Financial management is
an art of planning, organizing, directing, and controlling of
an organization's financial resources to achieve its financial goals and
objectives. It involves making decisions related to the acquisition,
allocation, utilization, and monitoring of funds and other financial resources
to optimize the financial performance of an organization.
Financial management encompasses various aspects of
financial activities, including budgeting, financial analysis, financial
reporting, financial risk management, cash flow management, capital budgeting,
and financial decision making. It involves managing financial resources in a way
that maximizes the value of the organization, ensures financial sustainability,
and mitigates financial risks.
The key objectives of
financial management are to ensure efficient utilization of financial
resources, maximize profits or shareholder value, maintain liquidity, manage
risks, and make informed financial decisions. Financial managers or financial
officers are responsible for planning, implementing, and monitoring financial
strategies, policies, and procedures to achieve these objectives and ensure the
financial well-being of the organization. They work closely with other
functional areas within an organization, such as accounting, marketing,
operations, and human resources, to ensure alignment of financial goals with
overall organizational objectives.
Financial management MCQs.
Financial management is
concerned with:
A) Maximizing profits
B) Minimizing costs
C) Both A and B
D) None of the above
Answer: C) both A and B
Not a function of financial
management?
A) Financial planning
B) Investment decision
C) Human resource management
D) Financing decision
Answer: C) Human resource
management
The process of estimating the
future financial requirements of a firm is known as:
A) Financial analysis
B) Financial forecasting
C) Financial planning
D) Financial control
Answer: B) Financial
forecasting
Not considered a
financial statement?
A) Balance sheet
B) Income statement
C) Cash flow statement
D) Sales statement
Answer: D) Sales statement
Total assets minus its
total liabilities is called:
A) Net income
B) Gross profit
C) Net worth
D) Revenue
Answer: C) Net worth
The percentage of a company's
earnings paid out as dividends to shareholders is called:
A) Retained earnings
B) Payout ratio
C) Return on equity
D) Debt-to-equity ratio
Answer: B) Payout ratio
Not a source of
long-term financing?
A) Bonds
B) Preferred stock
C) Common stock
D) Accounts payable
Answer: D) Accounts
payable
The expense of borrowing
money is known as:
A) Interest rate
B) Inflation rate
C) Discount rate
D) Capital gains tax rate
Answer: A) Interest
rate
The process of selling
accounts receivable to a third party in order to raise cash is called:
A) Factoring
B) Leasing
C) Hedging
D) Securitization
Answer: A) Factoring
The time it takes for a
company to convert its assets into cash is known as:
A) Cash conversion cycle
B) Inventory turnover
C) Receivables turnover
D) Fixed asset turnover
Answer: A) Cash conversion cycle
The process of evaluating the
financial performance of a company by comparing it to other companies in the
same industry is called:
A) Financial analysis
B) Vertical analysis
C) Horizontal analysis
D) Ratio analysis
Answer: D) Ratio
analysis
Is not a part profitability
ratio?
A) Return on assets
B) Gross profit margin
C) Current ratio
D) Return on equity
Answer: C) Current
ratio
The amount of debt a company
has relative to its equity is called:
A) Debt ratio
B) Debt-to-equity ratio
C) Interest coverage ratio
D) Asset turnover ratio
Answer: B) Debt-to-equity
ratio
The amount of money a company
generates from its operations after subtracting operating expenses is called:
A) Net income
B) EBITDA
C) Free cash flow
D) Gross profit
Answer: B) EBITDA
------------is not a
liquidity ratio?
A) Current ratio
B) Quick ratio
C) Debt-to-equity ratio
D) Cash ratio
Answer: C) Debt-to-equity
ratio
The ability of a company to
meet its short-term obligations is measured by the:
A) Current ratio
B) Debt ratio
C) Return on equity
D) Gross profit margin
Answer: A) Current
ratio
Financial Management MCQs
Primary goal of financial
management?
A) Maximizing profits
B) Minimizing expenses
C) Maximizing shareholder
value
D) Minimizing risk
Answer: C) Maximizing
shareholder value
Financial statements reports
a company's revenues and expenses over a period of time?
A) Balance sheet
B) Income statement
C) Statement of cash flows
D) Statement of retained
earnings
Answer: B) Income statement
What is the formula for
calculating the net present value (NPV) of a project?
A) NPV = Present value of
cash inflows - Present value of cash outflows
B) NPV = Future value of cash
inflows - Future value of cash outflows
C) NPV = Average value of
cash inflows - Average value of cash outflows
D) NPV = Total value of cash
inflows - Total value of cash outflows
Answer: A) NPV =
Present value of cash inflows - Present value of cash outflows
Purpose of financial
leverage?
A) To increase profits
B) To decrease risk
C) To increase the value of a
firm
D) To decrease the cost of
capital
Answer: C) to
increase the value of a firm
What is the difference
between common stock and preferred stock?
A) Common stockholders have
voting rights, while preferred stockholders do not.
B) Preferred stockholders
have voting rights, while common stockholders do not.
C) Preferred stock pays a
fixed dividend, while common stock does not.
D) Common stock pays a fixed
dividend, while preferred stock does not.
Answer: A) Common
stockholders have voting rights, while preferred stockholders do not.
Current ratio formula?
A) Current assets / current
liabilities
B) Current liabilities /
current assets
C) Total assets / total
liabilities
D) Total liabilities / total
assets
Answer: A) Current
assets / current liabilities
Financial statements?
A) To provide information to
investors and creditors about a company's financial performance and condition.
B) To provide information to
the government about a company's financial performance and condition.
C) To provide information to
employees about a company's financial performance and condition.
D) To provide information to
customers about a company's financial performance and condition.
Answer: A) to provide
information to investors and creditors about a company's financial performance
and condition.
What is the difference
between a bond and a stock?
A) Bonds represent ownership
in a company, while stocks represent a loan to a company.
B) Bonds pay a fixed interest
rate, while stocks pay a variable dividend.
C) Bonds have a maturity
date, while stocks do not.
D) Bonds have voting rights,
while stocks do not.
Answer: B) Bonds pay
a fixed interest rate, while stocks pay a variable dividend.
What is the time value of
money?
A) The idea that a dollar
today is worth more than a dollar in the future due to inflation.
B) The idea that a dollar
today is worth more than a dollar in the future due to interest earned.
C) The idea that a dollar in
the future is worth more than a dollar today due to inflation.
D) The idea that a dollar in
the future is worth more than a dollar today due to interest earned.
Answer: B) The idea
that a dollar today is worth more than a dollar in the future due to interest
earned