Financial Management Multiple Choice Questions

The main objective of financial management is:

• Maximizing sales

• Minimizing cost

• Maximizing shareholder wealth

• Increasing market share

Finance deals primarily with:

• Money and investment decisions

• Product design

• Human resources

• Advertising and promotion

Investment, financing, and dividend decisions are:

• Accounting functions

• Marketing functions

• Core financial decisions

• HR decisions

Working capital is defined as:

• Total assets minus total liabilities

• Fixed assets minus current assets

• Current assets minus current liabilities

• Current liabilities minus current assets

Capital structure refers to:

• Mix of debt and equity financing

• Inventory control

• Dividend policy

• Fixed assets investment

Cost of capital represents:

• Minimum rate of return required by investors

• Interest rate on short-term loans

• Tax rate

• Depreciation rate

Liquidity refers to a firm’s ability to:

• Meet short-term obligations

• Increase profitability

• Expand operations

• Reduce expenses

Leverage means:

• Use of fixed costs to magnify returns

• Reduction of debt

• Increase in equity

Financial planning ensures:

• Adequate funds at the right time

• Increased production

• Market share growth

• Reduction of taxes

Risk and return are:

• Directly related

• Inversely related

• Unrelated

• Negatively correlated