Question 1

In finance, what is the potential for loss?

Accepted Answer

The potential for loss refers to the risk involved in a financial investment or decision. Leverage, business chance, and factoring may also have risks, but they do not necessarily refer to the potential for loss.

Question 2

What are short-term forecasts that project revenues, costs of goods, and operating expenses over a one-year period?

Accepted Answer

Short-term forecasts that project revenues, costs of goods, and operating expenses over a one-year period are commonly referred to as operating plans.

Question 3

In seeking a balance between the opportunity for profit and the potential for loss, a financial manager is dealing with which of the following concepts?

Accepted Answer

The concept being dealt with here is the risk-return trade-off, which involves choosing investments that balance the potential for profit (return) with the potential for loss (risk). Financial managers must consider this trade-off when making investment decisions to ensure they achieve the right balance for their organization's goals and financial stability. The other options (A, B, D) are not accurate or specific enough to describe this concept.

Question 4

Which of the following enables the company to estimate the amount and timing of its investment and financing needs?

Accepted Answer

A financial plan incorporates financial forecasts, projections, and budgeting to estimate the company's investment and financing needs over a certain period. Therefore, a financial plan is the best choice.

Question 5

Which type of management is used to determine the most effective ways to acquire and use funds to achieve the company's goals?

Accepted Answer

Financial management involves determining the most effective ways to acquire and use funds to achieve the company's goals. Corporate management is focused on the overall strategic direction of the company, operations management is concerned with overseeing the production processes, and accounting management is focused on managing financial records and reporting.

Question 6

Financial managers constantly strive for a balance between which of the following?

Accepted Answer

Financial managers need to balance the opportunity for profit with the potential for loss. In order to achieve their financial goals, managers have to take calculated risks, but they need to be conscious of potential losses and take steps to mitigate them. This requires balancing the potential for profit with the potential for risk.

Question 7

To maximize the company's value, the financial manager has to constantly strive for a balance between which of the following?

Accepted Answer

The answer of To maximize the company's value, the financial...

Question 8

Financial management is best described by which of the following?

Accepted Answer

Financial management involves analyzing and interpreting financial statements prepared by accountants to make informed financial decisions. It goes beyond just collecting and presenting financial data and is closely related to accounting. While the CEO may be involved in financial management, it is not solely their responsibility, and it is not completely different from accounting.

Question 9

As part of the task of managing cash flows, financial managers perform which of the following activities?

Accepted Answer

Financial managers oversee the collection of accounts receivable as part of their task of managing cash flows. They are responsible for monitoring and ensuring the timely receipt of payments from customers and clients. Collecting financial data, presenting financial data, and hiring accountants may also be part of their overall responsibilities, but these activities are not directly related to managing cash flows.

Question 10

Lowell Arden bought and sold shares for a profit. What is the profit Arden earned on his investment in shares?

Accepted Answer

Profit earned on investment in shares is typically referred to as investment return. Investments involve risk and probabilities, but those terms are not specific to describing the profit earned. Investment certainty is not a common term in finance.

Question 11

European Airlines forecast that its profits will increase by 2-4 percent for flights between Europe and Canada during the next 12 months. This prediction is part of which of the following activities?

Accepted Answer

The answer of European Airlines forecast that its profits will...

Question 12

The financial planning process begins with which of the following?

Accepted Answer

Financial planning typically starts with financial forecasts, which involve projecting revenues, costs, and other financial details into the future to guide budgeting, investment, and other financial decisions.

Question 13

Hannah Perez keeps track of day-to-day operational data to make sure her employer has enough cash to run the business. She will determine if and when the company she works for should open a second distribution centre. Which type of manager is Perez?

Accepted Answer

Hannah Perez is responsible for managing financial operations and cash flow, which makes her a financial manager.

Question 14

The concept of risk-return trade-off is best described by which of the following?

Accepted Answer

The risk-return trade-off refers to the decision to accept higher risks in exchange for potentially higher returns. Therefore, option B correctly describes the concept. Option A is incorrect as risk-return trade-off is relevant at all levels of management. Option C and D are both incorrect as there is no inherent relationship between the concept of risk-return trade-off and whether a company is national or international or whether it is a service provider or a manufacturer.

Question 15

The primary goal of financial managers is best described by which of the following?

Accepted Answer

Financial managers strive to maximize the value of the company to its owners, which often requires a long-term focus on decisions related to investments, financing, and dividend policies. While paying employees regularly is an important responsibility of financial managers, it is not their primary goal. Developing new goods and services is typically the domain of product managers or innovation teams, not financial managers. Financial managers may play a role in evaluating the financial feasibility of new projects, but their focus is on maximizing shareholder value rather than generating new ideas.

Question 16

Financial managers are best described by which of the following?

Accepted Answer

Financial managers are responsible for tracking the flow of money into and out of the company, managing financial risks, developing financial strategies, and ensuring the overall financial health of the organization. They are not solely focused on profit maximization, do not typically play an operational role, and are typically involved in long-term strategic planning.

Question 17

In finance, what is the opportunity for profit?

Accepted Answer

Profit in finance is typically associated with return. Investors seek to earn a return on their investments, which is the money they earn on top of what they initially invested. The opportunity for profit arises when the potential return on an investment is higher than the cost of funding that investment. While factors such as value and risk may impact the potential return on an investment, ultimately it is the return that drives profitability.

Question 18

Which of the following do financial managers use to describe the inflow and outflow of cash?

Accepted Answer

Financial managers use the term "cash flows" to describe the inflow and outflow of cash within a business.

Question 19

One of the key activities of the financial manager is to obtain funding for the company's operations and investments. In doing this, the financial manager has to constantly strive for a balance between which of the following?

Accepted Answer

The financial manager must maintain a balance between debt and equity financing to ensure the company's financial stability and long-term success. Too much debt can increase the risk of default, while too much equity dilutes ownership and can also reduce profitability. A balance must be struck between the two to optimize the company's financial structure.

Question 20

Which of the following is NOT one of the three key activities of the financial manager?

Accepted Answer

The three key activities of the financial manager are investment (spending money), financing (raising money), and financial planning. While risk assessment is an important aspect of the financial manager's job, it is not considered one of the key activities.

Quiz 18: Finance