Tips on How to Handle a Finance Exam- Multiple Choice, Short, and Long Answer Questions
Your finance exam may consist of multiple choice, short-form, or long-form questions, depending on the topics covered. Some topics like introduction to finance and key definitions will take the form of multiple choice and short-form answers. In contrast, complex finance concepts will take the long-form format.
So, how do you handle these questions in a finance exam?
- Multiple choice questions
- Read the questions carefully
Unlike high school tests, where it was easy to guess an answer from the given choices, college-level exams are not that easy. The way to get through multiple choice questions is to study hard and practice with problems and examples in the books. That way, you will do well in the exam.
Here are some tips that will help handle the finance exam with multiple-choice questions:
This may seem obvious, but it is the most crucial tip when handling multiple-choice questions. Take your time when going through the questions as well as the answers. Underline important words like 'NOT,' 'MOST LIKELY', and 'ALWAYS' as these give meaning to the question and determine your answer.
It is not likely to get mathematical questions in multiple-choice format. Make sure you choose the choice that explains the finance concepts tested. Try to answer the questions without looking at the choices to avoid confusion. For example, if the question asks which choice explains the concept of Net Present Value, try to define this before choosing one of the options.
- Eliminate incorrect options
- Manage your time
Once you have defined the question from your understanding, try eliminating the choices that seem incorrect. Some answers may be significantly off and unrelated to the question, while others may be highly similar. The elimination method will narrow down the most probable answer and make it easier for you to choose the right one.
Once you have eliminated the incorrect options, reread the question and see which of the remaining answers best fit the question. Eliminate the options furthest from the book definitions. Choose the answer that is closest to the one learned in class.
Multiple-choice exam questions may be many compared to other forms of exams. Therefore, you must manage your time correctly. Ensure that if you first check the time limit given for the whole exam, then approximate how much time you will need to tackle all the questions. If you are working on an online exam, it may be impossible to go back to questions once you have already moved on from that section. Ensure that you consider that.
If it is possible to move forward and ahead between the questions sections, this gives you a leeway to leave difficult questions for later. Answer those that appear more straightforward to you and those that address concepts you are familiar with. You can go back to the unanswered questions at a future time. Time management will also give you time to go through your answers and check that you have answered them all. Do not leave any questions unanswered. You can guess if the concepts are unfamiliar, but this is highly discouraged.
Unlike multiple-choice questions, short-answer questions will not have any choices but will mainly be questions with a short space to write your answer. Short-answer questions are given to assess students' understanding of course concepts, meanings, and significance.
Here are some strategies to help you handle these questions.
- Study for understanding
- Read instructions and answer the easy questions first
- Be concise with your answers
The most crucial strategy for short answer exam questions is to study beforehand. Not only studying and cramming formulas and finance concepts but understanding finance fundamentals. Since the questions will mainly be short and maybe some uncomplicated problem sets, you can use flashcards to help you study. Learn formulas and understand how they are used
An example of a topic in the short answer exam would be: given a table with a number of years and cash flow amounts, use the payback period method to calculate the expected payback period in years. This is an uncomplicated question; you indicate the payback period formula and the simple calculation involved. You must have studied this concept and understood it enough to apply it to the exam question.
Read the instructions given in the question as they dictate the format of the answer. Is the exam asking you to describe, compare, summarize, or contrast concepts? Remember that if your answer does not follow the instructions, e.g., if the question asked you to list the assumptions of The Capital Asset Pricing Model (CAPM), explaining the assumptions would be a waste of time. This only requires a list of the said assumptions without explaining them. Hence the importance of reading instructions.
Once you understand the instructions, you begin answering the most straightforward questions. This will save you more time in the exam, and you can always go back to the difficult questions after you finish the easy ones. In some exams, you can get clues on difficult questions when trying to remember answers to the more straightforward ones.
The answer to a short question exam should be short. For questions asking for definitions, examples, or for you to describe some points, be thorough in your explanations and concise. Avoid over-explaining concepts that do not need explaining. Give simple examples and illustrations to your points, but keep it short. Simply ensure that your answers are accurate without needing to be long and wordy.
Reread the questions once you are done. Check for questions with several parts, and ensure they are well done. Like our example above, your question could have a part asking for the definition of CAPM, part 2 asking for the assumptions, and part 3 for the formula. Ensure you answer all the parts so you do not lose any marks for unanswered questions.
Long answer questions will mainly be in the final exam and require more reading and writing than the first two. Long-form questions require more descriptions, examples, and extended calculations. Ensure you have studied hard and practiced with examples to handle the exam better.
Here are a few more tips;
- Have an overall strategy for tackling the exam
Having studied before sitting for the exam, create a simple strategy immediately on how you will tackle the exam. Go through the exam paper noting down the time limit, the number of questions to be tackled, the concepts familiar to you, and the marks in each section. This strategy will allow you to plan your time well and ensure no question is left unanswered. You can also answer what you know and leave the difficult questions later.
Long answer questions contain keywords like explain, argue, compare, calculate, and discuss. For finance, your exam could have several mathematical calculations. Write down the formulas for each and set apart time to tackle them. Have some notes on the side of the concepts you want to explain in your answer.
- Have a logical flow to your answers
Long answer questions may be in the form of essays or long points that need to be discussed and explained. Your answers should, therefore, have a logical flow. Ensure you begin by giving a direct answer to the question and then explaining the answer. In long-form questions, you have to ensure that all the answers are also long. This means having credible explanations and broad discussions of the answers.
Clearly show your workings in mathematical questions and ensure that one can follow from the beginning to how the answer came to be. Say you are tackling a question on cash flow statements. This would typically have several parts; one for the workings to get information on investing, financing, and operational activities, and one on the actual statement of cash flows. The logical flow to this question would be showing your workings and then using the workings to form the cash flow statement. Explain where necessary and clearly label elements where necessary.
Tackling exam questions, whether multiple choice, short answer, or long answer, can be difficult. However, planning your time and work, reading instructions, and logically answering the questions are tips that can help you handle your finance exam better.