CIMA BA1 Exam Questions Free Practice Test

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Questions # 1:

All other things remaining equal, which of the following would encourage a speculative short-term capital flow into a country's currency?

Options:

A fall in the country's interest rates

An expected depreciation of the country's exchange rate

The abolition by the country of previously-imposed exchange controls which deterred inward investment

Foreign-based multinational companies locating new factories in the country

Questions # 2:

All of the following were contributory causes of the banking crisis of 2008 (the 'credit crunch') except one. Which ONE is the exception?

Options:

Large scale default in the in the US sub-prime mortgage market

Over- capitalization of commercial and investment banks

The bundling of mortgages into collateralized debt obligations which were sold onto banks

Erroneous credit rating of collateralized debt obligations by credit rating agencies

Questions # 3:

Which of the following is an example of regulation as a form of government intervention in the economy?

Options:

The government requiring that seat belts are fitted in all coaches and regularly tested

The government announcing the abolition of rules which restrict the number of commercial radio stations allowed by law to operate

The government encouraging the General Medical Council to discipline doctors judged to be professionally negligent

The government selling a state-owned industry such as Air Traffic Control to private ownership

Questions # 4:

Central banks inspect and sometimes set minimum limits on the reserves held by commercial banks. Which ONE of the following statements is NOT a reason that central banks seek to influence the reserves of commercial banks?

Options:

To influence commercial banks' ability to create credit

To avoid the commercial banks running out of liquidity

To regulate the profits of commercial banks

To prevent the collapse of the banking system

Questions # 5:

Which of the following is not a source of long-term capital for a company?

Options:

Retained profits

Dividends

Term loans

Issuing corporate bonds

Questions # 6:

Following a 10% reduction in the value of its currency, the volume of imports into the country falls by 10%, whilst the volume of exports rises by 15%.

Which of the following effects will occur?

Options:

Balance of payments will improve

Balance of payments will deteriorate

Terms of trade will improve

The central bank will be forced to borrow more foreign exchange to cover the shortfall

Questions # 7:

Identify the source of funds most appropriate for a growing company to use which wishes to borrow funds long-term to pay for initial marketing research and promotion?

Options:

A debenture

A commercial bill

Ordinary shares

Overdraft

Questions # 8:

Which of the following is NOT achieved by the price mechanism in a market economy?

Options:

Signaling of consumers' requirements

Allocation of adequate resources for future investment

Rationing of scarce resources between potentially unlimited demands

Setting of rewards to factors of production

Questions # 9:

Which of the following is NOT a suitable way for a manufacturing company to finance buying assets?

Options:

Certificates of deposit

Commercial bills

Commercial bonds

Leases

Questions # 10:

Which of the following is most likely to lead to a rise in the exchange rate of country's currency and a fall in the price of stocks shares?

Options:

An increase in the deficit in the country's balance of payments on current account

Foreign investors purchasing shares on the country's capital markets

An increase in the country's money supply

An increase in rates of interest within the country

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