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Financial Management Basics Test Online

Mustansar KhanLast Updated: July 8, 2025

Financial Management Basics Test Online

Financial Management Basics Test

Total Questions:	41
Time Allowed:	20 Minutes
Total Marks:	41
How to Attempt Test:	Please choose the right Option in MCQ-type question.
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1. Which of the following is an example of a financial risk?

Increased marketing expenses

Market fluctuations in stock prices

Company expansion into new markets

High employee turnover

2. Which of the following financial ratios measures a company’s profitability?

Current Ratio

Debt-to-Equity Ratio

Return on Assets (ROA)

Inventory Turnover

3. What is the "net present value" (NPV) in capital budgeting?

The future value of all future cash flows

The total revenue generated from an investment

The total cost incurred from financing a project

The current value of future cash inflows minus the investment

4. Which of the following best describes an "income statement"?

A statement showing the revenue, expenses, and profit of a company over a period

A financial plan for future growth

A report detailing a company’s assets and liabilities

A document that shows the company's stock price

5. Which of the following is an example of equity financing?

Short-term borrowings

Issuing shares to the public

Selling bonds

Bank loans

6. Which of the following is a financial management activity related to capital structure?

Determining the balance between debt and equity financing

Determining the product pricing strategy

Deciding on the inventory turnover rate

Deciding how much money to spend on marketing

7. What does the "break-even point" refer to in financial management?

The level of sales at which profits are maximized

The point where total expenses exceed total revenue

The level of sales at which total revenue equals total costs

The point where fixed costs are fully covered

8. Which of the following is an example of a long-term liability?

Bank overdraft

Accounts payable

Bonds payable

Wages payable

9. What is the "time horizon" in financial planning?

The length of time it takes to prepare financial reports

The period over which liabilities are to be settled

The period over which financial resources are expected to be used or invested

The expected period of profitability for a business

10. What is the primary role of a financial manager in a company?

To handle the company's marketing and sales

To decide how to allocate funds in the business to maximize shareholder value

To prepare the company’s financial statements

To manage human resources

11. Which of the following best defines "capital expenditure"?

Money spent on everyday operations of the business

Money spent on advertising and promotions

Money paid as dividends to shareholders

Money spent on purchasing long-term assets, such as property or machinery

12. Which of the following is the primary objective of financial management?

To minimize costs

To maximize profits

To maximize the value of the firm for its shareholders

To ensure legal compliance

13. Which of the following is considered a "liquid" asset?

Land

Cash

Building

Equipment

14. Which of the following is a purpose of conducting a financial analysis?

To set the price for products and services

To assess a company’s financial health and performance

To calculate the tax liabilities of a company

To determine how much profit a company should generate

15. Which of the following is a characteristic of "equity financing"?

It provides a guaranteed return on investment

It involves selling a stake in the company

It requires repayment with interest

It increases the company’s liabilities

16. What does the "operating margin" measure in financial management?

The return on investment in long-term assets

The profitability of a company’s core operations

The total expenses as a percentage of revenue

The efficiency of asset management

17. Which of the following is a key characteristic of debt financing?

It does not need to be repaid

The company must repay the principal along with interest

It requires giving up ownership in the company

It is a form of long-term equity investment

18. Which of the following is a key function of financial management?

Designing marketing strategies

Making investment decisions

Ensuring that tax laws are followed

Managing human resources

19. Which of the following is an example of a short-term financing source?

Retained earnings

Commercial paper

Shareholder equity

Long-term bonds

20. Which financial ratio measures the ability of a company to meet its short-term obligations?

Current ratio

Gross profit margin

Debt-to-equity ratio

Price-to-earnings ratio

21. Which of the following is an example of a non-cash expense?

Dividend payments

Depreciation

Interest expense

Sales revenue

22. What does the term "capital budgeting" refer to?

The process of managing cash flow

The process of managing short-term liabilities

The process of deciding where to invest in long-term assets

The process of determining tax rates

23. What is "financial leverage"?

Reducing business expenses

Using debt to increase the return on equity

Investing profits into long-term assets

Increasing shareholder equity without debt

24. What does the "return on investment" (ROI) measure?

The potential for future growth

The company's debt-to-equity ratio

The liquidity of a company’s assets

The efficiency of an investment in generating profit

25. What is the primary purpose of financial forecasting?

To create tax strategies for the company

To estimate future financial outcomes based on historical data

To determine the company’s tax liabilities

To assess a company's profitability for the current year

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26. What is the formula for calculating the current ratio?

Total revenue ÷ Total expenses

Net income ÷ Shareholder equity

Current assets ÷ Current liabilities

Total assets ÷ Total liabilities

27. What is the "cash conversion cycle"?

The time it takes for the company to generate income

The time taken to pay off creditors

The time taken to convert cash into inventory and back into cash through sales

The period between the acquisition of raw materials and the sale of finished goods

28. Which of the following is a type of financial statement that shows the company’s financial position at a specific point in time?

Statement of retained earnings

Balance sheet

Cash flow statement

Income statement

29. Which of the following is a characteristic of a "highly leveraged" company?

The company has a high proportion of debt compared to equity

The company has a large amount of equity financing

The company relies mostly on retained earnings

The company has minimal debt

30. What does the "time value of money" principle state?

Money depreciates in value at a fixed rate

Money has no value over time

The value of money remains constant over time

Money received today is worth more than the same amount received in the future

31. Which of the following is an example of a "non-cash" expense?

Interest payments

Depreciation

Rent

Wages

32. What does the debt-to-equity ratio measure?

The ratio of current liabilities to total liabilities

The proportion of a company's capital that comes from equity

The profitability of a company

The proportion of assets financed by debt

33. Which of the following is a source of long-term financing?

Bonds

Accounts payable

Commercial paper

Bank overdraft

34. What does "liquidity" refer to in financial management?

The company’s ability to pay short-term obligations with its available assets

The company’s ability to raise capital from investors

The company’s ability to manage its long-term debt

The company's ability to generate profits

35. Which of the following is considered a current asset?

Equipment

Cash

Land

Buildings

36. What is working capital?

The capital invested by shareholders

The total assets of a company

The difference between current assets and current liabilities

The long-term capital employed in the business

37. What is the "cost of capital"?

The profit margin on goods sold

The cost of producing goods for sale

The total revenue generated by a company

The cost incurred by a company to obtain funds, including both equity and debt

38. Which of the following is a characteristic of "diversification" in financial management?

Increasing the company’s short-term liabilities

Reducing the company’s debt levels

Focusing on a single investment to maximize returns

Spreading investments across different assets to reduce risk

39. What is the main purpose of the "profitability" ratio in financial management?

To calculate the company’s debt levels

To measure the company’s ability to generate profits from its resources

To determine the company’s financial stability

To evaluate the efficiency of asset utilization

40. Which of the following is a typical indicator of a company’s financial performance?

Market value of its stock

The size of its physical assets

Number of employees

Company’s brand recognition

41. What does the "capital asset pricing model" (CAPM) help determine in financial management?

The cost of equity capital

The amount of debt financing a company should use

The appropriate amount of inventory to maintain

The total market value of a company’s stock

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Mustansar KhanLast Updated: July 8, 2025

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Financial Management Basics Test Online

Financial Management Basics Test Online

Financial Management Basics Test

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