1. Which of the following is NOT an objective of financial management?

o A) Ensuring adequate supply of funds B) Ensuring effective utilization of funds

o C) Maximizing shareholder wealth D) Minimizing social responsibility
2. The primary aim of wealth maximization as a financial objective is:
o A) To maximize the market price of shares B) To increase dividend payments
o C) To reduce capital investment D) To minimize risk in investments
3. The process of determining the value of an asset based on its future cash flows is known as:
o A) Budgeting B) Discounting C) Compounding D) Capitalization
4. Which of the following is a major source of long-term finance?
o A) Bank overdraft B) Debentures C) Trade credit D) Bills of exchange
5. What does the term ‘capital structure’ refer to?
o A) The total value of a company’s assets B) The mix of equity and debt used by a company
o C) The operational cost of a company D) The company’s profit margin
6. Which of the following is a non-financial objective of financial management?
o A) Maximizing wealth B) Ensuring adequate supply of funds
o C) Minimizing cost D) Ensuring social responsibility
7. Which of the following is true about the cost of equity?
o A) It is always higher than the cost of debt
o B) It is the return expected by shareholders on their investment
o C) It is constant for all companies
o D) It is irrelevant in capital budgeting decisions
8. The term ‘leverage’ in financial management refers to:
o A) The return on investment B) The use of debt to finance the company
o C) The total capital of a company D) The equity share capital
9. Which of the following is the first step in the financial management process?
o A) Investment decision B) Dividend decision C) Financing decision D) Cash management
10. The main objective of financial management is to:
o A) Maximize sales B) Maximize profits C) Maximize shareholder wealth D) Minimize costs
11. Which of the following sources of finance is considered the cheapest?
o A) Equity share capital B) Debentures C) Retained earnings D) Preference shares
12. The term ‘working capital’ refers to:
o A) Total assets B) Total liabilities C) Difference between current assets and current liabilities
o D) None of the above
13. The formula for the current ratio is:
o A) Current Assets / Current Liabilities B) Current Liabilities / Current Assets
o C) Fixed Assets / Current Liabilities D) Current Assets / Total Assets
14. Which of the following is considered a long-term financing option?
o A) Short-term loans B) Trade credit C) Debentures D) Bank overdrafts
15. Which of the following is a key element in the capital budgeting decision?
o A) Cost of debt B) Capital structure C) Risk and return analysis D) Cash flow projections
16. The main advantage of using debt financing is:
o A) Tax benefits B) Increased financial risk C) Increased ownership control
o D) Decreased interest expenses
17. Which of the following is an example of a financial risk?
o A) High level of debt B) High market competition C) High employee turnover
o D) High inflation
18. In financial management, the term ‘liquidity’ refers to:
o A) A company’s ability to meet short-term obligations
o B) A company’s profitability
o C) A company’s solvency
o D) A company’s market share
19. What is the main function of a financial manager in an organization?
o A) Managing cash flow B) Managing day-to-day operations
o C) Minimizing operational costs D) Making strategic investment decisions
20. Which of the following is a limitation of financial management?
o A) Financial data are subjective B) It ignores non-financial aspects of decision-making
o C) It emphasizes short-term profitability
 o D) All of the above
21. Which of the following is a component of capital budgeting?
o A) Profit and loss statement B) Cash flow estimation C) Dividend decision D) Return on
equity
22. Which ratio measures the company’s ability to meet its long-term obligations?
o A) Current ratio B) Quick ratio C) Debt-equity ratio D) Return on assets
23. Which financial statement is most important for financial management?
o A) Balance Sheet B) Cash Flow Statement C) Profit and Loss Account D) All of the above
24. What is the main purpose of financial planning?
o A) To decide on investment in new projects
o B) To prepare a budget for expenses
o C) To forecast the company’s financial needs
o D) To analyze past financial performance
25. Which of the following is NOT a part of the financial management process?
o A) Investment decision B) Financing decision C) Marketing decision D) Dividend decision
26. The cost of capital is the:
o A) Return required by investors B) Cost of goods sold C) Rate of return on assets D) Return
on investment
27. The weighted average cost of capital (WACC) is used to:
o A) Determine the cost of equity capital B) Evaluate the company’s debt-to-equity ratio
o C) Calculate the cost of long-term capital D) Assess the profitability of the firm
28. Which of the following is a disadvantage of debt financing?
o A) Lower cost of capital B) Increased risk of insolvency
o C) Increased control over operations
o D) Tax benefits
29. The capital structure decision involves determining:
o A) The firm’s marketing strategy
o B) The mix of debt and equity financing
o C) The firm’s production process
o D) The firm’s dividend policy
30. In financial management, the term ‘solvency’ refers to:
o A) A company’s ability to meet its short-term obligations
o B) A company’s ability to pay its long-term debts
o C) A company’s profitability
o D) A company’s operational efficiency
31. The main source of finance for a new company is usually:
o A) Debentures B) Equity capital C) Retained earnings D) Bank loans
32. Which of the following is the objective of cost of capital?
o A) Maximizing debt financing B) Minimizing cost of equity
o C) Minimizing the total cost of financing
o D) Maximizing retained earnings
33. Which of the following is NOT a tool for measuring financial performance?
o A) Return on equity B) Earnings per share C) Profit margin D) Market share
34. Which decision is involved in working capital management?
o A) Investment in long-term assets B) Dividend distribution
o C) Management of current assets and liabilities
o D) Selection of capital budgeting projects
35. Which of the following is a characteristic of retained earnings as a source of finance?
o A) No cost associated B) Not available for expansion
o C) High risk D) Requires external approval
36. Which of the following is a direct benefit of financial management?
o A) Improved customer satisfaction B) Increased revenue from sales
o C) Better management of funds and assets
o D) Lower operational costs
37. The dividend decision involves determining:
o A) How much to reinvest in the company
o B) How to allocate earnings between dividends and retained earnings
 o C) The amount of capital needed to expand operations
o D) The interest rate on borrowed capital
38. Which of the following ratios measures the firm’s ability to pay off its current liabilities without
relying on inventory?
o A) Current ratio B) Quick ratio C) Debt-equity ratio D) Return on investment
39. A company’s break-even point is the level of sales at which:
o A) Profits are maximized B) Total revenue equals total costs
o C) Fixed costs are covered D) Variable costs are covered
40. Which of the following is a feature of equity financing?
o A) No repayment obligation B) Fixed interest payments
o C) Increased financial risk D) Tax deductibility
41. The profitability index is used to evaluate:
o A) The expected profitability of a project B) The company’s net profit margin
o C) The rate of return on investment D) The financial risk associated with an investment
42. Which of the following best describes a company’s financial strategy?
o A) Maximizing sales growth B) Minimizing operational costs
o C) Balancing risk and return in capital allocation decisions
o D) Increasing market share
43. Which of the following is a reason for a company to issue bonds?
o A) To raise long-term capital without diluting ownership
o B) To increase debt-equity ratio
o C) To minimize tax liabilities
o D) To increase market share
44. The term ‘earnings before interest and taxes (EBIT)’ refers to:
o A) Profit after taxes and interest B) Operating profit before interest and taxes
o C) Net income D) Total revenue
45. Which of the following is a financial management technique used to analyze the relationship
between debt and equity?
o A) Profit margin analysis B) Debt-equity ratio analysis
o C) Break-even analysis D) Liquidity ratio analysis
46. In financial management, ‘financial risk’ refers to:
o A) The risk of not being able to pay current liabilities
o B) The risk associated with the volatility of returns on investments
o C) The risk of operating in a competitive market
o D) The risk of not generating enough revenue
47. Which of the following is an example of a fixed cost?
o A) Raw material cost B) Rent for factory building
o C) Commission to sales staff D) Electricity bill
48. In financial terms, liquidity refers to the ability to:
o A) Meet long-term obligations B) Meet short-term obligations
o C) Maximize profits D) Increase market share
49. Which of the following is considered an opportunity cost in financial management?
o A) Investment in inventory B) Capital tied up in unproductive assets
o C) Tax savings on interest payments D) None of the above
50. Which of the following is a feature of financial planning?
o A) Ensures profitability in the short-term
o B) Ensures liquidity in operations
o C) Helps in maintaining long-term solvency
o D) None of the above

