#1
What is the primary goal of financial planning?
To achieve financial goals
ExplanationFinancial planning aims to help individuals and businesses achieve their financial objectives.
#2
Which of the following is NOT a component of the financial planning process?
Human resource management
ExplanationHuman resource management is not typically a component of financial planning, which focuses on monetary aspects.
#3
What does ROI stand for in finance?
Return on Investment
ExplanationROI stands for Return on Investment, a measure of the profitability of an investment relative to its cost.
#4
Which financial statement reports a company's revenues and expenses over a specific period?
Income statement
ExplanationThe income statement details a company's financial performance by showing revenues and expenses over a specific time frame.
#5
What is the concept of diversification in investment?
Spreading investment across different assets to reduce risk
ExplanationDiversification involves spreading investments across various assets to minimize risk.
#6
What is the purpose of a SWOT analysis in financial planning?
To evaluate internal and external factors that may affect the financial situation
ExplanationSWOT analysis assesses internal and external factors influencing financial situations for effective planning.
#7
Which of the following is a short-term source of financing for a business?
Trade credit
ExplanationTrade credit is a short-term financing option for businesses to facilitate transactions.
#8
What is the concept of time value of money (TVM) in financial management?
The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity
ExplanationTVM recognizes that money's present value is greater than its future value due to earning potential.
#9
What is the formula to calculate the current ratio?
Current Assets / Current Liabilities
ExplanationThe current ratio is calculated by dividing current assets by current liabilities, indicating a company's short-term liquidity.
#10
What is the difference between a mutual fund and an ETF (Exchange-Traded Fund)?
Mutual funds can only be bought and sold at the end of the trading day, while ETFs can be traded throughout the day
ExplanationMutual funds trade at the day's end, while ETFs can be traded throughout the day, distinguishing their market accessibility.
#11
What does the term 'liquidity' refer to in finance?
The ability to convert assets into cash quickly without significant loss of value
ExplanationLiquidity denotes the ease of converting assets into cash rapidly without substantial loss of value.
#12
What is the concept of CAPM (Capital Asset Pricing Model) in finance?
A model used to calculate the expected return on an investment
ExplanationCAPM is a model employed to estimate the anticipated return on an investment, considering risk and the market's expected return.