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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 a type of financial statement that shows the company’s financial position at a specific point in time?

Income statement

Statement of retained earnings

Balance sheet

Cash flow statement

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

The value of money remains constant over time

Money depreciates in value at a fixed rate

Money has no value over time

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

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

Buildings

Equipment

Cash

Land

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

The company has a large amount of equity financing

The company has a high proportion of debt compared to equity

The company has minimal debt

The company relies mostly on retained earnings

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

The efficiency of an investment in generating profit

The company's debt-to-equity ratio

The potential for future growth

The liquidity of a company’s assets

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

Inventory Turnover

Debt-to-Equity Ratio

Current Ratio

Return on Assets (ROA)

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

The profitability of a company’s core operations

The efficiency of asset management

The return on investment in long-term assets

The total expenses as a percentage of revenue

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

Deciding how much money to spend on marketing

Determining the balance between debt and equity financing

Determining the product pricing strategy

Deciding on the inventory turnover rate

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

To handle the company's marketing and sales

To prepare the company’s financial statements

To manage human resources

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

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

Reducing the company’s debt levels

Increasing the company’s short-term liabilities

Spreading investments across different assets to reduce risk

Focusing on a single investment to maximize returns

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

It is a form of long-term equity investment

The company must repay the principal along with interest

It does not need to be repaid

It requires giving up ownership in the company

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

To maximize profits

To maximize the value of the firm for its shareholders

To minimize costs

To ensure legal compliance

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

Retained earnings

Long-term bonds

Shareholder equity

Commercial paper

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

To determine the company’s financial stability

To evaluate the efficiency of asset utilization

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

To calculate the company’s debt levels

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

The total market value of a company’s stock

The appropriate amount of inventory to maintain

The cost of equity capital

The amount of debt financing a company should use

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

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

Money paid as dividends to shareholders

Money spent on advertising and promotions

Money spent on everyday operations of the business

17. What is working capital?

The capital invested by shareholders

The long-term capital employed in the business

The difference between current assets and current liabilities

The total assets of a company

18. What is the "cash conversion cycle"?

The time taken to pay off creditors

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

The time it takes for the company to generate income

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

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

Land

Building

Equipment

Cash

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

Accounts payable

Commercial paper

Bonds

Bank overdraft

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

Market value of its stock

Company’s brand recognition

The size of its physical assets

Number of employees

22. What is the "cost of capital"?

The cost of producing goods for sale

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

The profit margin on goods sold

The total revenue generated by a company

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

A report detailing a company’s assets and liabilities

A financial plan for future growth

A document that shows the company's stock price

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

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

Net income ÷ Shareholder equity

Current assets ÷ Current liabilities

Total revenue ÷ Total expenses

Total assets ÷ Total liabilities

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

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

The process of managing short-term liabilities

The process of determining tax rates

The process of managing cash flow

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

The ratio of current liabilities to total liabilities

The proportion of assets financed by debt

The profitability of a company

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

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

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

The period over which liabilities are to be settled

The length of time it takes to prepare financial reports

The expected period of profitability for a business

28. What is "financial leverage"?

Reducing business expenses

Using debt to increase the return on equity

Increasing shareholder equity without debt

Investing profits into long-term assets

29. 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 point where fixed costs are fully covered

The level of sales at which total revenue equals total costs

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

It increases the company’s liabilities

It requires repayment with interest

It provides a guaranteed return on investment

It involves selling a stake in the company

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

Bonds payable

Wages payable

Bank overdraft

Accounts payable

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

Designing marketing strategies

Ensuring that tax laws are followed

Making investment decisions

Managing human resources

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

Selling bonds

Short-term borrowings

Issuing shares to the public

Bank loans

34. Which of the following is an example of a financial risk?

Company expansion into new markets

High employee turnover

Increased marketing expenses

Market fluctuations in stock prices

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

Sales revenue

Dividend payments

Depreciation

Interest expense

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

To assess a company’s financial health and performance

To set the price for products and services

To calculate the tax liabilities of a company

To determine how much profit a company should generate

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

Depreciation

Wages

Rent

Interest payments

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

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

The company’s ability to raise capital from investors

The company's ability to generate profits

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

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

Debt-to-equity ratio

Current ratio

Price-to-earnings ratio

Gross profit margin

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

The total revenue generated from an investment

The total cost incurred from financing a project

The future value of all future cash flows

The current value of future cash inflows minus the investment

41. What is the primary purpose of financial forecasting?

To determine the company’s tax liabilities

To create tax strategies for the company

To estimate future financial outcomes based on historical data

To assess a company's profitability for the current year

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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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Financial Management Basics Test Online

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