1. Which of the following is a source of long-term finance?

o A) Retained earnings B) Trade credit C) Bank overdraft D) Short-term loan
2. The ‘cost of debt’ is generally:
o A) Always higher than the cost of equity B) Equal to the rate of interest paid on debt
o C) A fixed percentage of total debt D) Irrelevant in financial decision-making
3. The optimal capital structure is the one that:
o A) Maximizes the market value of the company’s shares B) Minimizes the risk of debt
o C) Reduces the equity base D) Eliminates external financing
4. The key decision in capital budgeting is to:
o A) Minimize the use of debt B) Select profitable projects to invest in
o C) Decide the dividend payout ratio D) Analyze the cost of debt
5. Which of the following is an example of a financial institution?
o A) Department stores B) Bank C) Insurance company D) Both B and C
6. The term ‘debt-equity ratio’ indicates the relationship between:
o A) Fixed and current assets B) Borrowed funds and equity capital
o C) Assets and liabilities D) Net profit and equity
7. A financial manager’s objective of wealth maximization includes:
o A) Maximizing the firm’s profits at the expense of risk
o B) Maximizing the market value of equity shares
o C) Minimizing the cost of capital
o D) Maximizing debt
8. The primary source of information for making financial decisions is the:
o A) Balance Sheet B) Profit and Loss Account
o C) Cash Flow Statement D) None of the above
9. Which of the following is an objective of financial management?
o A) Minimizing the cost of production
o B) Maximizing profit C) Maximizing wealth for shareholders
o D) Minimizing tax liability
10. What is the formula for calculating the current ratio?
o A) Current Assets – Current Liabilities
o B) Current Assets / Current Liabilities
o C) Quick Assets / Current Liabilities
o D) Current Liabilities / Current Assets
11. The cost of equity capital is calculated using which method?
o A) Net income method B) Capital asset pricing model (CAPM)
o C) Discounted cash flow method D) Both B and C
12. Which of the following is NOT a characteristic of equity shares?
o A) Ownership in the company
o B) Fixed dividend rate
o C) Voting rights
o D) Risk of loss
13. The principle of ‘time value of money’ suggests that:
o A) Money received today is worth more than money received in the future
o B) Money received in the future is worth more than money received today
o C) Money is valuable only in the future
o D) Money received today and in the future are equally valuable
14. In the context of financial management, ‘solvency’ means:
o A) Ability to pay short-term obligations
o B) Ability to pay long-term obligations
o C) Ability to maximize profit
o D) Ability to meet both short-term and long-term obligations
15. Which of the following is an example of a financial risk?
o A) Risk of loss of market share
o B) Risk of losing key employees
o C) Risk of not meeting short-term liabilities
o D) All of the above
16. The process of making decisions about investments in long-term assets is known as:
o A) Working capital management
o B) Capital budgeting
o C) Financial planning
o D) Cash flow management
17. The capital budgeting process involves:
 o A) Estimating future cash inflows B) Analyzing the cost of capital
o C) Assessing the risk of the investment D) All of the above
18. Which of the following is NOT a feature of a debenture?
o A) Secured by assets of the company
o B) Fixed rate of interest
o C) Voting rights for holders
o D) Fixed maturity period
19. The decision regarding the proportion of debt and equity to be used in the capital structure is
known as the:
o A) Investment decision B) Financing decision
o C) Dividend decision D) Budgeting decision
20. Which of the following is considered a financial asset?
o A) Brand value B) Inventory - C) Stock of securities D) Machinery
21. Which of the following is a tool used to calculate the cost of capital?
o A) Break-even analysis
o B) Net present value (NPV)
o C) Weighted average cost of capital (WACC)
o D) Return on equity (ROE)
22. Which of the following sources of finance is considered to be the riskiest?
o A) Equity capital B) Retained earnings C) Debentures D) Bank loan
23. Which of the following ratios is used to measure the financial leverage of a company?
o A) Current ratio B) Debt-equity ratio C) Return on equity D) Quick ratio
24. Which of the following is NOT a component of working capital management?
o A) Management of inventory B) Cash management
o C) Management of long-term assets D) Accounts receivable management
25. The ‘net working capital’ is calculated as:
o A) Current Assets – Current Liabilities
o B) Current Assets + Current Liabilities
o C) Fixed Assets – Current Liabilities
o D) None of the above
26. The main objective of dividend decisions is to:
o A) Maintain the company’s earnings B) Minimize dividend payments
o C) Maximize shareholder wealth D) Reduce the company’s expenses
