#1
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Balance Sheet
ExplanationShows assets, liabilities, and equity at a specific moment.
#2
What is the primary goal of financial management in a business?
Maximizing shareholder wealth
ExplanationFocuses on increasing shareholders' value.
#3
In the context of financial decision-making, what does the term 'WACC' stand for?
Weighted Average Cost of Capital
ExplanationAverage cost of a company's capital.
#4
What is the main purpose of a budget in financial management?
To forecast future financial performance
ExplanationPlans for future financial activities.
#5
What role does the Chief Financial Officer (CFO) play in a company's financial decision-making?
Strategic financial planning and decision-making
ExplanationOversees financial strategies and decisions.
#6
What does the term 'Net Present Value (NPV)' represent in financial decision-making?
Difference between present value of cash inflows and outflows
ExplanationEvaluates profitability by discounting cash flows.
#7
In capital budgeting, what does the payback period measure?
The time it takes to recoup the initial investment
ExplanationTime required to recover initial investment.
#8
Which financial ratio measures a company's ability to meet its short-term obligations with its most liquid assets?
Current Ratio
ExplanationAssesses liquidity using current assets.
#9
What is the formula for calculating the Return on Investment (ROI)?
Net Profit / Initial Investment
ExplanationDetermines profitability relative to investment.
#10
What is the purpose of a sensitivity analysis in financial decision-making?
To analyze the impact of changes in key variables on financial outcomes
ExplanationAssesses effects of variable changes.
#11
What is the Modigliani-Miller theorem related to in finance?
Capital Structure
ExplanationAddresses company financing decisions' effects.
#12
In financial decision-making, what does the term 'opportunity cost' refer to?
The cost of forgoing the next best alternative
ExplanationCost of the best alternative not chosen.
#13
What does the term 'hedging' mean in the context of financial risk management?
Minimizing the impact of adverse price movements
ExplanationStrategy to offset potential losses.
#14
In capital budgeting, what is the significance of the Internal Rate of Return (IRR)?
It measures the profitability of the project
ExplanationEvaluates project's profitability.
#15
Which financial metric measures the efficiency of a company's inventory management?
Inventory Turnover
ExplanationEvaluates how quickly inventory is sold.