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BA1 CIMA Fundamentals of Business Economics Free Practice Exam Questions (2025 Updated)

Prepare effectively for your CIMA BA1 Fundamentals of Business Economics certification with our extensive collection of free, high-quality practice questions. Each question is designed to mirror the actual exam format and objectives, complete with comprehensive answers and detailed explanations. Our materials are regularly updated for 2025, ensuring you have the most current resources to build confidence and succeed on your first attempt.

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Total 468 questions

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

A.

Retained profits

B.

Dividends

C.

Term loans

D.

Issuing corporate bonds

Which ONE of the following financial instruments is NOT issued for long term borrowing by the issuer?

A.

Treasury bills

B.

Equities

C.

Treasury bonds

D.

Mortgages

Which one of the following methods of government borrowing is most likely to be inflationary?

The sale of:

A.

Treasury bills to the banking sector

B.

Long-term securities to insurance companies and pension funds

C.

National savings securities to the general public

D.

Long-term securities to the banking sector

Diseconomies of scale

A.

are the result of the operation of the law of diminishing returns

B.

occur because all firms face a U shaped short run average cost curve

C.

cause the long run average cost curve to rise

D.

are the result of businesses adopting a divisional structure

Lenders normally wish to offer their funds for the short term, but most borrowers prefer to borrow over the long term. Resolving this mismatch is known as:

A.

Risk reduction

B.

Aggregation

C.

Maturity transformation

D.

Pooling

All of the following are examples of not-for-profit organizations except one. Which ONE is the exception?

A.

Mutual savings societies

B.

Charities

C.

Partnerships

D.

Trade Unions

Which of the following is not a reason for a firm to issue bonds rather than ordinary shares to raise additional finance?

A.

Cheaper borrowing because the interest payments on bonds qualify for tax relief whereas dividend payments do not

B.

Cash flow advantages because dividends are discretionary but interest payments are not

C.

To avoid diluting the votes of existing shareholders as a consequence of issuing shares to strangers

D.

Lower risk because bond holders cannot liquidate a firm for non-payment of interest whereas shareholders can

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?

A.

A debenture

B.

A commercial bill

C.

Ordinary shares

D.

Overdraft

Which of the following pairings of policy instruments and policy objectives is correct?

A.

A

B.

B

C.

C

D.

D

If a country were to join a currency union (for example, the European single currency, the Euro), its businesses would experience all of the following except which one?

A.

Reduced transaction costs on overseas transactions.

B.

Exchange rate certainty.

C.

A common monetary policy.

D.

Reduced price transparency.

The real rate of interest is

A.

The rate of interest charged by banks on loans.

B.

The nominal rate of interest adjusted for inflation.

C.

The compound rate of interest.

D.

The rate of interest charged on loans plus administrative charges.

Calculate the yield to an investor available from the following commercial bill:

Face value$100,000

Market price$98,500

Maturity90 days time

A.

1.5%

B.

4.5%

C.

6.1%

D.

$1,500

Which THREE of the following processes are likely to occur during a recession?

A.

A fall in the gross domestic product of the economy

B.

An increase in the number of unemployed workers.

C.

A reduction in the amount of subsidies paid out by the government

D.

A worsening of the trade balance

E.

A fall in the government's tax income

F.

An increase in the interest rate

Which of the following businesses is least likely to benefit from an appreciation of Country A's currency against Country B's currency?

A.

A fashion producer in Country A exporting garments to Country

B.

A food company in Country B exporting condiments to Country A

C.

An automobile producer in Country A importing car parts from suppliers in Country B

D.

A pharmaceutical company in Country A that pays a license to a patent holder in Country B

The following table provides the frequency distribution and cumulative frequencies of the cost of monthly rent for 120 apartments. What is the percentage of apartments whose monthly rent is less than $510?

A.

21%

B.

50%

C.

25%

D.

41%

If country A imposes a quota on imports from country B, what is the direct effect of the quota?

A.

The price of imports into country A will rise

B.

The price of imports into country A will fall

C.

The quantity of imports into country A will fall

D.

The quantity of imports into country A will rise

Which TWO of the following business costs are directly affected by a rise in the interest rate*? D The cost of procuring equity finance

A.

The cost of complying with government regulations.

B.

The cost of borrowing from private lenders.

C.

The cost of accessing government subsidies

D.

The cost of procuring intermediate goods.

A forward exchange contract would be appropriate (or a company that

A.

is due to receive a payment denominated in foreign currency today

B.

is due to receive a large payment denominated in foreign currency in five months' time

C.

is worried that its products are becoming less competitive due to a general appreciation of the domestic currency over lime

D.

is expected to pay a substantial amount denominated in national currency to a foreign creditor m six months' time

A car dealer uses the following trend equation to estimate the number of cars sold each quarter

Y = 120 + 3t

Where y = number of cars sold each quarter and t = time period expressed in units

What is the forecasted number of cars sold in period 12. if there is an additive seasonal factor of 55?

A.

156

B.

101

C.

211

D.

139

Dividend income from shares held overseas is recorded in which of the following balance of payments components?

A.

Capital account

B.

Financial account

C.

Profit account

D.

Current account

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Total 468 questions
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