27. The formula to calculate the debt-equity ratio is:
o A) Total debt / Total equity B) Total equity / Total debt
o C) Total debt / Total assets D) Total liabilities / Equity
28. Which of the following is an example of a short-term finance source?
o A) Long-term bonds B) Debentures C) Bank overdraft D) Equity shares
29. Which of the following is true about financial planning?
o A) It is necessary for companies to avoid making financial mistakes
o B) It involves setting clear objectives and strategies for finance
o C) It focuses on both short-term and long-term goals
o D) All of the above
30. Which of the following financial instruments has no maturity date?
o A) Preference shares B) Debentures C) Equity shares D) Bonds
31. The cost of capital is used primarily to:
o A) Determine the firm’s profitability B) Evaluate investment projects
o C) Set the dividend payout ratio D) Calculate sales targets
32. Which of the following is NOT a function of a financial manager?
o A) Raising funds for the company B) Making long-term investment decisions
o C) Making production decisions D) Managing cash flow
33. Which of the following is a characteristic of preferred stock?
o A) Voting rights B) Fixed dividend payment C) Risk-free returns D) Both A and B
34. The ‘time value of money’ principle emphasizes that:
o A) Money available today is worth more than the same amount in the future
o B) Future money is more valuable than money available today
o C) Money does not change in value over time
 o D) Money’s value is determined solely by inflation
35. Which of the following is NOT a factor in determining the cost of equity?
o A) Risk-free rate of return B) Market risk premium
o C) Expected dividend payout D) Return on assets
36. Which of the following statements about financial leverage is TRUE?
o A) Financial leverage refers to the use of equity in capital structure
o B) High financial leverage increases the firm’s risk
o C) Low financial leverage results in higher returns for shareholders
o D) Financial leverage does not affect the cost of capital
37. Which of the following decisions is primarily concerned with capital budgeting?
o A) Dividend payout B) Purchase of fixed assets
o C) Borrowing funds D) Marketing expenditure
38. Which of the following would improve a company’s current ratio?
o A) Increase in short-term liabilities B) Increase in long-term liabilities
o C) Decrease in current liabilities D) Decrease in current assets
39. In financial management, the term ‘liquidity’ refers to:
o A) The ability of a company to pay long-term obligations
o B) The ability to generate profits
o C) The ability to meet short-term obligations
o D) The rate at which a company generates cash
40. The cost of equity capital is:
o A) Equal to the rate of return required by shareholders
o B) Always lower than the cost of debt
o C) A fixed percentage of total equity
o D) Not relevant in capital budgeting decisions
41. Which of the following best describes a company’s net worth?
o A) Total liabilities B) Total assets
o C) Shareholder’s equity
o D) Revenue minus expenses
42. In financial management, risk refers to:
o A) The likelihood of achieving an expected return
o B) The probability of earning high profits
o C) The certainty of incurring a loss
o D) None of the above
43. The capital asset pricing model (CAPM) helps in determining:
o A) The company’s profitability
o B) The required rate of return on equity
o C) The company’s tax liabilities
o D) The debt-equity ratio
44. Which of the following is the formula for calculating the weighted average cost of capital
(WACC)?
o A) (Cost of equity × Proportion of equity) + (Cost of debt × Proportion of debt)
o B) (Cost of equity × Proportion of debt) + (Cost of debt × Proportion of equity)
o C) (Proportion of equity + Proportion of debt) / Total capital
o D) Cost of debt × Proportion of debt
45. Which of the following is an example of an intangible asset?
o A) Machinery B) Patents
o C) Inventory D) Buildings
46. Which of the following would be considered a capital expenditure?
o A) Purchase of raw materials B) Purchase of equipment
o C) Payment of wages D) Payment of taxes
47. The return on investment (ROI) measures:
o A) How much profit a company generates from its assets
o B) The company’s ability to pay short-term obligations
o C) The efficiency of capital budgeting decisions
o D) The overall profitability of the company
48. Which of the following financial statements is most useful in determining the liquidity of a
company?
o A) Balance Sheet B) Income Statement
o C) Cash Flow Statement D) None of the above
49. The debt service coverage ratio is used to determine:
o A) A company’s profitability
o B) A company’s ability to pay its debt obligations
o C) A company’s operational efficiency
o D) A company’s market value
50. A company’s financial policy should be based on:
o A) Maximizing profit B) Minimizing debt
o C) Maximizing shareholder wealth D) Minimizing taxes

