Finance

Question 1

What is the definition of finance in business?

Answer 1

Finance in business refers to the management of money, including the processes of obtaining, investing, and managing funds.

Question 2

True or False: The primary objective of finance is to maximize shareholder wealth.

Answer 2

True

Question 3

What are the three main types of finance?

Answer 3

The three main types of finance are personal finance, corporate finance, and public finance.

Question 4

Fill in the blank: _____ finance involves managing the funding and capital structure of a company.

Answer 4

Corporate

Question 5

What is the difference between fixed costs and variable costs?

Answer 5

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

Question 6

What does the term ‘cash flow’ refer to?

Answer 6

Cash flow refers to the total amount of money being transferred into and out of a business.

Question 7

Which financial statement shows a company’s profitability over a specific period?

Answer 7

The income statement.

Question 8

True or False: A balance sheet provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time.

Answer 8

True

Question 9

What is the formula for calculating profit?

Answer 9

Profit = Revenue - Costs.

Question 10

Multiple Choice: Which of the following is a source of internal finance? A) Bank loan B) Retained earnings C) Share capital

Answer 10

B) Retained earnings

Question 11

What is a budget?

Answer 11

A budget is a financial plan that estimates future income and expenditures over a specific period.

Question 12

Fill in the blank: _____ is the cost of borrowing money, typically expressed as a percentage.

Answer 12

Interest

Question 13

What is a break-even point?

Answer 13

The break-even point is the level of sales at which total revenues equal total costs, resulting in no profit or loss.

Question 14

True or False: An increase in sales will always lead to an increase in profit.

Answer 14

False

Question 15

What does ROI stand for, and what does it measure?

Answer 15

ROI stands for Return on Investment, and it measures the profitability of an investment relative to its cost.

Question 16

What is the purpose of financial forecasting?

Answer 16

The purpose of financial forecasting is to estimate future financial outcomes based on historical data and trends.

Question 17

Multiple Choice: Which of the following is NOT a method of external finance? A) Venture capital B) Trade credit C) Retained earnings

Answer 17

C) Retained earnings

Question 18

What is the role of a financial manager?

Answer 18

The role of a financial manager is to oversee the financial health of an organization by managing investments, budgeting, and financial planning.

Question 19

Fill in the blank: _____ analysis is used to assess the viability, stability, and profitability of a business.

Answer 19

Financial

Question 20

What does the term ‘liquidity’ refer to in finance?

Answer 20

Liquidity refers to the ease with which an asset can be converted into cash.

Question 21

True or False: Equity financing involves raising capital through the sale of shares.

Answer 21

True

Question 22

What is the significance of the current ratio?

Answer 22

The current ratio measures a company’s ability to pay its short-term liabilities with its short-term assets.

Question 23

Multiple Choice: Which of the following is considered a long-term source of finance? A) Overdraft B) Debentures C) Trade credit

Answer 23

B) Debentures

Question 24

What is the purpose of a cash flow forecast?

Answer 24

The purpose of a cash flow forecast is to predict future cash inflows and outflows to ensure that a business can meet its obligations.

Question 25

Fill in the blank: _____ is the amount of money that remains after all expenses have been paid.

Answer 25

Net profit

Question 26

What is the difference between gross profit and net profit?

Answer 26

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.