#1
What is the primary goal of financial management?
Maximizing shareholder wealth
ExplanationGoal of increasing value for shareholders.
#2
What does the term 'ROI' stand for in finance?
Return on Investment
ExplanationMeasurement of profitability.
#3
What is the concept of diversification in investment?
Investing in multiple assets with different risk levels
ExplanationRisk management strategy.
#4
What is the purpose of financial ratios in analyzing a company's performance?
To evaluate the company's profitability, liquidity, and solvency
ExplanationAssessment of financial health and efficiency.
#5
What is the purpose of a dividend policy in finance?
To maximize shareholder wealth
ExplanationDistribution of profits to investors.
#6
What is the formula to calculate the net present value (NPV) of an investment?
NPV = Cash Inflows - Cash Outflows
ExplanationAssessment of investment profitability.
#7
Which of the following is a measure of a company's liquidity?
Current ratio
ExplanationIndicator of short-term financial health.
#8
What does the Capital Asset Pricing Model (CAPM) measure?
Risk and return of a security
ExplanationRelationship between risk and expected return.
#9
Which of the following is a measure of systematic risk?
Beta
ExplanationSensitivity to market movements.
#10
What does the debt-to-equity ratio indicate about a company?
Its reliance on debt financing relative to equity financing
ExplanationFinancial leverage level.
#11
What is the Modigliani-Miller theorem primarily concerned with?
Capital structure
ExplanationRelationship between financing and valuation.
#12
What is the time value of money (TVM) principle based on?
Interest rates
ExplanationPreference for money today over future.
#13
What does the term 'efficient market hypothesis' propose?
Stock prices reflect all available information
ExplanationPrices adjust rapidly to new information.
#14
What is the 'discount rate' in the context of financial management?
The rate used to calculate the present value of future cash flows
ExplanationAdjustment for time value of money.
#15
Which of the following is not a component of the DuPont analysis?
Equity Ratio
ExplanationRatio assessing return on equity.