1.C) Maximizing shareholder wealth

2. A) To maximize the market price of shares
3. B) Discounting
4. B) Debentures
5. B) The mix of equity and debt used by a company
6. B) Ensuring adequate supply of funds
7. B) It is the return expected by shareholders on their investment
8. B) The use of debt to finance the company
9. C) Financing decision
10. C) Maximize shareholder wealth
11. C) Retained earnings
12. C) Difference between current assets and current liabilities
13. A) Current Assets / Current Liabilities
14. C) Debentures
15. C) Risk and return analysis
16. A) Tax benefits
17. A) High level of debt
18. A) A company’s ability to meet short-term obligations
19. D) Making strategic investment decisions
20. D) All of the above
21. B) Cash flow estimation
22. C) Debt-equity ratio
 23. D) All of the above
24. C) To forecast the company’s financial needs
25. C) Marketing decision
26. A) Return required by investors
27. C) Calculate the cost of long-term capital
28. B) Increased risk of insolvency
29. B) The mix of debt and equity financing
30. B) A company’s ability to pay its long-term debts
31. B) Equity capital
32. C) Minimizing the total cost of financing
33. D) Market share
34. C) Management of current assets and liabilities
35. A) No cost associated
36. C) Better management of funds and assets
37. B) How to allocate earnings between dividends and retained earnings
38. B) Quick ratio
39. B) Total revenue equals total costs
40. A) No repayment obligation
41. A) The expected profitability of a project
42. C) Balancing risk and return in capital allocation decisions
43. A) To raise long-term capital without diluting ownership
44. B) Operating profit before interest and taxes
45. B) Debt-equity ratio analysis
46. B) The risk associated with the volatility of returns on investments
47. B) Rent for factory building
48. B) Meet short-term obligations
49. B) Capital tied up in unproductive assets
50. C) Helps in maintaining long-term solvency

1. A) Retained earnings
2. B) Equal to the rate of interest paid on debt
3. A) Maximizes the market value of the company’s shares
4. B) Select profitable projects to invest in
5. D) Both B and C (Bank and Insurance company)
6. B) Borrowed funds and equity capital
7. B) Maximizing the market value of equity shares
8. C) Cash Flow Statement
9. C) Maximizing wealth for shareholders
10. B) Current Assets / Current Liabilities
11. D) Both B and C (CAPM and Discounted Cash Flow)
12. B) Fixed dividend rate
13. A) Money received today is worth more than money received in the future
14. B) Ability to pay long-term obligations
15. C) Risk of not meeting short-term liabilities
16. B) Capital budgeting
17. D) All of the above
18. C) Voting rights for holders
19. B) Financing decision
20. C) Stock of securities
21. C) Weighted average cost of capital (WACC)
22. A) Equity capital
23. B) Debt-equity ratio
24. C) Management of long-term assets
25. A) Current Assets – Current Liabilities
26. C) Maximize shareholder wealth
27. A) Total debt / Total equity
28. C) Bank overdraft
29. D) All of the above
30. C) Equity shares
31. B) Evaluate investment projects
32. C) Making production decisions
33. D) Both A and B
34. A) Money available today is worth more than the same amount in the future
35. D) Return on assets
36. B) High financial leverage increases the firm’s risk
37. B) Purchase of fixed assets
38. C) Decrease in current liabilities
39. C) The ability to meet short-term obligations
40. A) Equal to the rate of return required by shareholders
41. C) Shareholder’s equity
42. A) The likelihood of achieving an expected return
43. B) The required rate of return on equity
44. A) (Cost of equity × Proportion of equity) + (Cost of debt × Proportion of debt)
45. B) Patents
46. B) Purchase of equipment
47. A) How much profit a company generates from its assets
48. A) Balance Sheet
49. B) A company’s ability to pay its debt obligations
50. C) Maximizing shareholder wealth

