Financial Management Quiz

The goal of financial management is to:

• Minimize risk for investors.

• Maximize value for shareholders.

• Reduce debt to zero.

• Increase liquidity ratios.

A liquid asset is one that:

• Cannot be converted into cash.

• Is held by the government.

• Can be quickly converted into cash with little risk.

• Requires a long-term investment.

What is the principle that higher returns are associated with greater risks?

• Budgeted income statement

• Risk-return trade-off

• Liquidity ratios

• Financial leverage

Which term describes net income reinvested in the firm?

• Retained earnings

• Liquidity ratios

• Financial capital

• Line of credit

What are funds provided by owners of a company called?

• Financial leverage

• Equity financing

• Liquidity ratios

• Net present value (NPV)

What measures a firm's ability to meet short-term obligations?

• Liquidity ratios

• Financial capital

• Capital structure

• Retained earnings

What is the mix of equity and debt used to finance a firm’s permanent needs?

• Financial leverage

• Capital structure

• Budgeted income statement

• Risk-return trade-off

Which term refers to the funds provided by owners of a company?

• Equity financing

• Financial leverage

• Liquidity ratios

• Net present value (NPV)

What is the term for a financial tool to evaluate long-term investment proposals?

• Net present value (NPV)

• Retained earnings

• Financial capital

• Line of credit

Financial leverage refers to:

• Funds provided by owners of a company.

• The degree to which a firm relies on debt financing.

• Short-term financing options for small businesses.

• The calculation of net present value.