Tag: introduction to financial markets

Questions Related to introduction to financial markets

Holders of assets can readily sell their financial assets through the mechanism of the financial market. This is because financial markets provide _________.

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. valuable information about securities being traded in the market

  2. assistance in Price Discovery

  3. liquidity to Financial Assets

  4. all of the above

Show answer
Correct Option: C
Explanation:

Holders of assets can readily sell their financial assets through the mechanism of the financial market. This is because financial markets provide liquidity to Financial Assets. Liquidity of financial assets means that financial assets can be converted into cash in a short time, with little or no loss in value.

State, with reasons, whether the following statements are True or False
The financial market contributes towards the nation's economic growth and development.

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

The financial market contributes towards the nation's economic growth and development. This statement is True. 
Reasons : 
(a) The place where people and institutions borrow money are brought together with those having surplus funds, is called a Financial Market.
(b) The financial market contributes to national growth by facilitating continuous flow of surplus fund to business enterprises (sick and deficit units) through its allocative function ensuring higher rate of return to the savers/household by investing the scarce resources in the enterprises having higher productivity, increasing the rate of capital formation. 
(c) The financial market contributes a lot to the development of the entreprenurial class by financing their business requirements. It obtain funds from individual households private and public sector units. Central govt. etc. and supply these funds to those business units who need it for productive purpose.
(d) The components of Financial Market is money market and capital market. It helps in accelerating the rate of industrial and economic development of the country. As a result, the standard of living and social welfare goes up. Thus, Financial market contributes towards the nations growth and development.

Answer the following question.
Primary and secondary markets _______.

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. Compete with each other

  2. Complement each other

  3. Function independently

  4. Control each other

Show answer
Correct Option: B
Explanation:

Primary market deals with the issue of new securities. That is, through the primary market a company raises capital directly from the borrowers. That is, once the securities are issued in primary market, they are then traded in the secondary market. It is in this sense that both the markets complement each other

The amount of gold, reserve currencies and special drawing rights available for the finance of International trade is known as ______.

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. international liquidity

  2. special drawing rights

  3. international monetary fund

  4. none of the above

Show answer
Correct Option: A

The most important techniques for maintaining marketing control is?

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. Cost analysis

  2. Market share analysis

  3. Non-financial control

  4. Marketing audit

Show answer
Correct Option: A

Deep financial market is ________________________.

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. The market which attracts funds in large volume

  2. The market that attracts funds from all types of investors.

  3. The underdevelopment market due to government regulations

  4. The market that provides opportunities for sufficient orders at suitable interest rates below and above the market price.

  5. The market that has easy effective interlinkages between its various parts and sub-parts.

Show answer
Correct Option: D
Explanation:

`Deep market is one where there are always sufficient orders for buying and selling at fine quotations, both below and above the market price, and where there are good opportunities for swap deals.

Giving excess protection to domestic markets, which have high entry barriers for foreign firms, over valuation of exchange indicates the adoption of _________ by the country?

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. Inward oriented strategy

  2. Inflation control

  3. Liberalization

  4. Outwards oriented strategy

  5. Export promotion strategy

Show answer
Correct Option: A
Explanation:

The strategy adopted by the developing countries to strengthen the domestic industries by an providing lot of protection to domestic industry in the form of heavy tarrifs/ restrictions on imports is called the inward oriented strategy.

The factors responsible for integration of financial markets are ___________________.

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. Increased cross penetration of foreign ownership.

  2. Liberalization of regulations governing the financial markets

  3. The development of new financial instruments

  4. All of the above

  5. Both (A) and (C) above

Show answer
Correct Option: D
Explanation:

Integration of financial markets involves the freedom and opportunity to raise funds from and to invest anywhere in the world, through any type of instrument. All the given factors are responsible for Integration of financial markets. 

The net liquidation value of a firm is the best indicator of its financial health. This is the proposal of ____________.

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. Beaver model

  2. L C Gupta model

  3. Wilcox model

  4. Altman's Z score model

  5. None of the above

Show answer
Correct Option: C
Explanation:

Wilcox proposed that the net liquidation value of the firm is the best indicator of its financial health. The net liquidation value can be obtained by the difference in liquidation value of a firms assets and the liquidation value of its liabilities.

The long-term investment of a firm involves __________________.

business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

  1. Irreversible investments

  2. Investments which benefit the firm for number of years

  3. All of the above

  4. None of the above

Show answer
Correct Option: C
Explanation:

Long-term decisions involve setting up of the firm, expansion, diversification modernization and other similar capital expenditure decisions requiring huge investment made by raising long-term sources, the benefits of which can be seen only in the long term. Because of the huge investments involved these decisions are irreversible.