1. Which of the following is the primary objective of financial markets?

o A) To facilitate the movement of money from one economy to another - B) To help businesses
raise funds
o C) To create wealth for investors - D) To regulate government spending
2. The market where new securities are issued is called:
o A) Secondary Market - B) Derivative Market
o C) Primary Market - D) Money Market
3. The main function of the stock exchange is to:
o A) Assist in raising capital - B) Regulate the financial institutions
o C) Help companies trade products - D) Determine the national income
4. Which of the following instruments are traded in the money market?
o A) Bonds and Debentures - B) Treasury Bills and Certificates of Deposit
o C) Stocks and Shares - D) Real Estate
5. Which of the following is an example of a capital market instrument?
o A) Treasury Bills - B) Commercial Paper
o C) Debentures - D) Certificate of Deposit
6. The organization responsible for regulating the securities market in India is:
o A) RBI - B) IRDA
o C) SEBI - D) NITI Aayog
7. Which of the following is the best description of a derivative market?
o A) A market where goods are sold and bought for immediate delivery - B) A market where
financial instruments derive their value from an underlying asset
o C) A market for government bonds - D) A market for high-risk securities
8. The Securities and Exchange Board of India (SEBI) was established in the year:
o A) 1990 - B) 1992
o C) 1988 - D) 2000
9. Which of the following are long-term financial markets?
o A) Capital Market - B) Money Market
o C) Commodities Market - D) Real Estate Market
10. Which of the following is a feature of the primary market?
o A) It deals in the sale of previously issued securities - B) It helps in the creation of new
securities
o C) It is highly regulated by the central bank - D) It involves foreign currency transactions
11. The process by which companies raise capital by issuing new shares to the public is known as:
o A) Private Placement - B) Public Offering
o C) IPO (Initial Public Offering) - D) Bond Issuance
12. Which of the following instruments is issued in the money market?
o A) Treasury Bills - B) Government Bonds
o C) Corporate Stocks - D) Equity Shares
13. Which of the following is NOT a part of the capital market?
o A) Equity Shares - B) Debentures
o C) Treasury Bills - D) Preference Shares
14. A secondary market facilitates:
o A) Buying and selling of new securities - B) Buying and selling of existing securities
o C) The creation of new securities - D) None of the above
15. The stock market is an example of which type of market?
o A) Money Market - B) Capital Market
o C) Commodity Market - D) Foreign Exchange Market
16. Which of the following is a short-term borrowing instrument?
o A) Debentures - B) Treasury Bills
o C) Equity Shares - D) Bonds
17. Which of the following is the role of a broker in the stock exchange?
o A) To raise capital for a company - B) To facilitate the buying and selling of securities
o C) To decide the market price of securities - D) To regulate the stock exchange
18. Which of the following is NOT a feature of a bond?
o A) Fixed maturity period - B) Fixed interest payment
o C) Ownership in the company - D) Tradeable in the secondary market
19. The market for government bonds is called the:
o A) Money Market - B) Capital Market
o C) Foreign Exchange Market - D) Debt Market
20. Which of the following is an example of a secondary market instrument?
o A) IPO - B) Stock of a listed company
o C) Commercial Paper - D) Treasury Bills
21. The primary market involves:
o A) Trading of existing securities - B) Sale of new securities
o C) Buying and selling of stocks only - D) Government securities
22. Which of the following is NOT traded in the money market?
o A) Treasury Bills - B) Commercial Paper
o C) Debentures - D) Repurchase Agreements
23. Which of the following best defines a financial instrument?
o A) A product used for trading in a commodity market - B) A security used for investing in a
capital market
o C) A document that represents a financial claim or ownership
o D) An instrument used by a company for raising loans
24. The term ‘liquidity’ in the context of financial markets refers to:
o A) The ability to pay off debt - B) The ease with which an asset can be converted into cash
o C) The ability to earn interest on securities - D) The market value of an asset
25. A market where buyers and sellers deal directly with each other without the involvement of
intermediaries is called a:
o A) Dealer Market - B) Auction Market
o C) Over-the-Counter Market - D) Direct Market
26. A government agency that regulates the financial markets and ensures investor protection is
called:
o A) RBI - B) SEBI
o C) NSE - D) BSE
