#1
What is the primary goal of financial management in a business?
Maximizing shareholder wealth
ExplanationFocuses on increasing value for shareholders.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationMeasures profitability relative to investment.
#3
What does the term 'EBIT' stand for in finance?
Earnings Before Interest and Taxes
ExplanationIndicates operating profitability.
#4
What is the purpose of financial forecasting in business finance?
To predict future financial performance
ExplanationAnticipates future financial outcomes.
#5
What does the term 'EBITDA' stand for in finance?
Earnings Before Interest, Taxes, and Depreciation Amortization
ExplanationIndicates operational cash flow.
#6
What is the formula for calculating the net present value (NPV) of an investment?
NPV = ∑ (Cash Flow / (1 + Discount Rate)^t) - Initial Investment
ExplanationDetermines the present value of future cash flows.
#7
What is the purpose of financial ratios?
To analyze a company's financial performance
ExplanationProvides insights into financial health.
#8
What does the term 'Leverage' refer to in finance?
The use of debt to finance assets
ExplanationUtilizing borrowed funds for investments.
#9
Which of the following is NOT a primary financial objective of a corporation?
Increasing customer satisfaction
ExplanationFocuses on market rather than financial goals.
#10
Which of the following is a component of the DuPont analysis?
Return on assets
ExplanationBreaks down ROE into its components.
#11
Which financial statement shows a company's revenues and expenses over a specific period?
Income statement
ExplanationSummarizes financial performance.
#12
What is the purpose of a sensitivity analysis in financial planning?
To analyze the impact of changes in key variables on financial outcomes
ExplanationAssesses effects of variable changes on finances.
#13
Which financial ratio measures a company's ability to pay its short-term obligations?
Current ratio
ExplanationAssesses liquidity for short-term debts.
#14
What is the formula to calculate the Weighted Average Cost of Capital (WACC)?
WACC = (Cost of Debt + Cost of Equity) / Total Capital
ExplanationEstimates average cost of financing.
#15
What does the term 'working capital' represent in finance?
The difference between current assets and current liabilities
ExplanationIndicates short-term financial health.