Test: Common Business Terminologies - CA Foundation MCQ

• World Bank: The finance agency created by the 1944 Bretton Woods negotiations was the World Bank.


• Establishment: The World Bank was established to provide financial and technical assistance to developing countries for development projects.


• Objectives: Its main objectives include reducing poverty, promoting sustainable economic development, and fostering investment in developing countries.


• Members: The World Bank has 189 member countries who work together to support these goals.


• Funding: It raises funds through issuing bonds on the world's financial markets and also receives contributions from member countries.


• Projects: The World Bank funds a wide range of projects in areas such as education, healthcare, infrastructure, and environmental sustainability.

• Definition: Securities under surveillance for some reason are placed on a Watch List.


• Reason for Inclusion: Securities are put on a Watch List by regulatory bodies or exchanges due to suspicious activities, potential violations, or other reasons.


• Monitoring: Once on the Watch List, these securities are closely monitored for any irregularities or further developments.


• Action: Depending on the findings during the monitoring period, regulatory bodies or exchanges may take necessary actions such as suspension, investigation, or enforcement actions.


• Public Disclosure: In some cases, the inclusion of securities on the Watch List may be publicly disclosed to alert investors and market participants.

• Wicked Witch: This is not a friendly term and is typically associated with villains in fairy tales.


• White Knight: A white knight is a friendly potential buyer who comes to the rescue of a company facing a hostile takeover or financial distress. They are seen as a positive force in the situation.


• Majority Stockholder: This term refers to an individual or entity that owns more than 50% of a company's outstanding shares. While they may have influence over the company, they are not necessarily a friendly potential buyer.


• Silent Partner: A silent partner is an individual who invests in a business but does not participate in its day-to-day operations. While they may be friendly, they are not typically referred to as potential buyers in the same way a white knight would be.

Therefore, a friendly potential buyer would most likely be called a White Knight in the context of business transactions.

• Vanilla: This term is used to describe a security issue that has no unusual features, making it a common and straightforward problem.

• Promissory Note: One of the expected conditions of lending is the signing of a promissory note, which is a legal document that outlines the terms of the loan agreement.


• Repayment: Another crucial condition is the borrower's commitment to repay the loan amount within the specified time frame and according to the agreed-upon terms.


• Collateral: In some cases, lenders may require collateral to secure the loan, which serves as a guarantee for the repayment of the borrowed funds.


• Interest: Lenders often charge interest on the loan amount, which is an additional cost for the borrower and a source of revenue for the lender.


• Default: Failure to meet the repayment obligations can lead to default, which may result in penalties, legal action, or damage to the borrower's credit score.

• What is LIFO?: LIFO stands for Last In First Out.


• Definition: LIFO is a method used in accounting and inventory management to calculate the value of inventory on hand. It assumes that the last items added to an inventory are the first ones sold.


• Usage: LIFO is commonly used in industries where the cost of inventory items fluctuates frequently, such as the retail sector.


• Example: If a company purchases 100 units of a product at different prices, under LIFO, the cost of goods sold will be based on the cost of the most recent purchases.


• Comparison to FIFO: LIFO is the opposite of FIFO (First In First Out), which assumes that the oldest items in an inventory are sold first.


• Impact on Financial Statements: LIFO can result in lower taxable income and lower inventory valuation on the balance sheet, compared to FIFO.

• Definition: An underfunded pension plan is a retirement plan that does not have enough assets to cover its obligations to plan participants.



• Cause: There are several reasons why a pension plan may become underfunded, including poor investment performance, inadequate contributions, or longer life expectancies of participants leading to increased payouts.



• Consequences: An underfunded pension plan may lead to financial instability for retirees who rely on the plan for income. It can also create challenges for the company sponsoring the plan, as they may be required to make additional contributions to meet their obligations.



• Regulation: Pension plans are regulated by government agencies to ensure that they are adequately funded to meet the future retirement needs of participants. Companies with underfunded pension plans may face penalties or required corrective actions to address the shortfall.



• Solutions: To address an underfunded pension plan, companies may need to increase contributions, adjust investment strategies, or consider other options such as offering buyouts to participants or transferring pension obligations to insurance companies.

• Answer: A - 10 Years

• U.S. Treasury Bonds are long-term securities issued by the U.S. Department of the Treasury to finance the government's borrowing needs.


• The minimum time it takes for a U.S. Treasury Bond to mature is 10 years.


• This means that investors who purchase a U.S. Treasury Bond will receive the face value of the bond plus any accrued interest after holding it for 10 years.


• Investors can choose to hold the bond until maturity or sell it before maturity in the secondary market.


• U.S. Treasury Bonds are considered low-risk investments because they are backed by the full faith and credit of the U.S. government.

Syndication allows banks to diversify, expanding their lending to broader geographic areas and industries. Second, syndication allows banks that are constrained by their capital-asset ratios to participate in loans to larger borrowers.

• Bull Posts: These are not the correct term for the posts on the floor of the stock exchange. Bull Posts refer to a positive or optimistic outlook on the market.


• Tranche: Tranche is a term used in finance to describe a portion of a security or investment. It is not related to the posts on the floor of the stock exchange.


• Commodity Sites: Commodity Sites are locations where commodities are traded, not stocks.


• Trading Posts: This is the correct term for the posts on the floor of the stock exchange. Trading Posts are physical locations on the trading floor where traders buy and sell stocks.

Therefore, the correct term for the posts on the floor of the stock exchange is Trading Posts.