27. Which of the following describes the role of an underwriter in the primary market?
o A) To issue securities to the public - B) To provide loans to investors
o C) To buy securities from the issuer and sell them to the public
o D) To manage the stock exchange
28. The process of converting securities into cash is known as:
o A) Liquidity - B) Mobilization
o C) Capitalization - D) Trading
29. Which of the following is true about the bond market?
 o A) It deals with short-term debt instruments - B) Bonds are usually issued by companies only
o C) Bonds can be traded in the secondary market - D) Bonds are not considered a safe
investment
30. Which of the following is NOT a function of the capital market?
o A) Facilitates long-term investments - B) Helps in the creation of new securities
o C) Helps in the efficient allocation of resources - D) Provides short-term funding for business
31. The risk associated with interest rate fluctuations in the bond market is known as:
o A) Credit risk - B) Market risk
o C) Interest rate risk - D) Liquidity risk
32. Which of the following is NOT a characteristic of an equity share?
o A) Voting rights - B) Fixed dividend
o C) Ownership in the company - D) Capital appreciation
33. Which of the following is the term used for the buying and selling of currencies in the foreign
exchange market?
o A) Forex Trading - B) Currency Exchange
o C) Foreign Exchange Swap - D) Currency Futures
34. The role of a financial intermediary in the financial market is to:
o A) Regulate the financial market - B) Facilitate transactions between buyers and sellers
o C) Create new securities - D) Provide loans to companies
35. Which of the following is a long-term debt instrument issued by a company?
o A) Treasury Bills - B) Commercial Paper
o C) Corporate Bonds - D) Repurchase Agreements
36. The organization responsible for overseeing the functioning of stock exchanges in India is:
o A) NSE - B) RBI
o C) SEBI - D) Ministry of Finance
37. The market for government securities is also called the:
o A) Stock Market - B) Bond Market
o C) Money Market - D) Forex Market
38. Which of the following describes a futures contract?
o A) A contract to buy an asset at a future date for a fixed price - B) A loan agreement with a
fixed interest rate
o C) A contract to buy an asset immediately at a market price - D) A contract to issue new
securities
39. A market where securities are issued and bought back by the government is called:
o A) Primary Market - B) Government Securities Market
o C) Money Market - D) Secondary Market
40. The value of a company’s shares is determined by the:
o A) Book value of its assets - B) Supply and demand in the market
o C) Amount of debt it holds - D) Profitability of the company
41. Which of the following is a characteristic of the money market?
o A) Short-term instruments are traded - B) It deals with long-term securities
o C) It facilitates the trading of bonds
o D) It is primarily for institutional investors
42. The ‘capital’ in capital markets refers to:
o A) Short-term financial instruments - B) Equity and debt instruments
o C) Currency exchange rates - D) Corporate bonds
43. Which of the following is NOT a financial instrument used in the money market?
o A) Commercial Paper - B) Treasury Bills
o C) Bonds - D) Certificates of Deposit
44. Which of the following best describes a mutual fund?
o A) A loan instrument for corporations - B) A pool of funds collected from various investors to
invest in securities
o C) A short-term lending instrument - D) A derivative financial instrument
45. Which of the following is a key function of the Reserve Bank of India in the financial markets?
o A) Issuing new shares to companies - B) Regulating commercial banking activities
o C) Trading in the stock market - D) Facilitating foreign exchange transactions
46. A market in which financial products are bought and sold for immediate delivery is called:
 o A) Spot Market - B) Futures Market
o C) Primary Market - D) Secondary Market
47. The buying and selling of assets that are similar to those in the capital markets but are not
directly linked to a company's shareholding is done in:
o A) Commodity Market - B) Futures Market
o C) Currency Market - D) Foreign Exchange Market
48. Which of the following financial instruments is considered a hybrid security?
o A) Preference Shares - B) Debenture
o C) Equity Shares - D) Convertible Bonds
49. Which of the following is a characteristic of the stock market?
o A) Provides short-term financing - B) Provides long-term financing
o C) Deals with government securities - D) Deals exclusively with foreign currencies
50. Which of the following is NOT a function of SEBI?
o A) Protecting investors from fraud - B) Regulating stock exchanges
o C) Issuing government bonds - D) Facilitating a fair trading environment

