payment instructions among institutions
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Correct Answer: D. A mechanism for exchanging and settling payment instructions among institutions
Explanation:
Clearing determines obligations between participating banks.
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A.
The market discount rate
B.
The inflation rate
C.
The dividend growth rate
D.
The stated annual interest rate applied to face value
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Correct Answer: D. The stated annual interest rate applied to face value
Explanation:
Coupon rate determines the bond's contractual interest payments.
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A.
The composition of inventory
B.
The layout of a factory
C.
The list of directors
D.
The mix of debt and equity used to finance a company
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Correct Answer: D. The mix of debt and equity used to finance a company
Explanation:
Capital structure influences risk, return, flexibility, and cost of capital.
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A.
Only income tax receipts
B.
Only foreign borrowing
C.
Private company sales
D.
Income received by government from taxes and non-tax sources
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Correct Answer: D. Income received by government from taxes and non-tax sources
Explanation:
Public revenue includes taxes, fees, dividends, royalties, and other receipts.
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A.
The ability to avoid all borrowing
B.
The requirement to balance every annual budget
C.
The use of only indirect taxes
D.
The ability to continue current fiscal policies without an unmanageable rise in debt
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Correct Answer: D. The ability to continue current fiscal policies without an unmanageable rise in debt
Explanation:
Sustainability depends on growth, interest rates, primary balances, and debt structure.
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A.
Protection for eligible depositors up to specified limits if a bank fails
B.
Insurance against investment losses in shares
C.
A guarantee of unlimited interest
D.
A loan repayment scheme
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Correct Answer: A. Protection for eligible depositors up to specified limits if a bank fails
Explanation:
Deposit insurance supports depositor confidence and financial stability.
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A.
Falls
B.
Rises
C.
Remains exactly unchanged
D.
Becomes equal to face value
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Correct Answer: A. Falls
Explanation:
New bonds offer higher returns when rates rise.
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A.
Use of debt or fixed financing charges to magnify equity returns and risk
B.
Use of machinery to increase output only
C.
Holding extra inventory
D.
Selling more products on cash
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Correct Answer: A. Use of debt or fixed financing charges to magnify equity returns and risk
Explanation:
Debt creates fixed obligations such as interest.
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A.
A plan of expected public revenue and expenditure for a period
B.
A list of all private investments
C.
A bank's balance sheet
D.
A company's sales forecast only
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Correct Answer: A. A plan of expected public revenue and expenditure for a period
Explanation:
The budget authorizes and estimates government financial activity.
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A.
Government decisions about taxes and spending
B.
Central-bank action influencing money, credit, interest rates, and demand
C.
Company decisions about dividends
D.
Bank branch management
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Correct Answer: B. Central-bank action influencing money, credit, interest rates, and demand
Explanation:
Monetary policy aims at objectives such as price stability and sustainable activity.
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A.
The bond's coupon rate in every case
B.
The return implied by holding a bond to maturity under stated assumptions
C.
The issuer's accounting profit
D.
The face value divided by price
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Correct Answer: B. The return implied by holding a bond to maturity under stated assumptions
Explanation:
Yield to maturity discounts promised cash flows to the current price.
Choose an option to check your answer.
A.
Use of debt financing
B.
Use of fixed operating costs that makes profit sensitive to sales changes
C.
Use of short-term investments
D.
Use of tax credits
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Correct Answer: B. Use of fixed operating costs that makes profit sensitive to sales changes
Explanation:
High fixed operating costs amplify the effect of sales changes on operating profit.
