Topic: Basics of Business Finance and Financial Markets

Search 500 + past questions and counting.

BMF – Nov 2020 – L1 – SB – Q6 – Basics of Business Finance and Financial Markets

Explanation of loan covenants, reasons and benefits for share repurchase, and features of a finance lease arrangement.

Question

(a) For many loan agreements, the borrower is required to provide undertakings or guarantees of some kind.
Distinguish between covenants and guarantees. (5 Marks)

(b) State THREE reasons why a company will repurchase its shares and THREE benefits that will accrue to the company for doing so. (6 Marks)

(c) Companies can acquire assets with finance lease instead of buying assets with equity or debt capital.
State SIX main features of a finance lease arrangement. (9 Marks)

(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate finance, Finance lease, Guarantees, Loan Covenants, Share repurchase
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q16 – Basics of Business Finance and Financial Markets

Calculate the present value of N12,000 received in one year at a 5% time preference rate.

Question

Assuming a 5% time preference rate, what is the present value of N12,000 received one year from now?
A. N11,428.80
B. N11,539.90
C. N12,428.80
D. N12,539.90
E. N13,528.80

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Calculations, Present Value, Time Preference Rate
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q15 – Basics of Business Finance and Financial Markets

Identify why banks are considered important financial intermediaries.

Question

Banks are important financial intermediaries because they:
A. Create new debt
B. Are the only source of debt finance
C. Are the only source of long-term finance
D. Operate between investors and borrowers
E. Take deposits from all their customers

Answer

Find Related Questions by Tags, levels, etc.

Tags: Banking, Financial Intermediaries, Investment
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Identify the term for strategies maximizing profits through innovative financial methods.

Question

Strategies adopted by companies to maximize profits using innovative methods to compute the fair value of financial instruments is best described as:
A. Financial accounting
B. Financial engineering
C. Strategic financial management
D. Strategic management accounting
E. Strategic financial accounting

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Engineering, Financial instruments, Profit Maximization
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q10 – Basics of Business Finance and Financial Markets

Calculate the amount to set aside annually to accumulate a sum for a car replacement in 5 years.

Question

How much should Mr. Eaglet set aside at the end of each year to replace his motor car in 5 years’ time if the cost of a new car remains at ₦5 million and the rate of interest stays at 7% per annum?
A. N669,349.23
B. N779,349.23
C. N869,349.23
D. N979,349.23
E. N989,349.23

Answer

Find Related Questions by Tags, levels, etc.

Tags: Annuities, Financial planning, Future Value, Savings
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q9 – Basics of Business Finance and Financial Markets

Calculate the present value needed to reach a lump sum in 5 years with compound interest.

Question

Lokoson must pay a lump sum of N960,000 in 5 years. What amount deposited today at 5.8% compounded annually will make up the sum of money?
A. N724,200.36
B. N724,300.37
C. N725,200.36
D. N725,300.37
E. N725,300.37

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compound Interest, Lump Sum, Present Value, Time value of money
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q8 – Basics of Business Finance and Financial Markets

Calculate the compound interest earned on a deposit over 11 years at 6.50%, compounded quarterly.

Question

What is the amount of interest earned by a deposit of N414,000 for 11 years at 6.50% compounded quarterly?
A. N427,455
B. N427,467
C. N437,455
D. N437,467
E. N447,467

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compound Interest, Financial Mathematics, Investment
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q7 – Basics of Business Finance and Financial Markets

Calculate the simple interest rate for a 3-month loan.

Question

Ronny wants to borrow N160,000 from his friend. He is willing to pay back N174,400 in 3 months. What simple interest rate will be applicable?
A. 34%
B. 35.5%
C. 36%
D. 36.5%
E. 37%

Answer

Find Related Questions by Tags, levels, etc.

Tags: Interest Rate, Loan Repayment, Simple Interest
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

Question

Which of the following is NOT a function of a stock exchange?

A. Provide a system in which shares can be traded in a regulated manner
B. Enforce rules of business conduct on market participants
C. Ensure availability of shares and bonds to be traded by investors
D. Ensure that there is an efficient system for providing new financial information about companies to investors in the market
E. Provide a system for recording information about the prices at which shares are bought and sold and making them available to participants

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Markets, Securities Trading, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

Question

Which of the following is NOT a function of a stock exchange?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Markets, Securities Trading, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – May 2016 – L1 – SA – Q11 – Basics of Business Finance and Financial Markets

This question assesses the understanding of sources of business financing.

Question

Which of the following is NOT a source of financing?
A. Bank overdrafts
B. Short-term bank loans
C. Suppliers
D. Proceeds of disposal of fixed assets
E. Operating leases

Answer

Find Related Questions by Tags, levels, etc.