 Which of the following is NOT a characteristic of a capital market?

 A) Deals with long-term instruments | B) Involves buying and selling of stocks and bonds
 C) Provides liquidity for short-term investments | D) Facilitates long-term capital raising

 Which of the following markets deals with short-term securities?

 A) Money Market | B) Capital Market

 C) Foreign Exchange Market | D) Commodity Market

 Which of the following is a government debt instrument traded in the money market?

 A) Bonds | B) Treasury Bills

 C) Debentures | D) Shares

 Which type of market deals with the buying and selling of existing securities?

 A) Primary Market | B) Secondary Market

 C) Money Market | D) Futures Market

 Which of the following is an example of a derivative financial instrument?

 A) Bonds | B) Equity Shares

 C) Futures Contracts | D) Treasury Bills

 Which of the following is NOT a function of financial markets?

 A) Facilitating price discovery | B) Providing liquidity to the investors

 C) Ensuring government control over companies | D) Mobilizing savings for investment

 The first time a company offers shares to the public is known as:

 A) Secondary Offering | B) Public Offering

 C) Initial Public Offering (IPO) | D) Bond Issuance

 Which of the following is NOT a feature of the stock market?

 A) It deals with shares of listed companies | B) It provides a platform for the trading of stocks
 C) It facilitates the raising of capital by the government | D) It provides a market for buying and selling
of corporate bonds
 In the Indian financial market, which of the following is known as the “market for short-term
securities”?

 A) Capital Market | B) Money Market

 C) Foreign Exchange Market | D) Derivatives Market

 Which of the following is the primary function of a stock exchange?

 A) Facilitate trading of financial instruments | B) Provide loans to investors

 C) Issue new securities | D) Regulate stock market transactions

 Which of the following is the correct order of financial markets in terms of time to maturity?

 A) Money Market < Capital Market < Derivatives Market | B) Money Market < Derivatives Market <
Capital Market
 C) Capital Market < Money Market < Derivatives Market | D) Capital Market < Derivatives Market <
Money Market

 Which of the following is an example of a capital market instrument?

 A) Treasury Bills | B) Debentures

 C) Commercial Papers | D) Certificates of Deposit

 Which of the following is a type of market where financial instruments are bought and sold?

 A) Stock Market | B) Money Market

 C) Capital Market | D) All of the above

 Which of the following is true about the primary market?

 A) Existing securities are traded | B) New securities are issued

 C) It deals with short-term securities | D) It is a market for buying and selling government bonds

 Which of the following is NOT a function of the Reserve Bank of India in the financial markets?

 A) Issue new government securities | B) Regulate banking operations

 C) Facilitate monetary policy | D) Provide loans to private companies

 Which of the following is an example of a long-term debt instrument?

 A) Treasury Bills | B) Corporate Bonds

 C) Commercial Paper | D) Certificates of Deposit

 Which of the following is NOT a feature of the money market?

 A) Deals with short-term instruments | B) Deals with long-term instruments

 C) Provides liquidity to the financial system | D) Aims at maintaining stability in interest rates

 Which of the following is considered a "safe haven" asset in times of financial instability?

 A) Stocks | B) Gold
 C) Bonds | D) Cryptocurrency

 Which of the following is a typical participant in the capital market?

  A) Retail investors | B) Banks
 C) Pension Funds | D) All of the above

 Which of the following is true about a bond?

 A) It represents ownership in a company | B) It is a form of debt raised by companies

 C) It does not pay interest | D) It is issued in the primary market only

 Which of the following is a type of stock exchange?

 A) New York Stock Exchange | B) Tokyo Stock Exchange

 C) London Stock Exchange | D) All of the above

 Which of the following is NOT a key function of financial markets?

 A) Providing information on prices | B) Facilitating government control over companies

 C) Facilitating price discovery | D) Providing liquidity for trade

 The ‘underwriting’ function in the capital market is primarily handled by:

 A) Commercial Banks | B) Investment Banks

 C) Mutual Funds | D) Government

 Which of the following best describes an equity share?

 A) A debt instrument that pays fixed interest | B) A share of ownership in a company

 C) A loan provided to the company | D) A financial instrument that represents a claim on company
profits

 The market for government securities is known as:

 A) Corporate Bond Market | B) Government Securities Market

 C) Money Market | D) Secondary Market

 Which of the following markets is used for hedging and speculation?

 A) Capital Market | B) Money Market

 C) Derivatives Market | D) Stock Market

 Which of the following is an example of a short-term debt instrument?

 A) Treasury Bonds | B) Commercial Paper

 C) Corporate Bonds | D) Equity Shares

 In which market are government bonds primarily traded?

 A) Stock Market | B) Money Market

 C) Government Securities Market | D) Forex Market

 The buying and selling of securities between investors is done in the:

 A) Primary Market | B) Secondary Market

 C) Money Market | D) Commodity Market

 Which of the following financial products is traded in the capital market?

  A) Treasury Bills | B) Corporate Shares
 C) Commercial Paper | D) Treasury Bonds

 A 'futures contract' is a type of:

 A) Equity Instrument | B) Derivative Instrument

 C) Money Market Instrument | D) Bond

 Which of the following is a role of the Securities and Exchange Board of India (SEBI)?

 A) Issue government securities | B) Regulate the functioning of stock exchanges

 C) Provide loans to corporations | D) Manage the economy

 The trading of shares in the secondary market occurs on:

 A) Stock Exchanges | B) Derivatives Exchanges

 C) Private Deals | D) Over-the-counter Markets

 Which of the following markets is directly related to the liquidity of a financial system?

 A) Capital Market | B) Money Market

 C) Commodity Market | D) Forex Market

 The main objective of a 'Money Market' is to:

 A) Facilitate long-term investments | B) Provide short-term funds

 C) Regulate exchange rates | D) Provide equity capital

 Which of the following is true about the foreign exchange market?

 A) It deals with the buying and selling of bonds | B) It is the market where currencies are traded
 C) It deals with equity shares of companies | D) It is a type of money market

 The bond market primarily deals with:

 A) Long-term debt instruments | B) Short-term equity instruments

 C) Government securities | D) Futures contracts

 Which of the following is a key characteristic of equity markets?

