Financial Management

How is financial viability of an organization typically assessed?

• Employee satisfaction

• Customer feedback

• Financial Statements

• Market Share

What is a common financial ratio used to assess liquidity?

• Return on Investment (ROI)

• Current Ratio

• Debt-to-Equity Ratio

• Price-Earnings Ratio

Answer explanation

Current ratio is the relationship between current assets and current liabilities, indicating the liquidity of a business i.e. its ability to meet its short term obligations. Also referred to as the liquidity ration

In financial analysis, what does the term "working capital" refer to?

• Long-term assets

• Current assets minus current liabilities

• Total assets minus total liabilities

• Revenue minus expenses

Answer explanation

1. The capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.

What is a potential consequence of poor financial management for a business?

• Increased profitability

• Enhanced market reputation

• Insufficient cash flow

• Higher employee morale

How can poor financial management impact a company's credit rating?

• It has no effect on credit rating

• Improves credit rating

• Lowers credit rating

• Stays constant

Answer explanation

Your business credit score works a lot like your personal one.

And it’s one thing banks and other lenders (and investors) use to make decisions about lending or investments.

This can be important when applying for debt finance.

If you want to take out a Business LoanLink opens in a new window, an OverdraftLink opens in a new window or another form of debt, your score will determine factors such as:

• how much you can borrow

• your interest rate

• whether you’ll be approved for a loan at all

There are other implications too.

Unlike a personal credit score, your business credit score is available for anyone to view.

This means customers, suppliers and other companies can check it.

And it could come into play in day-to-day business dealings – for example, when you’re negotiating contracts or tenders, or when you’re looking for insurance.

Which financial statement is crucial for evaluating a company's profitability over a specific period?

• Balance Sheet

• Income Statement

• Cash Flow Statement

• Statement of Retained Earnings

Answer explanation

An income statement is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period. The other two key statements are the balance sheet and the cash flow statement.

What does the term "ROI" stand for in finance?

• Return on Investment

• Rate of Interest

• Risk of Inflation

• Revenue on Investment

What is the purpose of a "master budget" in financial management?

• Monitoring day-to-day expenses

• Estimating overall company profitability

• Controlling long-term investments

• Analyzing short-term market trends

Which budget focuses on a company's long-term capital investments?

• Operational budget

• Capital budget

• Cash budget

• Flexible budget

Answer explanation

Capital budgeting is used to decide whether or not an investment is worthwhile. Organisations may have several opportunities to use available capital and must measure the potential of each opportunity.

Who might provide expert advice on tax planning and financial strategies to a business?

• Human Resources Manager

• Financial Analyst

• Operations Manager

• Management Consultant