Finance Flashcards
What is the definition of finance in business?
Finance in business refers to the management of money, including the processes of obtaining, investing, and managing funds.
True or False: The primary objective of finance is to maximize shareholder wealth.
True
What are the three main types of finance?
The three main types of finance are personal finance, corporate finance, and public finance.
Fill in the blank: _____ finance involves managing the funding and capital structure of a company.
Corporate
What is the difference between fixed costs and variable costs?
Fixed costs remain constant regardless of production levels, while variable costs change with the level of production.
What does the term ‘cash flow’ refer to?
Cash flow refers to the total amount of money being transferred into and out of a business.
Which financial statement shows a company’s profitability over a specific period?
The income statement.
True or False: A balance sheet provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time.
True
What is the formula for calculating profit?
Profit = Revenue - Costs.
Multiple Choice: Which of the following is a source of internal finance? A) Bank loan B) Retained earnings C) Share capital
B) Retained earnings
What is a budget?
A budget is a financial plan that estimates future income and expenditures over a specific period.
Fill in the blank: _____ is the cost of borrowing money, typically expressed as a percentage.
Interest
What is a break-even point?
The break-even point is the level of sales at which total revenues equal total costs, resulting in no profit or loss.
True or False: An increase in sales will always lead to an increase in profit.
False
What does ROI stand for, and what does it measure?
ROI stands for Return on Investment, and it measures the profitability of an investment relative to its cost.
What is the purpose of financial forecasting?
The purpose of financial forecasting is to estimate future financial outcomes based on historical data and trends.
Multiple Choice: Which of the following is NOT a method of external finance? A) Venture capital B) Trade credit C) Retained earnings
C) Retained earnings
What is the role of a financial manager?
The role of a financial manager is to oversee the financial health of an organization by managing investments, budgeting, and financial planning.
Fill in the blank: _____ analysis is used to assess the viability, stability, and profitability of a business.
Financial
What does the term ‘liquidity’ refer to in finance?
Liquidity refers to the ease with which an asset can be converted into cash.
True or False: Equity financing involves raising capital through the sale of shares.
True
What is the significance of the current ratio?
The current ratio measures a company’s ability to pay its short-term liabilities with its short-term assets.
Multiple Choice: Which of the following is considered a long-term source of finance? A) Overdraft B) Debentures C) Trade credit
B) Debentures
What is the purpose of a cash flow forecast?
The purpose of a cash flow forecast is to predict future cash inflows and outflows to ensure that a business can meet its obligations.
Fill in the blank: _____ is the amount of money that remains after all expenses have been paid.
Net profit
What is the difference between gross profit and net profit?
Gross profit is the revenue remaining after deducting the cost of goods sold, while net profit is what remains after all expenses have been deducted.
