Financial Management MCQs

What is the difference between a capital gain and a capital loss.

A) A capital gain occurs when an asset is sold for more than its original purchase price, while a capital loss occurs when an asset is sold for less than its original purchase price
B) A capital gain occurs when an asset is sold for less than its original purchase price, while a capital loss occurs when an asset is sold for more than its original purchase price
C) A capital gain and a capital loss both refer to the same thing
D) A capital gain and a capital loss refer to an increase in the value of an asset over time
Answer: A) A capital gain occurs when an asset is sold for more than its original purchase price, while a capital loss occurs when an asset is sold for less than its original purchase price

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What is the difference between a balance sheet and an income statement.

A) A balance sheet shows a company’s assets, liabilities, and equity at a specific point in time, while an income statement shows a company’s revenue and expenses over a period of time
B) A balance sheet shows a company’s revenue and expenses over a period of time, while an income statement shows a company’s assets, liabilities, and equity at a specific point in time
C) A balance sheet and an income statement both show a company’s revenue and expenses
D) A balance sheet and an income statement both show a company’s assets and liabilities
Answer: A) A balance sheet shows a company’s assets, liabilities, and equity at a specific point in time, while an income statement shows a company’s revenue and expenses over a period of time

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What is the difference between a fixed rate loan and a variable rate loan.

A) A fixed rate loan has a variable interest rate, while a variable rate loan has a fixed interest rate
B) A fixed rate loan has a fixed interest rate, while a variable rate loan has a variable interest rate
C) A fixed rate loan and a variable rate loan both have the same interest rate
D) A fixed rate loan and a variable rate loan have different repayment terms
Answer: B) A fixed rate loan has a fixed interest rate, while a variable rate loan has a variable interest rate

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What is the difference between a fiscal year and a calendar year.

A) A fiscal year is a 12-month period that ends on December 31, while a calendar year is a 12-month period that can end on any day of the year
B) A fiscal year is a 12-month period that can end on any day of the year, while a calendar year is a 12-month period that ends on December 31
C) A fiscal year and a calendar year both refer to the same 12-month period
D) A fiscal year and a calendar year have different numbers of months
Answer: A) A fiscal year is a 12-month period that ends on December 31, while a calendar year is a 12-month period that can end on any day of the year

 

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What is the difference between a tax credit and a tax deduction.

A) A tax credit reduces the amount of tax owed, while a tax deduction reduces the amount of taxable income
B) A tax credit reduces the amount of taxable income, while a tax deduction reduces the amount of tax owed
C) A tax credit and a tax deduction both reduce the amount of tax owed
D) A tax credit and a tax deduction both reduce the amount of taxable income
Answer: A) A tax credit reduces the amount of tax owed, while a tax deduction reduces the amount of taxable income

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What is the difference between liquidity and solvency.

A) Liquidity refers to the ability of a company to meet its short-term obligations, while solvency refers to the ability of a company to meet its long-term obligations
B) Liquidity refers to the ability of a company to meet its long-term obligations, while solvency refers to the ability of a company to meet its short-term obligations
C) Liquidity and solvency both refer to the ability of a company to meet its short-term obligations
D) Liquidity and solvency both refer to the ability of a company to meet its long-term obligations
Answer: A) Liquidity refers to the ability of a company to meet its short-term obligations, while solvency refers to the ability of a company to meet its long-term obligations

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What is the difference between simple interest and compound interest.

A) Simple interest is calculated on the initial principal only, while compound interest is calculated on the initial principal plus any accumulated interest
B) Simple interest is calculated on the initial principal plus any accumulated interest, while compound interest is calculated on the initial principal only
C) Simple interest has a lower interest rate than compound interest
D) Simple interest has a higher interest rate than compound interest
Answer: A) Simple interest is calculated on the initial principal only, while compound interest is calculated on the initial principal plus any accumulated interest

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What is the difference between a stock and a bond.

A) Stocks represent ownership in a company, while bonds represent a loan to a company
B) Stocks represent a loan to a company, while bonds represent ownership in a company
C) Stocks have a fixed rate of return, while bonds have a variable rate of return
D) Stocks have a variable rate of return, while bonds have a fixed rate of return
Answer: A) Stocks represent ownership in a company, while bonds represent a loan to a company

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What is the difference between a dividend and a capital gain.

A) A dividend is a distribution of profits to shareholders, while a capital gain is the increase in the value of an investment
B) A dividend is the increase in the value of an investment, while a capital gain is a distribution of profits to shareholders
C) A dividend is a distribution of profits to employees, while a capital gain is a distribution of profits to shareholders
D) A dividend is the increase in the value of an employee’s compensation package, while a capital gain is the increase in the value of an investment
Answer: A) A dividend is a distribution of profits to shareholders, while a capital gain is the increase in the value of an investment

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What is the difference between a mutual fund and an index fund.

A) Mutual funds are managed actively by professional fund managers, while index funds track a specific market index passively
B) Mutual funds track a specific market index passively, while index funds are managed actively by professional fund managers
C) Mutual funds have a higher expense ratio than index funds
D) Mutual funds have a lower expense ratio than index funds
Answer: A) Mutual funds are managed actively by professional fund managers, while index funds track a specific market index passively

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