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Questions and Answers
What is the primary objective of financial management?
What is the primary objective of financial management?
- Minimizing expenses and cash flow
- Managing fluctuations in foreign currency
- Achieving long-term strategic financial management
- Maximizing the value of the firm for stockholders (correct)
What is the role of financial managers (FM) in an organization?
What is the role of financial managers (FM) in an organization?
- Primarily involved in treasury management
- Specialized professionals directly reporting to senior management (correct)
- Focused on long-term strategic planning only
- Line managers responsible for day-to-day operations
What does short-term working capital management in financial management primarily focus on?
What does short-term working capital management in financial management primarily focus on?
- Current assets and current liabilities (correct)
- Long-term capital structure management
- Strategic financial management
- Foreign currency hedging only
What is the main objective of profit maximization according to financial management?
What is the main objective of profit maximization according to financial management?
What is a short-run objective of financial management?
What is a short-run objective of financial management?
Financial management is primarily concerned with maximizing the value of the firm for customers.
Financial management is primarily concerned with maximizing the value of the firm for customers.
Treasury management is not related to the day-to-day management of funds.
Treasury management is not related to the day-to-day management of funds.
Long term strategic financial management includes capital budgeting and dividend policy.
Long term strategic financial management includes capital budgeting and dividend policy.
Maintaining proper cash flow is a long-run objective of financial management.
Maintaining proper cash flow is a long-run objective of financial management.
Profit maximization occurs when marginal cost is equal to marginal revenue.
Profit maximization occurs when marginal cost is equal to marginal revenue.
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Study Notes
Financial Management Objectives
- Primary objective of financial management: maximize the value of the firm for shareholders, not customers
- Role of financial managers (FM): manage the financial resources of an organization to achieve its objectives
Working Capital Management
- Short-term working capital management: primarily focuses on managing current assets and liabilities, ensuring sufficient liquidity and profitability
Profit Maximization
- Main objective of profit maximization: occurs when marginal cost is equal to marginal revenue
- Not a long-run objective of financial management; rather, a short-run objective
Long-Term Strategic Financial Management
- Includes capital budgeting and dividend policy
- Maintaining proper cash flow is a long-run objective of financial management, related to treasury management, which involves the day-to-day management of funds
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