ExpertEasy2 marksMultiple Choice
ACCA · Question 4 · Financial Management Environment
Section A
EcoBuild, a sustainable construction firm, needs to raise finance. The finance director is considering various instruments available in the money markets and capital markets.
Which TWO of the following are characteristics of the money markets?
Section A
EcoBuild, a sustainable construction firm, needs to raise finance. The finance director is considering various instruments available in the money markets and capital markets.
Which TWO of the following are characteristics of the money markets?
Answer options:
A.
They deal in short-term debt instruments.
B.
They are the primary venue for issuing new equity shares.
C.
They provide a mechanism for managing liquidity deficits.
D.
They facilitate the trading of long-term corporate bonds.
How to approach this question
Remember the distinction: Money markets = short term (liquidity). Capital markets = long term (investment).
Full Answer
The financial markets are divided into money markets (short-term, typically up to one year, used for liquidity management like commercial paper and Treasury bills) and capital markets (long-term, used for raising investment capital via shares and bonds).
Common mistakes
Selecting options related to equity or long-term bonds, which belong to the capital market.
Practice the full ACCA FM — Financial Management Practice Exam 1
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