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Business & Finance Quiz Worksheet

QUIZLINO
Set 1 · Mixed
Name:Class / Group:Score:     / 20

Choose the best answer for each question. The answer key is on the last page.

  1. What is the primary purpose of a credit risk assessment?
    A. To evaluate the likelihood that a borrower will repay a loan B. To determine stock prices C. To increase business profits D. To calculate taxes
  2. What is the purpose of a dividend payout ratio?
    A. To measure the percentage of earnings paid to shareholders as dividends B. To calculate employee bonuses C. To determine loan interest rates D. To measure company debt
  3. Which market condition is characterized by falling stock prices over a long period?
    A. Bull Market B. Bear Market C. Stable Market D. Open Market
  4. What is a junk bond?
    A. A high-risk, high-yield bond with a low credit rating B. A bond issued only by governments C. A bond that pays no interest D. A bond backed by gold
  5. What is a contingent liability?
    A. A potential obligation that depends on a future event B. A company's total revenue C. A guaranteed profit D. A type of investment fund
  6. What is the primary function of an investment bank?
    A. To help companies raise capital and provide financial advisory services B. To accept savings deposits from the public C. To issue driver's licenses D. To collect income taxes
  7. What is the purpose of a company's annual report?
    A. To summarize its financial performance and business activities B. To advertise new products C. To recruit employees D. To issue new currency
  8. What is the debt-to-equity ratio used to measure?
    A. A company's financial leverage B. The number of company employees C. The company's annual revenue D. The value of its inventory
  9. What is an asset?
    A. Money owed by a business B. Something valuable owned by a business C. A business expense D. A tax payment
  10. What is the purpose of a poison pill strategy?
    A. To make a hostile takeover more difficult or expensive B. To reduce company taxes C. To increase employee salaries D. To improve product quality
  11. What do you call money deposited into a bank account?
    A. Loan B. Deposit C. Dividend D. Salary
  12. What does EBITDA stand for?
    A. Earnings Before Interest, Taxes, Depreciation, and Amortization B. Earnings Before Income Tax and Business Assets C. Estimated Business Income, Taxes, and Assets D. Earnings Before Internal Tax Adjustments
  13. Which type of investment represents lending money to a government or company?
    A. Share B. Bond C. Mutual Fund D. ETF
  14. What is a liquidity trap in economics?
    A. A situation where low interest rates fail to stimulate spending B. A shortage of bank accounts C. A rise in stock prices D. A sudden increase in taxes
  15. What is a callable bond?
    A. A bond that the issuer can redeem before its maturity date B. A bond that cannot be sold C. A bond issued only by private companies D. A bond that never pays interest
  16. What is a budget deficit?
    A. When government spending exceeds government revenue B. When exports exceed imports C. When inflation falls below 2% D. When interest rates reach zero
  17. What is the primary purpose of business valuation?
    A. To estimate the economic value of a business B. To determine employee wages C. To prepare tax returns only D. To increase product sales
  18. What is a unicorn startup?
    A. A privately held startup valued at over $1 billion B. A company with no employees C. A government-owned technology firm D. A nonprofit startup
  19. What is the ownership unit of a company called?
    A. Bond B. Share C. Invoice D. Voucher
  20. What is the primary role of a shareholder in a company?
    A. To manage daily operations B. To own a portion of the company C. To audit financial records D. To collect taxes
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Answer key – Business & Finance (Set 1)

