Q1:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

The economic system in which business performs consists of _____ main sectors.
A. households
B. business firms
C. Both A and B
D. None of the above
Solution: C
Explanation- The economic system in which business performs consists of two main sectors.
Household sectors is the sector that provides funds to the business firm who further invest
these funds to the productive investment proposals.

Q2:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

Which of the following creates the link between the savers and investors?
A. Financial manager
B. Financial market
C. Financial instruments
D. None of the above
Solution: B
Explanation- Financial market is the place where saver may save they unproductive funds in
various financial instruments whereas the investors may procure funds from the various
financial institutions present in the market.

Q3:

Question Type: Concept

Question Variety: Text Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

Assertion (A): The financial market helps in mobilising the funds from saver to the investors.
Reason (R): The mobilization of funds from saver to the investor is known as allocative
function which is performed by financial market.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: A
Explanation- The financial market helps in mobilising the funds from saver to the investors.
The mobilization of funds from saver to the investor is known as allocative function which is
performed by financial market.

Q4:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

The rate of return would be __________ if allocative function is performed efficiently.

A. lower
B. higher
C. equal to the cost of capital
D. unaffected
Solution: B
Explanation- Allocative function refers to the mobilization of savings from household to the
investors. If allocation function is properly performed, then the rate of return would be
higher.
Q5:
Question Type: Conceptual
Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

Assertion (A): The efficient allocation is said to be done when the returns are high.
Reason (R): The firm with the highest productivity should be allocated with limited funds for
efficient allocation.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: B
Explanation- Both statements are correct as they are the consequences of efficient allocation
funds. The efficient allocation is said to be done when the returns are high. The firm with the
highest productivity should be allocated with limited funds for efficient allocation.

Q6:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

Identify the correct statement.

Codes:
I. Financial intermediation is the process through which allocation of funds can be
done.
II. Banks is one of an important financial institution.
III. Financial market is the place where exchange of financial assets takes place.
IV. Financial market exists whenever financial transactions occur.
Options:
A. Only statement II is correct
B. Statement III and IV are correct
 C. Statement II, III and IV are correct
D. All statements are incorrect
Solution: D
Explanation- Financial market is the place where exchange of financial assets takes place.
Financial market is the place where exchange of financial assets takes place. Banks is one of
an important financial institution. Financial intermediation is the process through which
allocation of funds can be done.

Q7:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

Which of the following is/are the major alternative mechanism through which allocation of
fund takes place?
A. Banks
B. Financial markets
C. Both A and B
D. None of the above
Solution: C
Explanation- Two major alternative mechanism through which allocation of fund takes place
i.e. Banks and financial markets. Household saves their fund to the bank who further lend
money to the investors.

Q8:

Question Type: Concept

Question Variety: Text Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

Financial system is comprised of ________.

Options:
A. Banks
 B. households
C. financial market
D. business firms
E. All of the above
Solution: E
Explanation- Financial system is the broader term which defines the whole arrangement of
financial activities. It is comprised of financial market, business firms, households and banks
or other intermediaries.
Q9:

Question Type: Numerical

Question Variety: Equation Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

Which of the following is/are the form of financial transactions through which asset creation
takes place?
A. Sales of equity shares
B. Issuance of debentures
C. Both A and B
D. None of the above
Solution: C
Explanation- Financial transactions through which assets creation may takes place includes
issuance of equity shares and debentures and sales of existing assets such as debentures,
shares or other financial assets.

Q10:

Question Type: Conceptual

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Financial Market
Concept Field: Concept of Financial market

Assertion (A): Householder provides funds to the business firms through financial
intermediaries.
Reason (R): The system that facilitates the exchange and creation of financial assets is known
as financial system.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: A
Explanation- Financial system is the system that facilitates the exchange or creation of
financial assets. In this system, households provide funds to the business firms through
financial intermediaries such as banks.