Deck 1: Overview of Financial Management

Question 1

Match the words with the term.

-Which of the following statements describes an activity which is financial management?

A) Looking after trade payables and corporate accounting is not a responsibility of the controller.
B) Monitoring the profit for the year which is the difference between revenue and gross profit.
C) The treasurer raising funds.
D) Ensuring that the cost of borrowing is greater than the return on assets.

Answer 1

The treasurer raising funds.

Question 2

Match the words with the term.

-Which of the following statements describes a financial management activity?

A) Arranging internal financing is obtained from banks and investors.
B) Ensuring liquidity by managing the payment of dividends.
C) Operating decisions dealing with better utilization of non-current assets.
D) The stability objective is related to the financial structure of a business.

Answer 2

The stability objective is related to the financial structure of a business.

Question 3

Match the words with the term.

-Which of the following activities is NOT a financial management function?

A) The treasurer is responsible for corporate accounting.
B) External financing is obtained from investors.
C) Internal financing is obtained from retained earnings and depreciation/amortization.
D) Improving net profit through the use of productivity indicators and planned downsizing.

Answer 3

The treasurer is responsible for corporate accounting.

Question 4

Match the words with the term.

-What is the ultimate objective of financial management?

A) to ensure the ROA is higher than ROR
B) to obtain a higher ROR than ROA
C) to ensure that ROA is higher than the cost of financing
D) to collect trade receivables faster than the payment of trade and other payables

Question 5

Match the words with the term.

-Which activity is the controller responsible for?

A) general accounting
B) tax administration
C) investor relations
D) analyzing short- and long-term borrowing sources

Question 6

Match the words with the term.

-What is considered an "efficiency" financial objective?

A) the ability to meet short-term financial commitments
B) the ability minimize the cost of borrowed funds
C) the return on trade receivables
D) the return on revenue

Question 7

Match the words with the term.

-What does the profit for the year pay for?

A) executive bonuses
B) interest on debt
C) dividends
D) employee salaries

Question 8

Match the words with the term.

-Which of the following is a source of internal financing?

A) revenue
B) depreciation/amortization
C) mortgages
D) long-term borrowings

Question 9

Match the words with the term.

-What do investing decisions deal with?

A) the cost of borrowed funds
B) planned downsizing
C) buying non-current assets
D) the financing mix

Question 10

Match the words with the term.

-What type of decision is the management of working capital?

A) an operating decision
B) an investing decision
C) a financing decision
D) a capital budgeting decision

Question 11

Match the words with the term.

-How is gross profit determined?

A) by deducting the cost of sales from revenue
B) by deducting operating expenses from revenue
C) by deducting income tax expense from profit before taxes
D) by deducting distribution costs from operating profit

Question 12

Match the words with the term.

-How is ROR calculated?

A) by dividing income before taxes by revenue
B) by dividing cost of sales by revenue
C) by dividing revenue by cost of sales
D) by dividing profit for the year by revenue

Question 13

Match the words with the term.

-Under which of these circumstances is a company a good investment?

A) A company is a good investment when the ROR is less than the cost of financing.
B) A company is a good investment when the ROA is greater than the cost of financing.
C) A company is a good investment when the ROA is less than the cost of capital.
D) A company is a good investment when the ROR is greater than the cost of financing.

Question 14

Match the words with the term.

-What term is defined as "the activity involved in raising funds and buying assets in order to obtain the highest possible return"?

A) accounting
B) marketing management
C) general management
D) financial management

Question 15

Match the words with the term.

-Why is it important for managers to ask, "How are we doing?"

A) It is required by their employment contract.
B) Investors want to know about a company's financial performance.
C) Interest groups have illegitimate and corresponding objectives.
D) Government agencies want to know about a company's financial performance.

Question 16

Match the words with the term.

-Who is responsible for credit and collection in a company?

A) the bookkeeper
B) the controller
C) the accountant
D) the treasurer

Question 17

Match the words with the term.

-What term refers to the relationship between assets and profit for the year?

A) stability
B) efficiency
C) liquidity
D) prosperity

Question 18

Match the words with the term.

-What does ROA measure?

A) efficiency
B) liquidity
C) fluency
D) prosperity

Question 19

Match the words with the term.

-What type of decision is made when a company decides whether to arrange a mortgage, sell bonds, or issue shares?

A) a financing decision using internal financing
B) an operating decision using internal financing
C) a financing decision using external financing
D) an operating decision using external financing

Question 20

Match the words with the term.

-Which of the following demonstrates the matching principle?

A) paying dividends to shareholders
B) ensuring that Assets = Liabilities + Equity
C) selecting the most appropriate financing source when buying an asset
D) systematically cutting overhead costs

Question 21

Match the words with the term.

-What type of decisions relate to accounts on the statement of income?

