IS103-Midterm Exam

What is the primary goal of financial management?

• Maximizing Shareholder Wealth
• Profit Maximization
• Maintaining Liquidity
• Ensuring Adequate Liquidity

Which of the following is NOT a function of financial management?

• Marketing Decisions
• Investment Decisions
• Financing Decisions
• Dividend Decisions

What does the scope of financial management include?

• Investment, Financing, and Dividend Decisions
• Human Resource Management
• Marketing Strategies
• Customer Relationship Management

In financial markets, what is typically traded in money markets?

• Short-term borrowing and lending instruments
• Long-term securities like stocks and bonds
• Real estate
• Commodities

What type of financial institution provides loans and accepts deposits?

• Commercial Banks
• Insurance Companies
• Investment Banks
• Pension Funds

Why is profit maximization NOT the only goal of financial management?

• It neglects long-term financial stability.
• It always ensures maximum return.
• It does not consider risks.
• It prioritizes liquidity over profits.

How do investment decisions impact a company's financial performance?

• They determine where and how funds are allocated to generate returns.
• They have no impact on financial performance.
• They only concern day-to-day expenses.
• They are irrelevant to dividend decisions.

What is the significance of dividend decisions in financial management?

• It determines the balance between distributing profits to shareholders and reinvesting in the business.
• It only involves paying taxes.
• It affects only short-term liquidity.
• It has no impact on shareholder value.

Why are interest rates important in investment decisions?

• They affect the cost of borrowing and the attractiveness of investments.
• They determine the amount of taxes a company will pay.
• They only influence long-term financial stability.
• They are irrelevant to investment decisions.

Which financial market focuses on the issuance of new securities?

• Primary Market
• Secondary Market
• Money Market
• Commodity Market