#1
Which of the following is a primary goal of financial management?
Maximizing shareholder wealth
ExplanationFinancial management aims to maximize the wealth of shareholders.
#2
Which financial statement shows a company's revenues and expenses over a period of time?
Income statement
ExplanationIncome statement displays company's financial performance over time.
#3
What is the main objective of capital structure management?
Maximize shareholder wealth
ExplanationCapital structure management seeks to maximize shareholder wealth.
#4
What does the term 'working capital' refer to?
The difference between current assets and current liabilities
ExplanationWorking capital is the difference between current assets and liabilities.
#5
What does the term 'cost of capital' refer to?
The cost of debt and equity financing
ExplanationCost of capital encompasses the expenses associated with debt and equity financing.
#6
Which of the following is NOT a component of working capital management?
Debt management
ExplanationWorking capital management excludes debt management as a component.
#7
What is the purpose of financial leverage?
To increase the potential return to shareholders
ExplanationFinancial leverage aims to amplify returns for shareholders.
#8
Which of the following is a measure of a company's liquidity?
Current ratio
ExplanationCurrent ratio assesses a company's liquidity position.
#9
What is the role of the financial markets in corporate finance?
To provide financing to corporations
ExplanationFinancial markets offer funding avenues for corporations.
#10
Which of the following is NOT a method of capital budgeting?
Cost of goods sold (COGS)
ExplanationCost of goods sold is not a method of capital budgeting.
#11
What is the formula for calculating the weighted average cost of capital (WACC)?
WACC = (E/V) * Re + (D/V) * Rd * (1 - Tc)
ExplanationWACC formula combines equity and debt components for overall cost.
#12
What is the Modigliani-Miller theorem about?
Dividend policy irrelevance
ExplanationModigliani-Miller theorem asserts the irrelevance of dividend policy.
#13
What is the formula for calculating the return on equity (ROE)?
Net Income / Total Equity
ExplanationROE formula: Net Income divided by Total Equity.
#14
Which of the following is NOT a characteristic of a callable bond?
Callable bonds are less risky for investors
ExplanationCallable bonds being less risky is not a characteristic.