A) accounting decisions
B) investing decisions
C) financing decisions
D) operating decisions

Question 22

Match the words with the term.

-What is most likely to result from rewarding quality work instead of fast work?

A) decreased profitability
B) improved gross profit and bottom line
C) higher costs
D) decreased worker pride

Question 23

Match the words with the term.

-What structure does stability refer to?

A) the revenue structure
B) the working capital structure
C) the cost structure
D) the financial structure

Question 24

Match the words with the term.

-Which of the following activities is NOT financial management?

A) Ensuring that a company's ROA is higher than the cost of financing.
B) Ensuring that all operating managers participate in making investing and financing decisions.
C) Ensuring that a company uses its resources in the most efficient and effective way.
D) Ensuring that a company raises sufficient funds.

Question 25

Match the words with the term.

-Which of the following statements concerning the role of a non-financial manager is false?

A) The non-financial manager who is responsible for resources or budgets should be familiar with the language of finance.
B) Business decisions made by non-financial managers do affect the financial performance of the organization.
C) All non-financial managers are really financial managers because their actions ultimately affect the financial statements.
D) Capital budgeting, ratio analysis, and break-even are financial tools used by non-financial managers.

Question 26

Match the words with the term.

-What does the weighted average cost of capital address?

A) investments made only by lenders
B) long-term financing
C) short-term borrowings
D) investments made only by shareholders

Question 27

Match the words with the term.

-Which of the following is used to calculate the gross profit?

A) extraordinary expenses
B) operating expenses
C) revenue
D) the cost of inventory

Question 28

Match the words with the term.

-Who is least likely to be interested in reading a company's financial statements?

A) investors
B) lenders
C) journalists
D) suppliers

Question 29

Match the words with the term.

-Who will be a user of financial statements, and what will they be used for?

A) Lenders will use financial statements to decide whether to invest in a company.
B) Investors will use financial statements to decide whether to lend money to a company.
C) The marketing department is interested in the operating income figures in the financial statements.
D) Managers will use financial statements to make decisions about their company.

Question 30

Match the words with the term.

-What is income tax expense deducted from to determine profit for the year?

A) revenue
B) profit before taxes
C) distribution expenses before taxes
D) profit before cost of sales

Question 31

Match the words with the term.

-What term refers to raising funds and buying assets to obtain the highest possible return?

A) financial management
B) materials management
C) operations management
D) asset management

Question 32

Match the words with the term.

-Which of the following is used to calculate the weighted average cost of capital?

A) mortgage payable
B) accrued expenses
C) profit for the year
D) trade and other payables

Question 33

Match the words with the term.

-Which of the following is a reason why financial management is important for business owners?

A) It informs owners exactly what will happen in the coming year.
B) It informs owners how much cash is on hand.
C) It allows managers to determine what the operating costs are.
D) It provides information about historical financial performance.

Question 34

Match the words with the term.

-Who is responsible for raising capital dollars in a company?

A) the manager
B) the owner
C) the treasurer
D) the controller

Question 35

Match the words with the term.

-What two items are used to measure liquidity?

A) cash and marketable securities
B) cash and shareholders equity
C) total assets and total liabilities
D) current assets and current liabilities

Question 36

Match the words with the term.

-Which of the following is an investing decision?

A) deciding if any dividends are paid
B) deciding what capital assets to acquire
C) deciding whether to obtain funds from shareholders and lenders
D) deciding how much to spend on administrative expenses

Question 37

Match the words with the term.

-What is the chief financial officer NOT responsible for?

A) general accounting
B) insurance
C) dividend payments
D) pension plans

Question 38

Match the words with the term.

-Who requires skills in reading financial statements, capital budgeting and break-even and cost benefit analysis?

A) human resources staff
B) taxation authorities
C) operating managers
D) the Senior Vice President, Sales

Question 39

Match the words with the term.

-What is a major goal of an operating manager?

A) to improve relations with investors
B) to formulate budgeting policies
C) to raise funds from investors
D) to improve financial performance

Question 40

Match the words with the term.

-What must plans include if they are to be expressed in measurable terms?

A) terms such as good, medium, and bad
B) specific expressions of corporate financial objectives
C) a reference to the firm's well-being
D) quantities and dollar amounts

Question 41

Match the words with the term.

-What do managers examine to assess the impact of their decisions on the financial well-being of their organization?

A) general corporation correspondence
B) statistical reports
C) financial pages of newspapers
D) financial statements

Question 42

Match the words with the term.

-Which of the following is an example of an external financing source?

A) mortgage payable
B) profit for the year
C) retained earnings
D) depreciation/amortization

Question 43

Match the words with the term.

-What is an example of "sources" of funds?

A) land
B) automobile
C) share capital
D) machinery and equipment

Question 44

Match the words with the term.

-What is an example of an internal source of funds?

