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Finance Flashcards

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1
Q

What is the primary purpose of financial statements?

A

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

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2
Q

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

A

False

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3
Q

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

A

balance sheet

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4
Q

What does the income statement primarily reflect?

A

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

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5
Q

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

A

C) Marketing activities

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6
Q

What is meant by ‘liquidity’ in finance?

A

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

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7
Q

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

A

False

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8
Q

What is the formula for calculating profit margin?

A

Profit Margin = (Net Income / Revenue) x 100

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9
Q

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

A

Assets

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10
Q

What does ‘debt financing’ refer to?

A

Raising capital through borrowing funds that must be repaid.

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11
Q

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

A

B) Return on Equity

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12
Q

What is the difference between fixed costs and variable costs?

A

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

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13
Q

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

A

True

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14
Q

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

A

current

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15
Q

What is the role of a financial manager?

A

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

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16
Q

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

A

C) Budget

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17
Q

What does ROI stand for?

A

Return on Investment

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18
Q

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

A

True

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19
Q

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

A

cash flow statement

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20
Q

What is a budget variance?

A

The difference between budgeted and actual figures.

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21
Q

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

A

B) Bonds Payable

22
Q

What is the purpose of a financial audit?

A

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

23
Q

True or False: Depreciation affects cash flow directly.

A

False

24
Q

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

A

trend analysis

25
Q

What is the break-even point?

A

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

26
Q

What is the primary purpose of financial management?

A

To maximize the value of the firm for its shareholders.

27
Q

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

A

False

28
Q

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

A

income statement

29
Q

What are the three main types of financial statements?

A

Balance sheet, income statement, and cash flow statement.

30
Q

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

A

Cash flow statement

31
Q

What does liquidity refer to in finance?

A

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

32
Q

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

A

False

33
Q

What is the formula for calculating the current ratio?

A

Current Assets / Current Liabilities

34
Q

What is meant by ‘working capital’?

A

The difference between current assets and current liabilities.

35
Q

What does ROI stand for in finance?

A

Return on Investment

36
Q

What is the purpose of a cash flow forecast?

A

To predict future cash inflows and outflows.

37
Q

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

A

False

38
Q

What is the break-even point?

A

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

39
Q

What are variable costs?

A

Costs that vary directly with the level of production.

40
Q

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

A

Capital budgeting

41
Q

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

A

It measures a company’s financial leverage and risk.

42
Q

What does EBITDA stand for?

A

Earnings Before Interest, Taxes, Depreciation, and Amortization

43
Q

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

A

True

44
Q

What is a financial ratio?

A

A quantitative relationship between two financial statement items.

45
Q

What is the purpose of financial forecasting?

A

To estimate future financial outcomes based on historical data.

46
Q

What does ‘capital structure’ refer to?

A

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

47
Q

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

A

return on assets (ROA)

48
Q

What is a budget?

A

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

49
Q

What is the main goal of budgeting?

A

To ensure that resources are allocated efficiently.

50
Q

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

A

False

51
Q

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

A

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

52
Q

What is meant by ‘financial leverage’?

A

Using borrowed funds to increase the potential return on investment.

Business Finance (1 decks)

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