FM - Introduction to Financial Management

Which of the following statements describes the main objective of financial management?

• Efficient acquisition and deployment of financial resources to ensure achievement of objectives

• Providing information to management for day to day functions of control and decision making

• Providing information to external users about the historical results of the organisation

• Maximisation of shareholder wealth

Which of the following is LEAST likely to fall within financial management?

• The dividend payment to shareholders is increased.

• Funds are raised to finance an investment project.

• Surplus assets are sold off.

• Non-executive directors are appointed to the remuneration committee.

Which of the following does NOT form part of the objectives of a corporate governance best practice framework?

• Separation of chairperson and CEO roles

• Establishment of audit, nomination and remuneration committees

• Minimisation of risk

• Employment of non-executive directors

Are the following statements true or false?

True False

1. Maximising market share is an example of a financial objective.

2. Shareholder wealth maximisation is the primary financial objective for a company listed on a stock exchange.

3. Financial objectives should be quantitative so that their achievement can be measured.

• True, False, True

• True, True, True

• True, False, False

• False, True, True

A school decides to have larger classes, and examination results suffer as a result. In terms of the 'value for money' framework, which of the following statements is true?

• Economy has increased but efficiency has decreased.

• Efficiency has increased but effectiveness has decreased.

• Economy has increased but effectiveness has decreased.

• Economy has increased but efficiency and effectiveness have decreased.

Are the following statements true or false?

True False

1. Accounting profit is not the same as economic profit.

2. Profit takes account of risk.

3. Accounting profit can be manipulated by managers.

• True, False, False

• True, False, True

• False, False, True

• True, True, False

A government body uses measures based upon the 'three Es' to measure value for money generated by a publicly funded hospital.

Which of the following relates to efficiency?

• Cost per successfully treated patient

• Cost per operation

• Proportion of patients readmitted after unsuccessful treatment

• Percentage change in doctors' salaries compared with previous year

Are the following statements true or false?

True False

1. Cash flow forecasting is primarily the responsibility of financial reporting.

2. Whether to undertake a particular new project is a financial management decision.

• True & False

• True & True

• False & False

• False & True

In relation to the financial management of a company, which of the following provides the best definition of a firm’s primary financial objective?

• To achieve long‐term growth in earnings

• To maximise the level of annual dividends

• To maximise the wealth of its ordinary shareholder

• To maximise the level of annual profit

Indicate, by clicking in the relevant boxes, whether the following objectives are financial or non‐financial objectives of a company.

Objective

1. Maximisation of market share    

2. Earnings growth    

3. Sales revenue growth    

4. Achieving a target level of customer satisfaction    

5. Achieving a target level of return on capital employed

• Financial - 1, 3

  Non‐financial - 2, 4 & 5

• Financial - 2, 3 & 5

  Non‐financial - 1 & 4

• Financial - 2, 4 & 5

  Non‐financial - 1 & 3

• Financial - 4 & 5

  Non‐financial - 1, 2 & 3