Finance

Question 1

What is the primary purpose of financial statements?

Answer 1

To provide a summary of the financial performance and position of a business.

Question 2

True or False: The balance sheet shows a company’s revenues and expenses.

Answer 2

False

Question 3

Fill in the blank: The _________ shows the company’s assets, liabilities, and equity at a specific point in time.

Answer 3

balance sheet

Question 4

What does the income statement primarily reflect?

Answer 4

The company’s revenues and expenses over a period of time.

Question 5

Multiple Choice: Which of the following is NOT a component of the cash flow statement? A) Operating activities B) Investing activities C) Marketing activities D) Financing activities

Answer 5

C) Marketing activities

Question 6

What is meant by ‘liquidity’ in finance?

Answer 6

The ability of a company to meet its short-term obligations.

Question 7

True or False: Retained earnings are part of the liabilities on the balance sheet.

Answer 7

False

Question 8

What is the formula for calculating profit margin?

Answer 8

Profit Margin = (Net Income / Revenue) x 100

Question 9

Fill in the blank: _________ are the resources owned by a business.

Answer 9

Assets

Question 10

What does ‘debt financing’ refer to?

Answer 10

Raising capital through borrowing funds that must be repaid.

Question 11

Multiple Choice: Which of the following is a financial ratio? A) Gross Profit B) Return on Equity C) Net Sales D) All of the above

Answer 11

B) Return on Equity

Question 12

What is the difference between fixed costs and variable costs?

Answer 12

Fixed costs remain constant regardless of production levels, while variable costs change with production volume.

Question 13

True or False: A higher current ratio indicates better liquidity.

Answer 13

True

Question 14

Fill in the blank: The _________ ratio measures a company’s ability to cover its short-term liabilities with its short-term assets.

Answer 14

current

Question 15

What is the role of a financial manager?

Answer 15

To manage the financial health of an organization and make strategic financial decisions.

Question 16

Multiple Choice: Which document provides a forecast of future revenues and expenses? A) Income Statement B) Cash Flow Statement C) Budget D) Balance Sheet

Answer 16

C) Budget

Question 17

What does ROI stand for?

Answer 17

Return on Investment

Question 18

True or False: A company’s equity represents the owner’s claim on the assets after all liabilities have been deducted.

Answer 18

True

Question 19

Fill in the blank: The _________ is a financial statement that summarizes the cash inflows and outflows over a specific period.

Answer 19

cash flow statement

Question 20

What is a budget variance?

Answer 20

The difference between budgeted and actual figures.

Question 21

Multiple Choice: Which of the following is considered a long-term liability? A) Accounts Payable B) Bonds Payable C) Wages Payable D) Credit Card Debt

Answer 21

B) Bonds Payable

Question 22

What is the purpose of a financial audit?

Answer 22

To assess the accuracy and fairness of a company’s financial statements.

Question 23

True or False: Depreciation affects cash flow directly.

Answer 23

False

Question 24

Fill in the blank: The _________ is used to evaluate the financial performance of a company over time.

Answer 24

trend analysis

Question 25

What is the break-even point?

Answer 25

The level of sales at which total revenues equal total costs, resulting in no profit or loss.

Question 26

What is the primary purpose of financial management?

Answer 26

To maximize the value of the firm for its shareholders.

Question 27

True or False: A balance sheet shows a company's revenues and expenses.

Answer 27

False

Question 28

Fill in the blank: The __________ shows a company's profitability over a specific period.

Answer 28

income statement

Question 29

What are the three main types of financial statements?

Answer 29

Balance sheet, income statement, and cash flow statement.

Question 30

Which financial statement provides information about a company's cash inflows and outflows?

Answer 30

Cash flow statement

Question 31

What does liquidity refer to in finance?

Answer 31

The ability of a company to meet its short-term obligations.

Question 32

True or False: The current ratio is a measure of a company's long-term solvency.

Answer 32

False

Question 33

What is the formula for calculating the current ratio?

Answer 33

Current Assets / Current Liabilities

Question 34

What is meant by 'working capital'?

Answer 34

The difference between current assets and current liabilities.

Question 35

What does ROI stand for in finance?

Answer 35

Return on Investment

Question 36

What is the purpose of a cash flow forecast?

Answer 36

To predict future cash inflows and outflows.

Question 37

True or False: Fixed costs change with the level of production.

Answer 37

False

Question 38

What is the break-even point?

Answer 38

The level of sales at which total revenues equal total costs.

Question 39

What are variable costs?

Answer 39

Costs that vary directly with the level of production.

Question 40

Fill in the blank: __________ is the process of planning and managing a firm's long-term investments.

Answer 40

Capital budgeting

Question 41

What is the significance of the debt-to-equity ratio?

Answer 41

It measures a company's financial leverage and risk.

Question 42

What does EBITDA stand for?

Answer 42

Earnings Before Interest, Taxes, Depreciation, and Amortization

Question 43

True or False: Depreciation is a non-cash expense.

Answer 43

True

Question 44

What is a financial ratio?

Answer 44

A quantitative relationship between two financial statement items.

Question 45

What is the purpose of financial forecasting?

Answer 45

To estimate future financial outcomes based on historical data.

Question 46

What does 'capital structure' refer to?

Answer 46

The mix of debt and equity financing used by a firm.

Question 47

Fill in the blank: The __________ measures the profitability of a company relative to its total assets.

Answer 47

return on assets (ROA)

Question 48

What is a budget?

Answer 48

A financial plan that estimates revenue and expenses over a specific period.

Question 49

What is the main goal of budgeting?

Answer 49

To ensure that resources are allocated efficiently.

Question 50

True or False: A higher credit rating indicates a higher risk of default.

Answer 50

False

Question 51

What is the significance of the price-to-earnings (P/E) ratio?

Answer 51

It indicates the market's expectations of a company's future earnings.

Question 52

What is meant by 'financial leverage'?

Answer 52

Using borrowed funds to increase the potential return on investment.