BUSN 410 Final Exam Questions and Correct
Answers
250 QUESTIONS
TABLE OF CONTENTS
# TOPIC
1 BUSN 410 Final Exam Questions and Correct Answers
Page 1
,Q1
What is the primary goal of financial management in a corporation?
A) Maximizing current profits
B) Maximizing shareholder wealth CORRECT
C) Minimizing employee turnover
D) Maximizing market share
Rationale
The primary goal of financial management is to maximize shareholder wealth, which is reflected in the
long-term value of the firm's common stock.
Q2
Which financial statement summarizes a firm's revenues and expenses over a specific period?
A) Balance sheet
B) Income statement CORRECT
C) Statement of cash flows
D) Statement of retained earnings
Rationale
The income statement reports revenues, expenses, and net income over a period of time, typically a
quarter or a year.
Q3
The balance sheet is based on which fundamental accounting equation?
A) Assets = Liabilities − Equity
B) Assets = Liabilities + Equity CORRECT
C) Equity = Assets + Liabilities
D) Liabilities = Assets + Equity
Page 2
,Rationale
The balance sheet is built on the accounting equation: Assets = Liabilities + Shareholders' Equity.
Q4
What does the current ratio measure?
A) A firm's ability to meet long-term obligations
B) A firm's profitability relative to sales
C) A firm's ability to meet short-term obligations CORRECT
D) A firm's efficiency in managing inventory
Rationale
The current ratio (Current Assets / Current Liabilities) measures a firm's ability to pay its short-term
debts.
Q5
Which ratio is calculated as Net Income divided by Total Assets?
A) Return on Equity (ROE)
B) Return on Assets (ROA) CORRECT
C) Profit Margin
D) Asset Turnover
Rationale
Return on Assets (ROA) = Net Income / Total Assets, measuring how efficiently a firm uses its assets to
generate profits.
Q6
What does a high inventory turnover ratio generally indicate?
A) Poor sales performance
B) Efficient inventory management CORRECT
C) Excessive inventory levels
Page 3
, D) High storage costs
Rationale
A high inventory turnover ratio indicates that inventory is sold and replenished frequently, reflecting
efficient inventory management.
Q7
Which of the following is a source of long-term financing?
A) Accounts payable
B) Accrued wages
C) Corporate bonds CORRECT
D) Trade credit
Rationale
Corporate bonds are a source of long-term debt financing, while accounts payable, accrued wages, and
trade credit are short-term sources.
Q8
What is the time value of money principle?
A) A dollar today is worth more than a dollar in the future CORRECT
B) A dollar in the future is worth more than a dollar today
C) Money has the same value regardless of time
D) Money loses value only during inflation
Rationale
The time value of money states that a dollar today is worth more than a dollar in the future because it can
be invested and earn interest.
Page 4
Answers
250 QUESTIONS
TABLE OF CONTENTS
# TOPIC
1 BUSN 410 Final Exam Questions and Correct Answers
Page 1
,Q1
What is the primary goal of financial management in a corporation?
A) Maximizing current profits
B) Maximizing shareholder wealth CORRECT
C) Minimizing employee turnover
D) Maximizing market share
Rationale
The primary goal of financial management is to maximize shareholder wealth, which is reflected in the
long-term value of the firm's common stock.
Q2
Which financial statement summarizes a firm's revenues and expenses over a specific period?
A) Balance sheet
B) Income statement CORRECT
C) Statement of cash flows
D) Statement of retained earnings
Rationale
The income statement reports revenues, expenses, and net income over a period of time, typically a
quarter or a year.
Q3
The balance sheet is based on which fundamental accounting equation?
A) Assets = Liabilities − Equity
B) Assets = Liabilities + Equity CORRECT
C) Equity = Assets + Liabilities
D) Liabilities = Assets + Equity
Page 2
,Rationale
The balance sheet is built on the accounting equation: Assets = Liabilities + Shareholders' Equity.
Q4
What does the current ratio measure?
A) A firm's ability to meet long-term obligations
B) A firm's profitability relative to sales
C) A firm's ability to meet short-term obligations CORRECT
D) A firm's efficiency in managing inventory
Rationale
The current ratio (Current Assets / Current Liabilities) measures a firm's ability to pay its short-term
debts.
Q5
Which ratio is calculated as Net Income divided by Total Assets?
A) Return on Equity (ROE)
B) Return on Assets (ROA) CORRECT
C) Profit Margin
D) Asset Turnover
Rationale
Return on Assets (ROA) = Net Income / Total Assets, measuring how efficiently a firm uses its assets to
generate profits.
Q6
What does a high inventory turnover ratio generally indicate?
A) Poor sales performance
B) Efficient inventory management CORRECT
C) Excessive inventory levels
Page 3
, D) High storage costs
Rationale
A high inventory turnover ratio indicates that inventory is sold and replenished frequently, reflecting
efficient inventory management.
Q7
Which of the following is a source of long-term financing?
A) Accounts payable
B) Accrued wages
C) Corporate bonds CORRECT
D) Trade credit
Rationale
Corporate bonds are a source of long-term debt financing, while accounts payable, accrued wages, and
trade credit are short-term sources.
Q8
What is the time value of money principle?
A) A dollar today is worth more than a dollar in the future CORRECT
B) A dollar in the future is worth more than a dollar today
C) Money has the same value regardless of time
D) Money loses value only during inflation
Rationale
The time value of money states that a dollar today is worth more than a dollar in the future because it can
be invested and earn interest.
Page 4
