#1
What is the primary goal of financial management?
Maximizing shareholder wealth
ExplanationEnhancing the value of the company for its shareholders.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationMeasures the profitability of an investment relative to its cost.
#3
What is the main purpose of financial ratios in analysis?
To provide insights into a company's financial health and performance
ExplanationHelps in evaluating and comparing a company's financial condition.
#4
What is the concept of 'Diversification' in investment?
Investing in multiple assets to reduce risk
ExplanationSpreading investments to minimize risk by not putting all eggs in one basket.
#5
What is the primary purpose of financial forecasting?
To predict future financial outcomes
ExplanationEstimates future financial performance based on historical data.
#6
What is the primary goal of inventory management?
To maximize inventory turnover
ExplanationAims to efficiently manage stock levels to optimize sales and minimize costs.
#7
Which financial statement reports a firm's financial position at a specific point in time?
Balance sheet
ExplanationSummarizes assets, liabilities, and equity at a given moment.
#8
What is the formula for calculating Earnings per Share (EPS)?
Net Income / Number of Common Shares Outstanding
ExplanationIndicates the profit attributable to each outstanding share.
#9
What is the Time Value of Money (TVM) principle in finance?
The concept that a dollar today is worth more than a dollar in the future
ExplanationMoney has greater value today than in the future due to potential earning capacity.
#10
What does the Debt-to-Equity ratio measure?
The proportion of debt financing relative to equity financing
ExplanationAssesses a company's reliance on debt compared to equity.
#11
What does the term 'Capital Budgeting' refer to in financial management?
The process of evaluating and selecting long-term investments
ExplanationDeciding on long-term investments to maximize returns.
#12
What is the role of a Chief Financial Officer (CFO) in a corporation?
Responsible for financial planning and reporting
ExplanationOversees financial matters and ensures accurate reporting.
#13
What does the term 'Leverage' refer to in finance?
The degree to which a company's debt financing is used
ExplanationThe extent to which a company employs borrowed funds.
#14
What is the formula for calculating Net Present Value (NPV) of an investment?
Total Cash Inflows - Total Cash Outflows, discounted at a specified rate
ExplanationDetermines the present value of future cash flows from an investment.