Introduction to Financial Management Quiz
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Questions and Answers

What is the primary objective of Financial Management?

  • Maximizing the firm's revenue
  • Minimizing the firm's expenses
  • Maximizing the value of shareholders' wealth (correct)
  • Maximizing the firm's market share
  • Which form of business organization is owned by one person and operated for his or her own profit?

  • Limited Liability Company
  • Corporation
  • Sole Proprietorship (correct)
  • Partnership
  • According to Gitman and Zutter, how do they define Finance?

  • The science and art of managing money (correct)
  • The body of facts, principles, and theories relating to money management
  • The process of raising money and allocating resources
  • The study of investment and financial markets
  • What does Finance involve?

    <p>Raising money or resources and allocating them effectively and efficiently</p> Signup and view all the answers

    Which business organization is an entity created by law and owned by shareholders?

    <p>Corporation</p> Signup and view all the answers

    What does Financial Management aim to maximize?

    <p>Value of shareholders' wealth</p> Signup and view all the answers

    What is the primary goal of financial management according to Cabrera (2017)?

    <p>Maximize the wealth of the shareholders</p> Signup and view all the answers

    In a small business, who often assumes direct responsibility for marketing, production, finance, and other functions?

    <p>President or General Manager</p> Signup and view all the answers

    What are the three major types of financial decisions made by the Finance Manager?

    <p>Investment decisions, Financing decisions, Operating decisions</p> Signup and view all the answers

    What is the role of the Chief Financial Officer in very large concerns?

    <p>He/she reports directly to the President or Executive Vice President or Chief Operating Officer</p> Signup and view all the answers

    What are the types of decisions determined by financing decisions?

    <p>Decisions related to asset investments and hurdle rate</p> Signup and view all the answers

    What is the primary responsibility of the Finance Manager in medium-size business concerns?

    <p>Assigned primary responsibility for funds supply aspects of the finance function</p> Signup and view all the answers

    What does an investment decision aim at?

    <p>To earn a return greater than a minimum acceptable return (hurdle rate)</p> Signup and view all the answers

    Who is usually one of the senior officers of the firm reporting directly to the President or Executive Vice President or Chief Operating Officer?

    <p>Chief Financial Officer</p> Signup and view all the answers

    What is the title often held by the officer responsible for the broader financial area in very large concerns?

    <p>Vice-President - Finance</p> Signup and view all the answers

    What are the key functional areas where responsibilities are often divided between a treasurer and a controller in some business firms?

    <p>Finance and Marketing Management</p> Signup and view all the answers

    Financial management is primarily concerned with acquiring funds and utilizing them to achieve the firm's desired goals.

    <p>True</p> Signup and view all the answers

    The goal of financial management is to minimize the wealth of the shareholders.

    <p>False</p> Signup and view all the answers

    In a small business, the head of the firm often assumes direct responsibility for marketing, production, finance, and other functions.

    <p>True</p> Signup and view all the answers

    In medium-size business concerns, a separate department headed by an officer with the title as Finance Manager may be assigned primary responsibility for the narrower funds supply aspects of the finance function.

    <p>True</p> Signup and view all the answers

    The chief finance officer usually reports directly to the Chief Operating Officer in very large concerns.

    <p>False</p> Signup and view all the answers

    Investment decisions aim at committing limited resources to projects that are expected to earn a return greater than a minimum acceptable return.

    <p>True</p> Signup and view all the answers

    Financing decisions determine how scarce resources are committed to projects.

    <p>False</p> Signup and view all the answers

    The mix of debt and equity is determined by operating decisions.

    <p>False</p> Signup and view all the answers

    The investment decisions should aim at investments in assets only when they are expected to earn a return greater than a minimum acceptable return.

    <p>True</p> Signup and view all the answers

    The primary goal of financial management is to maximize the wealth of the shareholders.

    <p>True</p> Signup and view all the answers

    Finance is only concerned with managing money and does not involve raising resources or allocating them.

    <p>False</p> Signup and view all the answers

    Financial management involves decisions that aim to maximize the value of shareholders' wealth.

    <p>True</p> Signup and view all the answers

    A partnership is a business owned by one person and operated for his or her own profit.

    <p>False</p> Signup and view all the answers

    A corporation is an entity created by law and owned by shareholders.

    <p>True</p> Signup and view all the answers

    The primary goal of financial management is to maximize the value of stakeholders' wealth.

    <p>False</p> Signup and view all the answers

    Financial management includes the study of investment and institutions and markets.

    <p>True</p> Signup and view all the answers

    Study Notes

    Financial Management Objectives

    • Primary objective is to acquire funds and utilize them to achieve the firm's goals.
    • Aims to maximize shareholder wealth, contrary to minimizing it.

    Forms of Business Organization

    • Sole proprietorship: Owned and operated by one individual for personal profit.
    • Corporation: Legal entity owned by shareholders.

    Definition and Scope of Finance

    • Finance defined as managing money, focusing on investment and markets, rather than just raising and allocating resources.
    • Involves making strategic decisions to maximize the value of shareholders' wealth.

    Business Responsibilities

    • In small businesses, the owner typically oversees all functions: marketing, production, finance, etc.
    • In medium-sized firms, a Finance Manager may handle narrower aspects of financial management.
    • Chief Financial Officer (CFO) in large firms reports directly to the Chief Operating Officer (COO).

    Types of Financial Decisions

    • Major financial decisions include investment, financing, and operational decisions.
    • Investment decisions focus on committing resources to projects with expected returns exceeding a minimum acceptable rate.
    • Financing decisions influence how resources are allocated, determining the mix of debt and equity.
    • Operational decisions detail the management of the firm’s daily activities.

    Finance Manager Responsibilities

    • In medium-sized businesses, the Finance Manager primarily addresses the firm’s funding processes.
    • Their goal aligns with maximizing shareholder wealth through effective financial strategies.

    Senior Financial Roles

    • The CFO, as a senior officer, plays a pivotal role in financial management and strategic planning within large firms.
    • The specific titles and responsibilities often vary between the Treasurer (focused on funding and investment) and Controller (focused on financial reporting and compliance).

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    Test your knowledge of the basic concepts and principles of financial management including overview, roles of finance manager, financial environment, and flow of funds in a business enterprise.

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