Commerce and Financial Management

What is the primary goal of financial management?

• Maximize shareholder wealth

• Expand market share

• Increase employee satisfaction

• Minimize costs

Explain the concept of working capital.

• Working capital is the profit generated by a company.

• Working capital is the total assets of a company.

• Working capital is the amount of money a company has in its bank account.

• Working capital is the difference between current assets and current liabilities.

What are the key components of a financial statement?

• Income statement, balance sheet, cash flow statement

• Profit statement, equity statement, revenue statement

Differentiate between fixed and variable costs.

• Fixed costs do not change with the level of production or sales, whereas variable costs do change based on the level of production or sales.

• Fixed costs are directly related to sales, while variable costs are not affected by sales.

• Fixed costs increase with production, while variable costs remain constant.

• Variable costs are incurred only in the short term, while fixed costs are long-term expenses.

What is the importance of budgeting in financial management?

• Budgeting has no impact on financial management

• Budgeting is important in financial management for planning, controlling expenses, setting financial goals, allocating resources effectively, and monitoring performance.

• Budgeting is only important for large corporations

• Budgeting is a one-time process and does not need to be revisited

Define the term 'cash flow' in the context of business finance.

• Cash flow is the amount of physical cash stored in a business

• Cash flow is the value of assets owned by a business

• Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business.

• Cash flow is the total revenue generated by a business

Discuss the role of financial ratios in analyzing a company's performance.

• Financial ratios are static and do not reflect changes in a company's performance

• Financial ratios play a crucial role in assessing a company's performance by providing valuable information on its financial strengths and weaknesses.

• Financial ratios have no impact on analyzing a company's performance

• Financial ratios are only useful for marketing purposes

What is the difference between equity financing and debt financing?

• Equity financing and debt financing both involve selling ownership shares.

• Equity financing involves borrowing money, while debt financing involves selling ownership shares.

• Equity financing involves selling ownership shares, while debt financing involves borrowing money.

• Equity financing is riskier than debt financing.

Explain the concept of time value of money.

• The concept of time value of money is irrelevant in financial planning

• A dollar today is worth less than a dollar in the future

• The time value of money is the idea that a dollar today is worth more than a dollar in the future.

• The time value of money is only applicable in the stock market

How does risk management play a crucial role in financial decision-making?

• Risk management only applies to non-financial areas

• Risk management has no impact on financial decision-making

• Financial decisions should be made without considering risks

• Risk management helps in identifying, assessing, and prioritizing risks to make informed financial decisions.