A) mortgages
B) retained earnings
C) common shares
D) bonds

Question 45

Match the words with the term.

-What is an example of an external source of funds?

A) mortgages
B) decreased receivables
C) depreciation/amortization
D) retained earnings

Question 46

Match the words with the term.

-Which of the following statements describes a source of funds?

A) Operating at a loss is a source of funds.
B) Trade credit is a source of funds.
C) Dividends paid are a source of funds.
D) Investments in all types of assets are sources of funds.

Question 47

Match the words with the term.

-Which of the following is NOT an operating decision?

A) Deciding on the amount of operating expenses.
B) Deciding on the amount of operating revenue.
C) Deciding on the amount of equipment to buy for the operating divisions.
D) Deciding on the amount of equity capital to raise for operating divisions.

Question 48

Match the words with the term.

-Which of the following is NOT a source of financing?

A) equipment vendors
B) investment bankers
C) dividends
D) commercial banks

Question 49

Match the words with the term.

-Which of the following are "forms" of financing?

A) instalment loans
B) unsecured short-term borrowings
C) inventories
D) term loans

Question 50

Match the words with the term.

-Which of the following is an example of an investing decision?

A) buying inventory
B) buying non-current assets
C) selling trade receivables
D) selling a bond

Question 51

Match the words with the term.

-What term refers to an increase in non-current assets between two accounting periods?

A) cash outflow
B) source of cash
C) cash inflow
D) revenue

Question 52

Match the words with the term.

-Which of the following is an example of a non-current liability?

A) trade receivables
B) inventories
C) mortgage payable
D) goodwill

Question 53

Match the words with the term.

-Which of the following statements describes the effect of taxes on interest and dividends?

A) Income taxes increase the cost of borrowing.
B) Income taxes increase the cost of preferred dividends.
C) Preferred share dividends are deductible for tax purposes.
D) Finance costs are deductible for tax purposes.

Question 54

Match the words with the term.

-When does cash flow increase?

A) when inventories are reduced
B) when trade receivables are increased
C) when revenue is reduced
D) when non-current assets are purchased

Question 55

Match the words with the term.

-An important objective of financial management is to ensure that the cost of borrowed funds is higher than the return on assets.

Question 56

Match the words with the term.

-Financial management ensures that operating managers formulate accounting and financial policies that are clearly defined.

Question 57

Match the words with the term.

-Financial management deals with two things: raising funds and buying and utilizing assets in order to gain the highest possible return.

Question 58

Match the words with the term.

-The controller is the person responsible for establishing the accounting and financial reporting policies and procedures.

Question 59

Match the words with the term.

-The treasurer is the person responsible for budgets and analysis.

Question 60

Match the words with the term.

-One key function of the treasurer is "investor relations".

Question 61

Match the words with the term.

-Efficiency measures the relationship between profit for the year (outputs) generated and assets employed (inputs).

Question 62

Match the words with the term.

-Liquidity focuses on the ability of a firm to grow (i.e., revenue, profit for the year, etc.).

Question 63

Match the words with the term.

-Stability deals with the relationship between debt and equity.

Question 64

Match the words with the term.

-Funds obtained from "external financing" include depreciation/amortization and retained earnings.

Question 65

Match the words with the term.

-Reducing working capital accounts such as trade receivables and inventories can generate funds "internally".

Question 66

Match the words with the term.

-Capital shares can be considered an "external" source of funds.

Question 67

Match the words with the term.

-Investing decisions relate to borrowing funds from investors.

Question 68

Match the words with the term.

-Investing decisions has to do with the management of current assets.

Question 69

Match the words with the term.

-Financing decisions focus on long-term borrowings.

Question 70

Match the words with the term.

-A commercial bank is a "form" of financing.

Question 71

Match the words with the term.

-A term loan and mortgage are considered "forms" of financing.

Question 72

Match the words with the term.

-A component of "financing decisions" is determining the proportion of funds that should be raised from lenders versus owners.

Question 73

Match the words with the term.

-The matching principle is the process of selecting the most appropriate financing source when selling an asset.

Question 74

Match the words with the term.

-Financing mix is an important component of "financing decisions".

Question 75

Match the words with the term.

-Revenue and cost of sales are accounts shown on the statement of income that deal with operating decisions.

Question 76

Match the words with the term.

-Planned downsizing is a recession-driven technique to add management layers in organizational charts to cut costs.

Question 77

Match the words with the term.

-Gross profit is the difference between revenue and cost of sales.

Question 78

Match the words with the term.

-Decisions affecting gross profit are found in two categories of expenses: distribution costs and cost of sales.

Question 79

Match the words with the term.

-Two accounts that affect profit for the year are distribution costs and administrative expenses.

Question 80

Match the words with the term.

-The purpose of the Sarbanes-Oxley Act was to set new standards for all public company boards, management and public accounting firm.