 A) They provide short-term financing | B) They provide long-term financing

 C) They deal with treasury bills | D) They are used for currency trading

 A company’s ability to raise capital depends on:

 A) Market conditions | B) Interest rates

 C) Company reputation | D) All of the above

 Which of the following financial instruments offers ownership in a company?

 A) Debenture | B) Equity Shares

 C) Bonds | D) Treasury Bills

 Which of the following markets helps in the diversification of risk?

  A) Money Market | B) Stock Market
 C) Derivatives Market | D) Corporate Bond Market

Which of the following is a feature of a hybrid financial instrument?

 A) It has characteristics of both equity and debt | B) It only represents a debt obligation
 C) It is only used in secondary markets | D) It pays a fixed interest rate

 Which of the following is a primary objective of the foreign exchange market?

 A) To facilitate the conversion of currencies | B) To facilitate trading of bonds

 C) To raise funds for businesses | D) To provide loans to the government

 The Indian Securities Market is regulated by:

 A) RBI | B) SEBI
 C) Ministry of Finance | D) Stock Exchanges

 Which of the following is a type of capital market instrument?

 A) Treasury Bills | B) Debentures

 C) Commercial Paper | D) Certificate of Deposit

 The primary function of the stock exchange is to:

 A) Facilitate the purchase of commodities | B) Provide a platform for trading securities

 C) Issue securities | D) Provide liquidity to money market instruments

 Which of the following financial instruments is primarily traded in the foreign exchange market?

 A) Bonds | B) Currencies
 C) Shares | D) Debentures

 Which of the following is NOT a function of the Securities and Exchange Board of India (SEBI)?

 A) Protect investor interests | B) Ensure transparency in the securities market

 C) Regulate the operation of stock exchanges | D) Issue government bonds

 A company raises capital through:

 A) Equity shares | B) Debentures

 C) Bonds | D) All of the above

 Which of the following is an example of an interest-bearing debt instrument?

 A) Equity Shares | B) Bonds

 C) Futures Contracts | D) Commodities

1. B) To help businesses raise funds

2. C) Primary Market
3. A) Assist in raising capital
4. B) Treasury Bills and Certificates of Deposit
5. C) Debentures
6. C) SEBI
 7. B) A market where financial instruments derive their value from an underlying asset
8. B) 1992
9. A) Capital Market
10. B) It helps in the creation of new securities
11. C) IPO (Initial Public Offering)
12. B) Government Bonds
13. C) Treasury Bills
14. B) Buying and selling of existing securities
15. B) Capital Market
16. B) Treasury Bills
17. B) To facilitate the buying and selling of securities
18. C) Ownership in the company
19. B) Bond Market
20. B) Stock of a listed company
21. B) Sale of new securities
22. C) Debentures
23. C) A document that represents a financial claim or ownership
24. B) The ease with which an asset can be converted into cash
25. C) Over-the-Counter Market
26. B) SEBI
27. C) To buy securities from the issuer and sell them to the public
28. A) Liquidity
29. C) Bonds can be traded in the secondary market
30. D) Provides short-term funding for business
31. C) Interest rate risk
32. B) Fixed dividend
33. A) Forex Trading
34. B) Facilitate transactions between buyers and sellers
35. C) Corporate Bonds
36. C) SEBI
37. B) Bond Market
38. A) A contract to buy an asset at a future date for a fixed price
39. B) Government Securities Market
40. B) Supply and demand in the market
41. A) Short-term instruments are traded
42. B) Equity and debt instruments
43. C) Bonds
44. B) A pool of funds collected from various investors to invest in securities
45. B) Regulating commercial banking activities
46. A) Spot Market
47. A) Commodity Market
48. D) Convertible Bonds
49. B) Provides long-term financing
50. C) Issuing government bonds

 B) Provides liquidity for short-term investments

 A) Money Market
 B) Treasury Bills
 B) Secondary Market
 C) Futures Contracts
 C) Ensuring government control over companies
 C) Initial Public Offering (IPO)
 C) It facilitates the raising of capital by the government
 B) Money Market
 A) Facilitate trading of financial instruments
 A) Money Market < Capital Market < Derivatives Market
 B) Debentures
 D) All of the above
 B) New securities are issued
 D) Provide loans to private companies
 B) Corporate Bonds
 B) Deals with long-term instruments
 B) Gold
 D) All of the above
 B) It is a form of debt raised by companies
 D) All of the above
 B) Facilitate government control over companies
 B) Investment Banks
 B) A share of ownership in a company
 B) Government Securities Market
 C) Derivatives Market
 B) Commercial Paper
 C) Government Securities Market
 B) Secondary Market
 B) Corporate Shares
 B) Derivative Instrument
 B) Regulate the functioning of stock exchanges
 A) Stock Exchanges
 B) Money Market
 B) Provide short-term funds
 B) It is the market where currencies are traded
 A) Long-term debt instruments
 B) They provide long-term financing
 D) All of the above
 B) Equity Shares
 C) Derivatives Market
 A) It has characteristics of both equity and debt
 A) To facilitate the conversion of currencies
 B) SEBI
 B) Debentures
 B) Provide a platform for trading securities
 B) Currencies
 D) Issue government bonds
 D) All of the above

 B) Bonds