Module 5 Quiz

What is financial statement analysis?

• The process of evaluating and interpreting the financial statements of a company to gain insights into its financial performance, stability, and profitability.

• The process of auditing financial statements for a company

• The process of creating financial statements for a company

• The process of predicting future financial performance based on historical data

What is the purpose of capital budgeting?

• To assess short-term financial needs

• To determine the company's annual budget

• To analyze the profitability of existing projects

• To evaluate and select long-term investment projects

What is working capital management?

• Management of long-term assets and liabilities

• Management of short-term assets and liabilities

• Management of fixed assets

• Management of human resources

Why is risk management important in business finance?

• Risk management is important in business finance because it helps businesses identify and assess potential risks, develop strategies to mitigate those risks, and protect their financial assets.

• Risk management only focuses on short-term financial goals.

• Risk management is not important in business finance.

• Risk management is too time-consuming and costly for businesses.

What is the cost of capital?

• The cost of capital is the required return on investment for a company or project.

• The cost of capital is the interest rate charged by banks for loans.

• The cost of capital is the amount of money a company spends on advertising.

• The cost of capital is the price of purchasing shares in a company.

How is financial statement analysis used to evaluate a company's performance?

• Financial statement analysis is used to evaluate a company's performance by analyzing its financial statements and assessing key financial ratios, trends, and comparisons to industry benchmarks or competitors.

• Financial statement analysis only focuses on a company's revenue.

• Financial statement analysis is not used to evaluate a company's performance.

• Financial statement analysis is used to evaluate a company's performance by analyzing its marketing strategies.

What are the key components of capital budgeting?

• estimating cash flows, assessing risk, determining the discount rate, evaluating investment criteria, and making the final decision

• evaluating fixed costs, analyzing variable costs, considering inflation rates, consulting with financial advisors, and implementing the plan

• calculating depreciation, analyzing market trends, considering tax implications, consulting with stakeholders, and executing the plan

• forecasting sales, conducting market research, analyzing competitors, developing a marketing strategy, and implementing the plan

How does working capital management impact a company's liquidity?

• Working capital management ensures that a company has enough current assets to cover its current liabilities, thus optimizing liquidity.

• Working capital management increases a company's current liabilities, reducing its liquidity.

• Working capital management only impacts a company's profitability, not its liquidity.

• Working capital management has no impact on a company's liquidity.

What are the different types of risks that businesses face?

• financial risk, operational risk, strategic risk, compliance risk, and reputational risk

• human resource risk, supply chain risk, and political risk

• technological risk, environmental risk, and legal risk

• market risk, credit risk, and liquidity risk

How is the cost of capital calculated?

• Weighted average of cost of debt and cost of equity

• Product of cost of debt and cost of equity

• Average of cost of debt and cost of equity

• Sum of cost of debt and cost of equity