D076 BUS 2040
Finance Skills for Managers
Final Assessment (Qns & Ans)
2025
1. Which of the following is a primary objective of financial
management?
- A. Maximizing sales revenue
- B. Minimizing operational costs
- C. Maximizing shareholder wealth
- D. Ensuring employee satisfaction
- ANS: C. Maximizing shareholder wealth
©2024/2025
, - Rationale: The primary objective of financial management
is to maximize shareholder wealth by increasing the value of the
firm's stock.
2. What is the main purpose of capital budgeting?
- A. To manage day-to-day cash flows
- B. To evaluate and select long-term investment projects
- C. To prepare financial statements
- D. To determine the optimal capital structure
- ANS: B. To evaluate and select long-term investment
projects
- Rationale: Capital budgeting involves evaluating and
selecting long-term investment projects that will generate future
cash flows and contribute to the firm's value.
3. Which of the following best describes the concept of 'cost of
capital'?
- A. The interest rate on short-term loans
- B. The return required by investors to compensate for the risk
of investing in the firm
- C. The total cost of production
- D. The cost of raw materials
©2024/2025
, - ANS: B. The return required by investors to compensate for
the risk of investing in the firm
- Rationale: The cost of capital represents the return that
investors expect for providing capital to the firm, reflecting the
risk associated with the investment.
Fill-in-the-Blank Questions
4. The process of determining the present value of future cash
flows is known as __________.
- ANS: Discounting
- Rationale: Discounting involves calculating the present
value of future cash flows by applying a discount rate, which
reflects the time value of money.
5. __________ is the ratio that measures a company's ability to
meet its short-term obligations with its most liquid assets.
- ANS: Quick Ratio (or Acid-Test Ratio)
- Rationale: The quick ratio measures a company's ability to
pay off its current liabilities without relying on the sale of
inventory.
6. The __________ is a financial statement that shows a
company's revenues, expenses, and profits over a specific period.
- ANS: Income Statement
©2024/2025
, - Rationale: The income statement provides a summary of a
company's financial performance over a specific period, including
revenues, expenses, and net income.
True/False Questions
7. True or False: The primary goal of working capital
management is to ensure that a company can meet its short-term
obligations.
- ANS: True
- Rationale: Working capital management focuses on
managing a company's short-term assets and liabilities to ensure it
can meet its short-term obligations.
8. True or False: The internal rate of return (IRR) is the discount
rate that makes the net present value (NPV) of an investment zero.
- ANS: True
- Rationale: The IRR is the discount rate at which the NPV of
an investment equals zero, indicating the project's expected rate of
return.
9. True or False: Financial leverage refers to the use of equity
financing to increase the potential return on investment.
- ANS: False
©2024/2025
Finance Skills for Managers
Final Assessment (Qns & Ans)
2025
1. Which of the following is a primary objective of financial
management?
- A. Maximizing sales revenue
- B. Minimizing operational costs
- C. Maximizing shareholder wealth
- D. Ensuring employee satisfaction
- ANS: C. Maximizing shareholder wealth
©2024/2025
, - Rationale: The primary objective of financial management
is to maximize shareholder wealth by increasing the value of the
firm's stock.
2. What is the main purpose of capital budgeting?
- A. To manage day-to-day cash flows
- B. To evaluate and select long-term investment projects
- C. To prepare financial statements
- D. To determine the optimal capital structure
- ANS: B. To evaluate and select long-term investment
projects
- Rationale: Capital budgeting involves evaluating and
selecting long-term investment projects that will generate future
cash flows and contribute to the firm's value.
3. Which of the following best describes the concept of 'cost of
capital'?
- A. The interest rate on short-term loans
- B. The return required by investors to compensate for the risk
of investing in the firm
- C. The total cost of production
- D. The cost of raw materials
©2024/2025
, - ANS: B. The return required by investors to compensate for
the risk of investing in the firm
- Rationale: The cost of capital represents the return that
investors expect for providing capital to the firm, reflecting the
risk associated with the investment.
Fill-in-the-Blank Questions
4. The process of determining the present value of future cash
flows is known as __________.
- ANS: Discounting
- Rationale: Discounting involves calculating the present
value of future cash flows by applying a discount rate, which
reflects the time value of money.
5. __________ is the ratio that measures a company's ability to
meet its short-term obligations with its most liquid assets.
- ANS: Quick Ratio (or Acid-Test Ratio)
- Rationale: The quick ratio measures a company's ability to
pay off its current liabilities without relying on the sale of
inventory.
6. The __________ is a financial statement that shows a
company's revenues, expenses, and profits over a specific period.
- ANS: Income Statement
©2024/2025
, - Rationale: The income statement provides a summary of a
company's financial performance over a specific period, including
revenues, expenses, and net income.
True/False Questions
7. True or False: The primary goal of working capital
management is to ensure that a company can meet its short-term
obligations.
- ANS: True
- Rationale: Working capital management focuses on
managing a company's short-term assets and liabilities to ensure it
can meet its short-term obligations.
8. True or False: The internal rate of return (IRR) is the discount
rate that makes the net present value (NPV) of an investment zero.
- ANS: True
- Rationale: The IRR is the discount rate at which the NPV of
an investment equals zero, indicating the project's expected rate of
return.
9. True or False: Financial leverage refers to the use of equity
financing to increase the potential return on investment.
- ANS: False
©2024/2025
