Financial Management Quiz: Objectives And Functions!

20 Questions | By Hdtchr | Updated: Mar 27, 2022 | Attempts: 9680

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Financial Management Quiz: Objectives And Functions! - Quiz

Managing your finances is extremely important. Take this financial management quiz right now if you want to learn more about how to go about efficiently managing your finances precisely! Financial management is not all about trying to save money. It is about how to get better at spending it. We sometimes make purchases that are not that useful to us, and we regret them almost as soon as we buy them. Learn more points like this with our quiz! All the best!

Questions and Answers

1.

What is the best criterion in evaluating the performance of a financial manager:
- A.
  
  Maximization of Corporate Profits.
- B.
  
  Maximizing a company's market share.
- C.
  
  Maximizing shareholder wealth
- D.
  
  Beating the competition.
- E.
  
  Maximizing the company's share market price.
2.

Which of the following is NOT a function of financial management:
- A.
  
  Deciding the best sources of finance.
- B.
  
  Spending money on capital expansion
- C.
  
  Preparation of Tax Returns
- D.
  
  Evaluating how much dividends to pay shareholders.
- E.
  
  The management of working capital.
3.

Numerous research has consistently shown that there is a strong positive correlation between the size of the executive bonuses paid to a financial manager and that financial manager's performance in maximizing shareholder wealth.
- A.
  
  True
- B.
  
  False
4.

What is the main criticism in using shareholder wealth as the best criterion in evaluating the performance of a financial manager:
- A.
  
  It does not take into account the shareholder's exposure to financial risk.
- B.
  
  It is not sustainable.
- C.
  
  It does not take into account the size of the shareholders investment.
- D.
  
  Maximizing profits is a more suitable criterion.
- E.
  
  Share market prices can be manipulated in the short term.
5.

When making investment decisions, professional investors mainly consider the size of their expected returns on investment.
- A.
  
  True
- B.
  
  False
6.

Which of the following goals would NOT serve as good criteria for evaluation of financial performance:
- A.
  
  Minimizing Corporate Tax
- B.
  
  Slashing costs
- C.
  
  Beating the Competition
- D.
  
  Maximizing Profits
- E.
  
  Maximizing market share.
7.

A company's market capitalization = Number of issued shares * market price per share.
- A.
  
  True
- B.
  
  False
8.

Which of the following would NOT be classified as a finance decision:
- A.
  
  Spending money on Capital Expenditure.
- B.
  
  Raising money using equity finance.
- C.
  
  Spending money on revenue expenditure.
- D.
  
  Borrowing Funds.
- E.
  
  Paying dividends to shareholders
9.

Which of the following would be part of a financial manager's dividend (or operating) decisions:
- A.
  
  Spending money on Capital Expenditure.
- B.
  
  Raising money using equity finance.
- C.
  
  Spending money on revenue expenditure.
- D.
  
  Borrowing Funds.
- E.
  
  Paying dividends to shareholders
10.

Which of the following would be part of a financial manager's investment decision:
- A.
  
  Spending money on Capital Expenditure.
- B.
  
  Raising money using equity finance.
- C.
  
  Spending money on revenue expenditure.
- D.
  
  Borrowing Funds.
- E.
  
  Paying dividends to shareholders
11.

The market value of a firm can be affected by:
- A.
  
  Investors' perceptions of the firm.
- B.
  
  General economic conditions
- C.
  
  The investments a firm's managers may make
- D.
  
  The dividend payments made by the firm
- E.
  
  Rumor, innuendo and gossip.
12.

An advantage of a Limited Liability Company form of business organization is that the liability of the company to pay its debts is limited by corporate law.
- A.
  
  True
- B.
  
  False
13.

A partnership must be dissolved when there is a change of ownership.
- A.
  
  True
- B.
  
  False
14.

The characteristics of a company limited by shares are:
- A.
  
  A company is managed by its owners.
- B.
  
  There exists an agency relationship between corporate management and shareholders.
- C.
  
  Shareholders can vote at the company's Annual General Meeting.
- D.
  
  A shareholder can vote to change the amount of dividend recommended by the Board of Directors.
- E.
  
  A company is a separate legal entity apart from its owners.
15.

Preference shareholders are entitled to be refunded their investment before unsecured creditors in the event of an insolvent company's liquidation.
- A.
  
  True
- B.
  
  False
16.

Preferential creditors (as defined by corporations law) have the same priority to their claims as preference shareholders do for return of their capital, in the event of an insolvent company's liquidation.
- A.
  
  True
- B.
  
  False
17.

Rank the following claims in order from least risk to most risk, from an investor's viewpoint: 1 - Mortgage, 2 - ordinary shares, 3 - Debentures, 4 - Unsecured Notes, 5 - Preference Shares:
- A.
  
  1-3-2-4-5
- B.
  
  1-3-4-5-2
- C.
  
  1-3-5-4-2
- D.
  
  1-3-4-2-5
- E.
  
  1-3-2-5-4
18.

Wealth maximization is superior to profit maximization as the goal of financial management, because:
- A.
  
  Profits include estimates, in addition to cash flows.
- B.
  
  Profits ignore time value of money.
- C.
  
  Profits take into account costs.
- D.
  
  Profit maximization disregards financial risk.
- E.
  
  Profit includes sales amounts.
19.

Under the Partnership Act, every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm incurred while a partner and after the partner's death, the partner's estate is also severally liable in a due course of administration for such debts and obligations so far as they remain unsatisfied.
- A.
  
  True
- B.
  
  False
20.

Whatever the individual investor's attitudes to risk, the market returns in relation to various measures of risk establish that investors, on average, are risk-averse.
- A.
  
  True
- B.
  
  False