  1. A. To evaluate the likelihood that a borrower will repay a loan – Credit risk assessment evaluates how likely a borrower is to repay a loan, by checking income, existing debts, credit history and collateral. Banks use it to decide whether to lend and at what interest rate. Higher-risk borrowers usually pay higher rates.
  2. A. To measure the percentage of earnings paid to shareholders as dividends – The dividend payout ratio measures the percentage of earnings paid to shareholders as dividends: Dividends ÷ Net Profit × 100. A 40% payout ratio means the company pays out ₹40 of every ₹100 earned and keeps ₹60 for growth. Mature companies usually have higher payout ratios.
  3. B. Bear Market – A bear market is a long period of falling stock prices, usually a drop of 20% or more from a recent high. It is named after the way a bear attacks by swiping its paws downward. Bear markets often happen during recessions, when investors are pessimistic.
  4. A. A high-risk, high-yield bond with a low credit rating – A junk bond is a high-risk bond with a low credit rating (below BBB-), issued by companies with weaker finances. To attract investors, it pays higher interest (yield). Michael Milken popularised junk bonds in the 1980s. They are also called high-yield bonds.
  5. A. A potential obligation that depends on a future event – A contingent liability is a potential obligation that depends on a future event, such as losing a lawsuit or a guarantee being called. It is not recorded as a liability unless it becomes probable, but it is disclosed in the notes to the accounts so investors are aware of the risk.
  6. A. To help companies raise capital and provide financial advisory services – An investment bank helps companies and governments raise capital by issuing shares and bonds, and gives advice on mergers and acquisitions. Goldman Sachs and Morgan Stanley are famous examples, and Kotak and ICICI Securities are well known in India. Most do not take savings deposits from the public.
  7. A. To summarize its financial performance and business activities – An annual report summarises a company's financial performance and activities over the year. It includes audited financial statements, a message from the chairman, management discussion, and information on strategy, governance and risks. Listed companies in India must publish one every year.
  8. A. A company's financial leverage – The debt-to-equity ratio measures financial leverage: total debt divided by shareholders' equity. A ratio of 2 means the company has ₹2 of debt for every ₹1 of equity. High leverage can boost returns in good times but increases the risk of trouble if profits fall.
  9. B. Something valuable owned by a business – An asset is something valuable owned by a business that can provide future benefit, such as cash, buildings, machinery, inventory or patents. Assets are listed on the balance sheet. Tangible assets can be touched, while intangible assets include brand names, trademarks and software.
  10. A. To make a hostile takeover more difficult or expensive – A poison pill is a defensive strategy that makes a hostile takeover more difficult or expensive. A common version lets existing shareholders buy extra shares at a discount if a bidder crosses a certain ownership level, diluting the bidder's stake. Twitter adopted one in 2022 against Elon Musk.
  11. B. Deposit – Money placed into a bank account is called a deposit. Banks keep deposits safe and use part of them to give loans. In India, deposits of up to ₹5 lakh per person per bank are insured by DICGC, a subsidiary of the Reserve Bank of India, if a bank fails.
  12. A. Earnings Before Interest, Taxes, Depreciation, and Amortization – EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. It measures a company's operating profit before financing and accounting choices, making it easier to compare companies. Critics, including Warren Buffett, warn that it can hide real costs like equipment replacement.
  13. B. Bond – A bond is an investment in which you lend money to a government or company. In return, the issuer pays regular interest, called the coupon, and repays the original amount on a fixed maturity date. Bonds are usually less risky than shares but offer lower potential returns.
  14. A. A situation where low interest rates fail to stimulate spending – A liquidity trap is a situation where interest rates are very low, near zero, but people and businesses still hoard cash instead of spending or investing, so lowering rates further does not boost the economy. Economist John Maynard Keynes described it; Japan experienced it in the 1990s.
  15. A. A bond that the issuer can redeem before its maturity date – A callable bond can be redeemed (repaid) by the issuer before its maturity date, usually when interest rates fall, letting the issuer borrow again more cheaply. Because investors face the risk of early repayment, callable bonds usually offer higher interest rates.
  16. A. When government spending exceeds government revenue – A budget deficit occurs when government spending exceeds government revenue in a year. The gap is usually covered by borrowing. In India, the central government's shortfall is called the fiscal deficit, and the government sets annual targets to reduce it as a percentage of GDP.
  17. A. To estimate the economic value of a business – Business valuation estimates the economic value of a business. Common methods include discounted cash flow (based on future earnings), comparing with similar companies, and asset-based valuation. Valuation is needed for selling a business, raising investment, mergers and taxes.
  18. A. A privately held startup valued at over $1 billion – A unicorn is a privately held startup valued at over $1 billion. Investor Aileen Lee coined the term in 2013 because such companies were rare. India has over 100 unicorns, including Zerodha, Swiggy and PhysicsWallah. A company valued above $10 billion is called a decacorn.
  19. B. Share – A share (or stock) is a unit of ownership in a company. Owning shares makes you a part-owner, called a shareholder. If a company has 1,000 shares and you own 10, you own 1% of it. Shareholders may receive dividends and can usually vote on important company decisions.
  20. B. To own a portion of the company – A shareholder owns a portion of a company by holding its shares. Shareholders can earn money through dividends and rising share prices, and can vote on major decisions, such as electing directors. They do not usually manage daily operations, which is the job of management.