ACCA Financial Management (F9) Certification Practice Exam

Which of the following transactions does the finance house market primarily facilitate?

1. Stock trading

2. Long-term investments

3. Short-term loans

4. Real estate financing

The correct answer is: Short-term loans

The correct answer reflects the primary function of finance houses, which is to facilitate short-term loans. Finance houses specialize in providing quick access to funds, catering particularly to businesses and consumers who need immediate financing solutions but may not have the ability to secure traditional bank loans due to time constraints or credit history. These loans are typically used for various purposes, such as managing cash flow, purchasing inventory, or covering unexpected expenses. Short-term financing is crucial in many business operations and often involves less rigorous approval processes compared to long-term financing alternatives. This aspect makes finance houses an essential resource for borrowers needing urgent liquidity. In contrast, stock trading pertains to the buying and selling of shares and is more aligned with stock exchanges and brokerage firms. Long-term investments generally involve asset purchases or projects requiring a longer duration for return on investment, which doesn't align with the quick transaction nature of finance houses. Real estate financing often involves larger amounts and longer terms, typically falling under the purview of specialized lenders or banks rather than finance houses focused on short-term lending solutions.