#1
Which of the following is a key objective of financial management?
Maximizing shareholder wealth
ExplanationFinancial management aims to maximize the wealth of shareholders by making strategic financial decisions.
#2
Which of the following financial statements reports a firm's financial position at a specific point in time?
Balance Sheet
ExplanationThe balance sheet provides a snapshot of a company's assets, liabilities, and equity at a particular moment.
#3
Which of the following is an example of a short-term financing option?
Trade Credit
ExplanationTrade credit is a short-term financing arrangement allowing buyers to delay payment to suppliers.
#4
Which of the following is NOT considered a primary financial decision?
Production Scheduling
ExplanationProduction scheduling pertains to operational management rather than financial decision-making.
#5
Which financial statement shows the revenues and expenses incurred by a company over a specific period?
Income Statement
ExplanationThe income statement displays a company's revenues, expenses, and profits or losses over a defined period.
#6
Which of the following represents a long-term source of financing?
Common Stock
ExplanationCommon stock represents ownership in a company and is a long-term source of capital.
#7
What is the formula for calculating the Net Present Value (NPV) of an investment?
NPV = Present Value - Initial Investment
ExplanationNPV calculates the present value of future cash flows minus the initial investment.
#8
What does the Weighted Average Cost of Capital (WACC) represent?
The average cost of all sources of capital weighted by their proportion in the capital structure
ExplanationWACC reflects the average cost of funds used by a company, considering the relative weight of each source of capital.
#9
What does the term 'Capital Budgeting' refer to in corporate finance?
The process of allocating resources to long-term assets
ExplanationCapital budgeting involves evaluating and selecting long-term investment projects that align with company goals.
#10
What is the primary goal of financial risk management?
To minimize the impact of risk on firm value
ExplanationFinancial risk management aims to mitigate potential losses and protect the firm's value from adverse events.
#11
Which of the following measures the profitability of a firm's investment decisions?
Net Present Value (NPV)
ExplanationNPV assesses the profitability of an investment by comparing present value of cash inflows to outflows.
#12
What does the term 'Liquidity' refer to in corporate finance?
The ability of a firm to meet its short-term obligations
ExplanationLiquidity indicates a company's ability to cover short-term debts and expenses with its current assets.
#13
What is the primary purpose of financial leverage?
To increase the return on equity
ExplanationFinancial leverage aims to amplify returns to shareholders by using debt financing.