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Which of the following statements describe the main objectives of a corporation?
Which of the following statements describe the main objectives of a corporation?
Which of the following is the LEAST likely to fall within financial management?
Which of the following is the LEAST likely to fall within financial management?
Why must finance managers consider shareholders' preferences for dividends versus capital gains?
Why must finance managers consider shareholders' preferences for dividends versus capital gains?
Which type of industry tends to have low return on sales but high inventory turnover?
Which type of industry tends to have low return on sales but high inventory turnover?
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______________ measure the ability of the firm to meet its short-term obligation.
______________ measure the ability of the firm to meet its short-term obligation.
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What are some common uses of short-term financing in businesses?
What are some common uses of short-term financing in businesses?
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Match the following programming languages with their primary usage:
Match the following programming languages with their primary usage:
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Which of the following are types of long-term financing?
Which of the following are types of long-term financing?
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________________ refers to short-term unsecured debts issued by firms to get funding from investors. It is normally issued by the firm with high credit rating such as bank.
________________ refers to short-term unsecured debts issued by firms to get funding from investors. It is normally issued by the firm with high credit rating such as bank.
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Which of the following is NOT relevant to working capital management?
Which of the following is NOT relevant to working capital management?
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Which of the following is NOT the steps in an account receivables collection process?
Which of the following is NOT the steps in an account receivables collection process?
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The following are relevant cash outflow to be recorded in project’s cash flow, EXCEPT
The following are relevant cash outflow to be recorded in project’s cash flow, EXCEPT
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Study Notes
Corporate Objectives
- The main objective of a corporation is to maximize shareholder wealth.
- Efficient acquisition and deployment of financial resources are essential to achieve this objective.
Financial Management
- Financial management involves providing information to management for day-to-day functions of control and decision making.
- It also involves raising funds to finance investment projects and managing surplus assets.
- Non-executive directors' appointment to the remuneration committee is not a part of financial management.
Shareholder Preferences
- Finance managers must consider shareholders' preferences for dividends versus capital gains to align company decisions with shareholder interests.
Liquidity Ratios
- Current ratio and quick ratio measure a company's ability to meet its short-term obligations.
- An increase in overdraft to buy and pay for inventory immediately will decrease the current ratio and quick ratio.
Industry Characteristics
- Industries competing based on volume of sales tend to have low return on sales but high inventory turnover.
Debt Management
- Gearing ratio, debt ratio, and interest coverage ratio are used to manage a firm's debt level.
- Gross profit margin is not a ratio used to manage debt.
Short-term Financing
- Short-term financing is used for payment of wages to employees and other short-term needs.
- Common sources of short-term financing include account receivables backed loans, bank overdrafts, factoring account receivables, and banker acceptances.
Long-term Financing
- Long-term financing sources include bonds and stocks.
Commercial Paper
- Commercial paper is a type of short-term unsecured debt issued by firms to get funding from investors, typically used by firms with high credit ratings such as banks.
Working Capital Management
- Working capital management involves managing cash, account receivables, and account payables.
- Staff management is not a part of working capital management.
Working Capital Ratios
- Current ratio, inventory turnover period, and receivables collection period are all working capital ratios.
- Debt ratio is not a working capital ratio.
Account Receivables Collection
- The steps in an account receivables collection process include sending statements of account, personal visits to clients, and legal proceedings.
- Appointing illegal collection agencies is not a part of the collection process.
Cash Flow
- Cash outflows to be recorded in a project's cash flow include incremental fixed costs, cannibalisation, and changes in net working capital.
- Sunk cost is not a relevant cash outflow.
Project Evaluation
- The initial investment of a project includes the costs of equipment, marketing surveys, and other expenses.
- Average Accounting Rate of Return (ARR) is calculated based on the projected net income over the project's life.
Risk Management
- Systematic risk includes interest risk, market risk, and inflation risk.
- Financial risk is not a type of systematic risk.
Diversification
- Diversification involves spreading risk by investing in various projects with different levels of risk.
- It does not involve investing in high-risk projects, specialized industries, or government projects.
Payback Period
- Payback period indicates the length of time a project takes to recover the cost of an investment.
- It is not the same as accounting rate of return, net present value, or internal rate of return.
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Description
This quiz covers the main objectives of a corporation and the role of financial management in achieving those goals. It includes topics such as maximizing shareholder wealth, financial resource allocation, and decision making.
