Financial Management

Question 1

What is the primary goal of financial management?

Answer 1

To maximize shareholder wealth.

Question 2

True or False: Financial management only deals with the acquisition of funds.

Answer 2

False

Question 3

Fill in the blank: The __________ is a financial statement that summarizes a company’s assets, liabilities, and equity.

Answer 3

balance sheet

Question 4

What does ROI stand for in financial management?

Answer 4

Return on Investment

Question 5

Which financial statement shows a company’s revenues and expenses over a specific period?

Answer 5

Income statement

Question 6

Multiple Choice: Which of the following is a long-term financing option? A) Bank loans B) Bonds C) Trade credit

Answer 6

B) Bonds

Question 7

What is the formula for calculating net income?

Answer 7

Net Income = Revenues - Expenses

Question 8

True or False: Working capital is calculated as current assets minus current liabilities.

Answer 8

True

Question 9

Fill in the blank: The __________ ratio measures a company’s ability to pay short-term obligations.

Answer 9

current

Question 10

What is the purpose of a cash flow statement?

Answer 10

To provide information about cash inflows and outflows over a period.

Question 11

Multiple Choice: Which of the following is NOT a type of financial management? A) Capital budgeting B) Financial forecasting C) Market research

Answer 11

C) Market research

Question 12

What does the term ‘leverage’ refer to in financial management?

Answer 12

The use of borrowed funds to increase the potential return on investment.

Question 13

True or False: Equity financing involves selling shares of stock in a company.

Answer 13

True

Question 14

Fill in the blank: The __________ is a financial metric that indicates the percentage of revenue that exceeds costs.

Answer 14

profit margin

Question 15

What is a budget?

Answer 15

A financial plan that outlines expected revenues and expenditures over a specific period.

Question 16

Multiple Choice: Which of the following is a source of short-term financing? A) Common stock B) Commercial paper C) Bonds

Answer 16

B) Commercial paper

Question 17

What is the purpose of financial forecasting?

Answer 17

To predict future financial conditions and performance.

Question 18

True or False: The break-even point is where total revenues equal total costs.

Answer 18

True

Question 19

Fill in the blank: __________ analysis is used to assess the profitability of different investment options.

Answer 19

Cost-benefit

Question 20

What is capital budgeting?

Answer 20

The process of planning and managing a firm’s long-term investments.

Question 21

Multiple Choice: Which of the following is a measure of a company’s profitability? A) Debt-to-equity ratio B) Return on equity C) Current ratio

Answer 21

B) Return on equity

Question 22

What does the term ‘dividend’ refer to?

Answer 22

A portion of a company’s earnings distributed to shareholders.

Question 23

True or False: The cost of capital is the return expected by those who provide capital to the company.

Answer 23

True

Question 24

Fill in the blank: The __________ is a ratio that compares a company’s current assets to its current liabilities.

Answer 24

current ratio

Question 25

What is the significance of the time value of money?

Answer 25

It states that a dollar today is worth more than a dollar in the future due to its potential earning capacity.

Question 26

Multiple Choice: Which of the following describes a fixed cost? A) Cost that changes with production levels B) Cost that remains constant regardless of production levels C) Cost that varies with sales

Answer 26

B) Cost that remains constant regardless of production levels

Question 27

What is risk management in financial management?

Answer 27

The identification, assessment, and prioritization of risks followed by coordinated efforts to minimize, monitor, and control the probability of unfortunate events.

Question 28

True or False: A high debt-to-equity ratio indicates a company is heavily financed by debt.

Answer 28

True

Question 29

Fill in the blank: __________ financing is raised through the sale of stocks and shares.

Answer 29

Equity

Question 30

What is the purpose of ratio analysis?

Answer 30

To evaluate the financial performance and position of a company.

Question 31

Multiple Choice: Which financial ratio indicates how much profit a company makes for every dollar of sales? A) Gross profit margin B) Net profit margin C) Operating profit margin

Answer 31

B) Net profit margin

Question 32

What does the term 'asset' refer to?

Answer 32

Resources owned by a company that have economic value.

Question 33

True or False: Accounts receivable are considered a liability.

Answer 33

False

Question 34

Fill in the blank: The __________ is a financial statement that shows the changes in equity from transactions with shareholders.

Answer 34

statement of changes in equity

Question 35

What is a financial market?

Answer 35

A marketplace where buyers and sellers participate in the trade of assets such as stocks, bonds, and currencies.

Question 36

Multiple Choice: Which of the following is considered an intangible asset? A) Equipment B) Patents C) Inventory

Answer 36

B) Patents

Question 37

What is the difference between gross profit and net profit?

Answer 37

Gross profit is revenue minus cost of goods sold, while net profit is gross profit minus all other expenses.

Question 38

True or False: A budget variance occurs when actual financial performance deviates from the budgeted performance.

Answer 38

True

Question 39

Fill in the blank: __________ is the process of evaluating investment opportunities to determine their potential returns.

Answer 39

Investment appraisal

Question 40

What is the role of a financial manager?

Answer 40

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

Question 41

Multiple Choice: Which of the following is a method of valuing a company's stock? A) Cost approach B) Market approach C) Income approach

Answer 41

C) Income approach

Question 42

What does the term 'liability' refer to?

Answer 42

Obligations that a company owes to outside parties.

Question 43

True or False: Financial management only focuses on short-term financial goals.

Answer 43

False

Question 44

Fill in the blank: __________ is the return on an investment expressed as a percentage of the original investment.

Answer 44

Yield

Question 45

What is a financial ratio?

Answer 45

A quantitative relationship between two financial statement figures.

Question 46

Multiple Choice: What is the primary source of funding for a startup company? A) Debt financing B) Venture capital C) Retained earnings

Answer 46

B) Venture capital

Question 47

What does diversification in finance mean?

Answer 47

Spreading investments across various assets to reduce risk.

Question 48

True or False: A company can be profitable but still experience cash flow problems.

Answer 48

True

Question 49

Fill in the blank: The __________ measures the liquidity of a company and its ability to cover short-term obligations.

Answer 49

quick ratio

Question 50

What is the purpose of a financial audit?

Answer 50

To examine and verify a company's financial statements and accounting practices.