Tags: Asset Disposal, Financing, Short-term Finance
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – May 2016 – L1 – SA – Q9 – Basics of Business Finance and Financial Markets

This question tests the calculation of Accounting Rate of Return (ARR) for a project based on financial data provided.

Question

ABC Limited is considering investing in a project with the following financial data:

The project life span is FOUR years and has no residual value at the end of the FOUR years. Calculate the ARR.

A. 25%
B. 30%
C. 32%
D. 33%
E. 35%

Answer

Find Related Questions by Tags, levels, etc.

Tags: ARR, Investment decisions, Project Appraisal
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – May 2016 – L1 – SA – Q8 – Basics of Business Finance and Financial Markets

This question focuses on identifying sources of short-term funds for a business.

Question

The following are sources of short-term funds, EXCEPT:
A. Bank Overdraft
B. Trade Payables
C. Operating Leases
D. Lease Finance
E. Debt Factoring

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business Loans, Funding Options, Short-term Finance
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – Nov 2014 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Discuss the segments of the Nigerian financial market, the advantages of listing on the stock exchange, and the listing requirements for the First-Tier and Alternative Securities Markets.

Question

The financial market is a mechanism by which surplus and deficit units of an economy can be brought together to accelerate the growth and development of the economy.

Required:

a. Explain the primary and secondary segments of the Nigerian financial market. (4 Marks)
b. State and explain FOUR advantages that a company would derive from listing on the stock exchange. (8 Marks)
c. List in a tabular form FOUR listing requirements each for the First-Tier and Alternative Securities Markets. (8 Marks)

(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Alternative Securities Market, First-Tier, Listing Requirements, Primary Market, Secondary Market, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2014

BMF – Nov 2014 – L1 – SA – Q11 – Basics of Business Finance and Financial Markets

Identifies the type of leaders who bring about innovation in organizational processes.

Question

Leaders who possess special ability to bring about innovation in organizational processes and development can be referred to as
A. Transactional leaders
B. Transformational leaders
C. Inventional leaders
D. Facilitative leaders
E. Strategic leaders

Answer

Find Related Questions by Tags, levels, etc.

Tags: Innovation, Leadership, Organizational Development
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2014

BMF – Nov 2014 – L1 – SA – Q7 – Basics of Business Finance and Financial Markets

Identifies the component not part of the financial structure of a firm.

Question

The financial structure of a firm is made up of the following components EXCEPT:

A. Ordinary shares
B. Preference shares
C. Debentures
D. Undistributed profits
E. Dividends

Answer

Find Related Questions by Tags, levels, etc.

Tags: Debentures, Financial structure, Shares, Undistributed Profits
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2014

BMF – May 2015 – L1 – SB – Q6 – Basics of Business Finance and Financial Markets

Describe the Boston Consulting Group (BCG) matrix used for business portfolio management.

Question

Describe the Boston Consulting Group (BCG) matrix.

Answer

Find Related Questions by Tags, levels, etc.

Tags: BCG Matrix, Product-Market Strategy, Strategic Analysis
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2015

BMF – May 2015 – L1 – SB – Q4 – Basics of Business Finance and Financial Markets

Discuss major cash flow items in capital investment projects and explain the payback period investment appraisal method.

Question

a. List and explain FOUR major cashflow items to be included in a capital investment project. (8 Marks)
b.
i. Explain the payback period technique of investment appraisal. (4 Marks)
ii. State TWO advantages and TWO disadvantages of payback period. (8 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Investment, Cash Flows, Investment Appraisal, Payback Period
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2015

BMF – MAY 2015 – L1 – SA – Q18 – Basics of Business Finance and Financial Markets

Identifying which option is not a financial instrument in the money market.

Question

Which of these is NOT a financial instrument traded in the money market?

A. Treasury Bills
B. Call money
C. Development stock
D. Stabilization securities
E. Bill Finance scheme

Answer

Find Related Questions by Tags, levels, etc.

Tags: Call money, Development stock, Financial instruments, Money market, Treasury bills
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2015

BMF – MAY 2015 – L1 – SA – Q15 – Basics of Business Finance and Financial Markets

Identifying the most commonly used source of short-term finance for businesses.

Question

Which of the following sources of finance available to businesses is the most frequently used for short-term finance?

A. Bank borrowing
B. Rights issues
C. New share issues
D. Retained earnings
E. Trade credit

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bank borrowing, Financial management, Short-term Finance, Sources of finance, Trade Credit
Level: Level 1