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.

Accepted Answer

The treasurer raising funds is a direct activity related to financial management, as it involves securing the capital necessary for the organization's operations and growth.

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.

Accepted Answer

D

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.

Accepted Answer

The treasurer is typically responsible for managing the organization's cash and investments, not corporate accounting, which is generally the domain of the accounting department or the chief financial officer (CFO).

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

Accepted Answer

The ultimate objective of financial management is to ensure that the Return on Assets (ROA) is higher than the cost of financing. This indicates that the company is generating a return on its investments that exceeds the cost it incurs to finance those investments, leading to value creation for shareholders.

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

Accepted Answer

The controller is typically responsible for overseeing general accounting functions, including maintaining financial records, preparing financial reports, and ensuring compliance with accounting standards.

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

Accepted Answer

The answer of Match the words with the term.
-What is...

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

Accepted Answer

Profit for the year is typically used to pay dividends to shareholders as a return on their investment.

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

Accepted Answer

Depreciation/amortization is a source of internal financing because it represents the allocation of a portion of the cost of an asset to each period of its useful life. This allocation creates a non-cash expense that reduces the company's taxable income, resulting in a corresponding increase in retained earnings.

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

Accepted Answer

Investing decisions primarily involve the allocation of capital to purchase non-current assets that will be used over a period of time to help the business generate revenue. These assets can include property, plant, and equipment among others.

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

Accepted Answer

Working capital management is an operating decision because it involves day-to-day financial operations, such as managing current assets and liabilities to ensure the company has sufficient liquidity to meet its short-term obligations and operational needs.

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

Accepted Answer

Gross profit is calculated by subtracting the cost of goods sold (COGS) or cost of sales from the total revenue. This measures how efficiently a company uses its labor and supplies in the production process.

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

Accepted Answer

ROR, or Return on Revenue, is calculated by dividing the profit for the year by the revenue. This ratio measures a company's profitability by showing how much profit is generated from the revenue earned.

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.

Accepted Answer

The answer of Match the words with the term.
-Under which...

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

Accepted Answer

Financial management involves the process of raising funds, managing those funds, and planning for future investments to ensure the highest possible return, aligning with the definition provided.

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.

Accepted Answer

Managers need to assess and communicate the company's financial performance to investors, as they are key stakeholders interested in the company's success and profitability.

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

Accepted Answer

The controller is responsible for overseeing the accounting operations of a company, which includes credit and collection activities. They ensure that the company's financial transactions are accurately recorded and that its credit policies are properly managed.

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

Accepted Answer

Efficiency refers to how well a company uses its assets to generate profit. It's a measure of the relationship between the assets a company has and the income or profit it generates from those assets.

Question 18

Match the words with the term.
-What does ROA measure?
A) efficiency
B) liquidity
C) fluency
D) prosperity

Accepted Answer

ROA, or Return on Assets, measures a company's efficiency in generating profit from its assets.

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

Accepted Answer

This is a financing decision because it involves choosing the method of raising funds for the company's operations or expansion. It is considered using external financing because the company is looking at options like mortgages, selling bonds, or issuing shares to obtain funds from outside sources, rather than using its own retained earnings or internal resources.

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

Accepted Answer

The answer of Match the words with the term.
-Which of...

Quiz 1: Overview of Financial Management

Match the words with the term. -Which of the following statements describes an activity which is financial management?

Match the words with the term. -Which of the following statements describes a financial management activity?

Match the words with the term. -Which of the following activities is NOT a financial management function?

Match the words with the term. -What is the ultimate objective of financial management?

Match the words with the term. -Which activity is the controller responsible for?

Match the words with the term. -What is considered an "efficiency" financial objective?

Match the words with the term. -What does the profit for the year pay for?

Match the words with the term. -Which of the following is a source of internal financing?

Match the words with the term. -What do investing decisions deal with?

Match the words with the term. -What type of decision is the management of working capital?

Match the words with the term. -How is gross profit determined?

Match the words with the term. -How is ROR calculated?

Match the words with the term. -Under which of these circumstances is a company a good investment?

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"?

Match the words with the term. -Why is it important for managers to ask, "How are we doing?"

Match the words with the term. -Who is responsible for credit and collection in a company?

Match the words with the term. -What term refers to the relationship between assets and profit for the year?

Match the words with the term. -What does ROA measure?

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?

Match the words with the term. -Which of the following demonstrates the matching principle?