#1
Which of the following is a key principle of financial management?
Maximizing shareholder wealth
ExplanationFocuses on increasing the value of shares for shareholders.
#2
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Balance sheet
ExplanationLists a company's assets, liabilities, and equity at a specific date.
#3
What is the purpose of budgeting in financial management?
To plan and control finances
ExplanationSets financial goals and allocates resources to achieve them.
#4
What is the purpose of financial forecasting in financial management?
To estimate future financial outcomes
ExplanationPredicts future financial performance based on current data.
#5
Which of the following is an example of an operating expense?
Employee salaries
ExplanationCosts incurred from day-to-day business activities.
#6
Which of the following is a primary goal of financial management?
Maximizing shareholder value
ExplanationFocuses on increasing the wealth of shareholders.
#7
What is the formula to calculate Return on Investment (ROI)?
ROI = (Net Profit / Total Assets) * 100
ExplanationMeasures the efficiency of an investment relative to its cost.
#8
What does the term 'liquidity' refer to in financial management?
A company's ability to turn assets into cash
ExplanationIndicates how quickly assets can be converted into cash.
#9
Which financial ratio measures a company's ability to meet short-term obligations with its most liquid assets?
Current ratio
ExplanationCompares a company's current assets to its current liabilities.
#10
What does the term 'capital budgeting' refer to in financial management?
Evaluating long-term investment opportunities
ExplanationAssesses potential investments in fixed assets for long-term returns.
#11
Which type of risk arises from changes in interest rates, exchange rates, or commodity prices?
Market risk
ExplanationResult of external factors affecting market conditions.
#12
What does the debt-to-equity ratio measure in financial management?
A company's financial leverage
ExplanationAssesses the proportion of debt financing relative to equity.
#13
Which of the following is a characteristic of efficient expense management?
Balancing income and expenses
ExplanationEnsures that expenses do not exceed income, maintaining financial stability.