D076 BUS 2040
Finance Skills for Managers
Final Assessment (Qns & Ans)
2025
1. Which of the following best describes the concept of "Net
Present Value (NPV)"?
- A) The total value of future cash flows
- B) The difference between the present value of cash inflows
and outflows
- C) The interest rate at which the net present value of an
investment is zero
©2024/2025
, - D) The future value of an investment
- ANS: B
- Rationale: NPV is the difference between the present value
of cash inflows and outflows, used to assess the profitability of an
investment.
2. What is the primary focus of working capital management?
- A) Long-term investment decisions
- B) Managing short-term assets and liabilities
- C) Determining the optimal capital structure
- D) Evaluating capital budgeting projects
- ANS: B
- Rationale: Working capital management focuses on
managing short-term assets and liabilities to ensure the company's
operational efficiency and financial stability.
3. Which of the following is NOT a component of the Capital
Asset Pricing Model (CAPM)?
- A) Risk-free rate
- B) Beta coefficient
- C) Market risk premium
- D) Dividend payout ratio
©2024/2025
, - ANS: D
- Rationale: The CAPM includes the risk-free rate, beta
coefficient, and market risk premium, but not the dividend payout
ratio.
Fill-in-the-Blank Questions
4. The __________ ratio measures a company's ability to meet
its short-term obligations with its most liquid assets.
- ANS: Quick
- Rationale: The quick ratio, also known as the acid-test ratio,
measures a company's ability to meet short-term obligations with
its most liquid assets, excluding inventory.
5. __________ is the process of evaluating and selecting long-
term investments that are consistent with the firm's goal of
maximizing owner wealth.
- ANS: Capital budgeting
- Rationale: Capital budgeting involves evaluating and
selecting long-term investments that align with the firm's
objective of maximizing shareholder wealth.
True/False Questions
©2024/2025
, 6. 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 is zero, indicating the expected rate of return on the
investment.
7. True or False: Financial leverage refers to the use of equity
financing to increase the potential return on investment.
- ANS: False
- Rationale: Financial leverage refers to the use of debt
financing to increase the potential return on investment, not equity
financing.
Multiple Response Questions
8. Which of the following are components of a company's
capital structure? (Select all that apply)
- A) Equity
- B) Debt
- C) Retained earnings
- D) Inventory
- ANS: A, B, C
©2024/2025
Finance Skills for Managers
Final Assessment (Qns & Ans)
2025
1. Which of the following best describes the concept of "Net
Present Value (NPV)"?
- A) The total value of future cash flows
- B) The difference between the present value of cash inflows
and outflows
- C) The interest rate at which the net present value of an
investment is zero
©2024/2025
, - D) The future value of an investment
- ANS: B
- Rationale: NPV is the difference between the present value
of cash inflows and outflows, used to assess the profitability of an
investment.
2. What is the primary focus of working capital management?
- A) Long-term investment decisions
- B) Managing short-term assets and liabilities
- C) Determining the optimal capital structure
- D) Evaluating capital budgeting projects
- ANS: B
- Rationale: Working capital management focuses on
managing short-term assets and liabilities to ensure the company's
operational efficiency and financial stability.
3. Which of the following is NOT a component of the Capital
Asset Pricing Model (CAPM)?
- A) Risk-free rate
- B) Beta coefficient
- C) Market risk premium
- D) Dividend payout ratio
©2024/2025
, - ANS: D
- Rationale: The CAPM includes the risk-free rate, beta
coefficient, and market risk premium, but not the dividend payout
ratio.
Fill-in-the-Blank Questions
4. The __________ ratio measures a company's ability to meet
its short-term obligations with its most liquid assets.
- ANS: Quick
- Rationale: The quick ratio, also known as the acid-test ratio,
measures a company's ability to meet short-term obligations with
its most liquid assets, excluding inventory.
5. __________ is the process of evaluating and selecting long-
term investments that are consistent with the firm's goal of
maximizing owner wealth.
- ANS: Capital budgeting
- Rationale: Capital budgeting involves evaluating and
selecting long-term investments that align with the firm's
objective of maximizing shareholder wealth.
True/False Questions
©2024/2025
, 6. 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 is zero, indicating the expected rate of return on the
investment.
7. True or False: Financial leverage refers to the use of equity
financing to increase the potential return on investment.
- ANS: False
- Rationale: Financial leverage refers to the use of debt
financing to increase the potential return on investment, not equity
financing.
Multiple Response Questions
8. Which of the following are components of a company's
capital structure? (Select all that apply)
- A) Equity
- B) Debt
- C) Retained earnings
- D) Inventory
- ANS: A, B, C
©2024/2025
