Peregrine Finance
Comprehensive Practice Exam
2026
Original Finance Questions
with Verified Answers,
Detailed Explanations and
Comprehensive Exam
Preparation
,1. What is the primary financial objective of a publicly traded
corporation?
A. Maximize accounting income each quarter
B. Minimize the company's tax liability
C. Maximize the number of employees
D. Maximize shareholder wealth
Rationale: The central objective of financial management is to
maximize the value of the owners' investment. Shareholder
wealth maximization considers expected future cash flows, risk,
and the timing of those cash flows rather than focusing solely
on short-term accounting profit.
2. Which financial statement primarily reports a company's
assets, liabilities, and shareholders' equity at a specific point
in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
,Rationale: The balance sheet provides a snapshot of financial
position at a particular date. It follows the fundamental
accounting relationship Assets = Liabilities + Equity.
3. A company reports revenue of $500,000 and expenses of
$375,000. What is its net income before taxes if there are no
other income or expense items?
A. $75,000
B. $125,000
C. $375,000
D. $500,000
Rationale: Net income before taxes is calculated by subtracting
expenses from revenue: $500,000 − $375,000 = $125,000. The
calculation measures the earnings generated before income
taxes.
4. Which item is classified as a current asset?
A. Long-term debt
B. Common stock
, C. Accounts receivable
D. Property and equipment
Rationale: Accounts receivable normally represents amounts
expected to be collected within the operating cycle or one year
and is therefore classified as a current asset.
5. What does working capital measure?
A. Total assets minus total liabilities
B. Fixed assets minus depreciation
C. Current assets minus current liabilities
D. Revenue minus operating expenses
Rationale: Net working capital equals current assets minus
current liabilities. It provides an indication of the company's
short-term liquidity and ability to meet near-term obligations.
6. A company has current assets of $240,000 and current
liabilities of $160,000. What is its working capital?
A. $80,000
B. $160,000
Comprehensive Practice Exam
2026
Original Finance Questions
with Verified Answers,
Detailed Explanations and
Comprehensive Exam
Preparation
,1. What is the primary financial objective of a publicly traded
corporation?
A. Maximize accounting income each quarter
B. Minimize the company's tax liability
C. Maximize the number of employees
D. Maximize shareholder wealth
Rationale: The central objective of financial management is to
maximize the value of the owners' investment. Shareholder
wealth maximization considers expected future cash flows, risk,
and the timing of those cash flows rather than focusing solely
on short-term accounting profit.
2. Which financial statement primarily reports a company's
assets, liabilities, and shareholders' equity at a specific point
in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
,Rationale: The balance sheet provides a snapshot of financial
position at a particular date. It follows the fundamental
accounting relationship Assets = Liabilities + Equity.
3. A company reports revenue of $500,000 and expenses of
$375,000. What is its net income before taxes if there are no
other income or expense items?
A. $75,000
B. $125,000
C. $375,000
D. $500,000
Rationale: Net income before taxes is calculated by subtracting
expenses from revenue: $500,000 − $375,000 = $125,000. The
calculation measures the earnings generated before income
taxes.
4. Which item is classified as a current asset?
A. Long-term debt
B. Common stock
, C. Accounts receivable
D. Property and equipment
Rationale: Accounts receivable normally represents amounts
expected to be collected within the operating cycle or one year
and is therefore classified as a current asset.
5. What does working capital measure?
A. Total assets minus total liabilities
B. Fixed assets minus depreciation
C. Current assets minus current liabilities
D. Revenue minus operating expenses
Rationale: Net working capital equals current assets minus
current liabilities. It provides an indication of the company's
short-term liquidity and ability to meet near-term obligations.
6. A company has current assets of $240,000 and current
liabilities of $160,000. What is its working capital?
A. $80,000
B. $160,000
