Financial Management MCQ Questions and Solutions with Explanations | Commerce

Factoring is a form of receivables financing. Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.

The relevant risk for a well-diversified portfolio is market risk. Market risk is the possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets in which he or she is involved.

The decision function of financial management can be broken down into the investment, financing, and asset management decisions.

A portfolio with securities all having positive correlation with each other has the least reduction of risk. A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds.

The time required to process and execute an order is called lead time. Lead time is the amount of time that passes from the start of a process until its conclusion.

Portfolio risk is best measured by the weighted average of individual risk. Portfolio risk is a chance that the combination of assets or units, within the investments that you own, fail to meet financial objectives.

The focal point of financial management in a firm is the creation of value for shareholders.

Markowitz's main contribution to portfolio theory is insight about the relative importance of variances and co variances in determining portfolio risk.

Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are perfectly positively correlated with each other. The term "security" is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation via stock a creditor relationship with a governmental body or a corporation represented by owning that entity's bond or rights to ownership as represented by an option.

The market price of a share of common stock is determined by individuals buying and selling the stock. The market value per share or fair market value of a stock is the price that a stock can be readily bought or sold in the current market place.