#1
What is the primary goal of financial management in a business?
Maximizing shareholder wealth
ExplanationEnhancing shareholder value through efficient resource allocation.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationMeasure of profitability relative to the cost of investment.
#3
What is the primary function of a financial market?
To facilitate the buying and selling of financial assets
ExplanationPlatform for trading various financial instruments.
#4
Which of the following is an example of a short-term financing option?
Trade credit
ExplanationCredit extended by suppliers to finance purchases.
#5
What does the term 'Dividend' refer to in finance?
A portion of company profits distributed to shareholders
ExplanationDistribution of profits to shareholders.
#6
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Balance sheet
ExplanationSummary of assets, liabilities, and equity at a given time.
#7
What is the formula for calculating the debt-to-equity ratio?
Total debt / Total equity
ExplanationMeasure of a company's debt compared to its equity.
#8
What is the formula to calculate Earnings Per Share (EPS)?
Net Income / Total Shares Outstanding
ExplanationProfit allocated to each outstanding share of common stock.
#9
What is the concept of present value in finance?
The value of money today
ExplanationAssessment of the current worth of future cash flows.
#10
What does the term 'Liquidity' refer to in finance?
Ability to convert assets into cash without significant loss
ExplanationEase of converting assets into cash.
#11
Which of the following is NOT a key principle of finance?
Profit maximization
ExplanationWhile important, profit maximization isn't the sole objective; it's about maximizing shareholder wealth.
#12
Which of the following is NOT a characteristic of a perfectly competitive market?
Control over market price by individual firms
ExplanationPerfect competition involves no single firm having control over prices.