30 Questions
What is the main focus of Financial Management?
Applying general management principles to financial resources of the enterprise
What are the two related activities described by the broad term 'Finance'?
The study of how money is managed and the actual process of acquiring needed funds
What is the scope of investment decisions in Financial Management?
Both investment in fixed assets and current assets
What is the term used to describe investment in current assets?
Working capital decisions
What are the three subcategories of finance?
Personal finance, corporate finance, and public finance
What is the primary goal of Financial Management?
To apply general management principles to financial resources
What is the primary function of profit in a business?
To provide a source of finance for business operations
What is a limitation of the profit maximization objective?
It ignores the risk factor involved in business
What is an advantage of earning maximum profits for a business?
It reduces the risk of business and provides a financial cushion
Why is profit maximization considered a vague and ambiguous objective?
Because it is not clearly defined
What is another term for the 'bigger is better' concept in profit maximization?
Profit maximization
What is one of the ways a business can fulfill its social responsibility obligations?
By earning maximum profits
What is a negative consequence of prioritizing profit over other considerations?
Exploitation of workers and consumers
What is the determinant of a shareholder's wealth?
Market value of shares
What is a benefit of wealth maximization as an objective?
It considers the time value of money
What is the result of investments that maximize Net Present Value?
Maximized shareholder wealth
Why is wealth maximization considered superior to profit maximization?
It focuses on cash flows rather than profit
How are cash inflows occurring at different points in time treated in Net Present Value calculations?
They are discounted with an appropriate discount rate
What is the primary purpose of providing a compensation package to managers?
To induce them to act in stockholders' interest
Who is responsible for monitoring the performance of managers?
All of the above
What is a key factor in determining the structure of the finance function in an organization?
All of the above
What is the responsibility of the Treasurer in a financial management function?
Cash management
What is the role of the Controller in a financial management function?
All of the above
What is the primary responsibility of the Financial Planning Manager?
Capital expenditures and financial planning
What is the primary function of financial markets?
To provide a platform for investors to trade financial instruments
What type of financing involves the use of retained earnings?
Internal corporate financing
Which market allows governments, banks, and corporations to raise money by directly selling financial instruments to the public?
Primary market
What is the primary difference between primary and secondary markets?
The timing of the sale
What is an example of an external source of funds for a company?
Bonds
What is the main function of financial intermediaries in indirect financing?
To act as a middleman between those who need capital and those who have capital to invest
Test your understanding of the nature of financial management, financial markets, objectives of financial management, and the cost of money. This quiz covers the basics of finance and is suitable for students of Financial Management BI 1223.
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