Financial Management Quiz 1

What is the primary objective of financial management?

• Maximization of profits

• Maximization of shareholders' wealth

• Maximization of sales

• Minimization of expenses

Which of the following is NOT a major decision in financial management?

• Investment decision

• Financing decision

• Dividend decision

• Marketing decision

The function of financial management includes:

• Raising capital

• Allocation of funds

• Managing risk

• All of the above

Which of the following is a key factor affecting capital structure?

• Market conditions

• Cost of debt and equity

• Risk and profitability

• All of the above

The cost of capital is:

• The cost of obtaining funds

• The amount of capital a company has

• The profit earned by a company

• The total revenue of a company

Which of the following sources of financing has the lowest cost of capital?

• Equity shares

• Preference shares

• Debt

• Retained earnings

If a company raises capital through retained earnings, its cost of capital is:

• Zero

• Equal to the return required by shareholders

• Higher than debt

• Equal to the risk-free rate

The financial structure of a company includes:

• Only equity

• Only debt

• Both equity and debt

• Only retained earnings

The debt-equity ratio is used to measure:

• Profitability

• Solvency

• Liquidity

• Efficiency

If the financial leverage of a company increases, it means:

• The company has more debt financing

• The company has more equity financing

• The company's risk decreases

• The company's profitability decreases