#1
Which of the following is a characteristic of a fixed budget?
It remains unchanged regardless of activity levels.
ExplanationFixed budgets do not adjust for changes in activity levels.
#2
What does the term 'ROI' stand for in financial management?
Return on Investment
ExplanationROI measures the profitability of an investment.
#3
What is the primary objective of financial management in an organization?
Maximizing shareholder wealth
ExplanationFinancial management aims to increase shareholder value.
#4
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Balance sheet
ExplanationBalance sheet presents assets, liabilities, and equity.
#5
What is the purpose of a cash flow statement?
To display the movement of cash into and out of a business.
ExplanationCash flow statement tracks cash movements.
#6
What is the main purpose of variance analysis in budgeting?
To identify deviations from the budgeted figures and analyze the reasons behind them.
ExplanationVariance analysis helps understand budget performance.
#7
Which budgeting technique involves estimating costs and revenues for each department or division within an organization?
Activity-based budgeting
ExplanationActivity-based budgeting allocates resources based on activities.
#8
What is the purpose of a SWOT analysis in the context of financial planning?
To assess an organization's strengths, weaknesses, opportunities, and threats.
ExplanationSWOT analysis evaluates internal and external factors.
#9
What is the role of a budget committee in the budgeting process?
To approve the final budget proposal.
ExplanationBudget committees finalize budget plans.
#10
Which of the following is a key principle of effective budgeting?
Ensuring participation from relevant stakeholders.
ExplanationInvolving stakeholders enhances budget effectiveness.
#11
What is the formula to calculate the payback period of an investment?
Payback Period = Initial Investment / Net Cash Inflow per Period
ExplanationPayback period calculates the time to recover investment.
#12
Which of the following is a disadvantage of using debt financing?
Risk of bankruptcy
ExplanationDebt financing increases bankruptcy risk.
#13
What is the significance of the time value of money in financial decision-making?
It helps in evaluating investments based on their cash flows over time.
ExplanationTime value of money assesses cash flow timing.
#14
What is the primary focus of strategic financial management?
Long-term financial sustainability and growth
ExplanationStrategic financial management emphasizes long-term goals.
#15
Which financial ratio measures a company's ability to meet its short-term obligations with its most liquid assets?
Current ratio
ExplanationCurrent ratio indicates short-term liquidity.