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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. What is the "cash conversion cycle"?

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

The time taken to pay off creditors

The time it takes for the company to generate income

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

Land

Cash

Equipment

Building

3. 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 everyday operations of the business

Money spent on advertising and promotions

4. What is "financial leverage"?

Investing profits into long-term assets

Increasing shareholder equity without debt

Using debt to increase the return on equity

Reducing business expenses

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

Cash flow statement

Balance sheet

Income statement

Statement of retained earnings

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

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

The expected period of profitability for a business

The period over which liabilities are to be settled

The length of time it takes to prepare financial reports

7. What is working capital?

The total assets of a company

The difference between current assets and current liabilities

The long-term capital employed in the business

The capital invested by shareholders

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

Ensuring that tax laws are followed

Making investment decisions

Managing human resources

Designing marketing strategies

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

Commercial paper

Accounts payable

Bonds

Bank overdraft

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

It requires repayment with interest

It involves selling a stake in the company

It increases the company’s liabilities

It provides a guaranteed return on investment

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

Bank loans

Short-term borrowings

Selling bonds

Issuing shares to the public

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

The process of managing short-term liabilities

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

The process of managing cash flow

The process of determining tax rates

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

Current Ratio

Return on Assets (ROA)

Debt-to-Equity Ratio

Inventory Turnover

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

To evaluate the efficiency of asset utilization

To determine the company’s financial stability

To calculate the company’s debt levels

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

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

To maximize the value of the firm for its shareholders

To minimize costs

To maximize profits

To ensure legal compliance

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

A document that shows the company's stock price

A report detailing a company’s assets and liabilities

A financial plan for future growth

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

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

Wages

Interest payments

Rent

Depreciation

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

To manage human resources

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

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

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

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

20. What is the primary purpose of financial forecasting?

To assess a company's profitability for the current year

To estimate future financial outcomes based on historical data

To create tax strategies for the company

To determine the company’s tax liabilities

21. 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

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

The point where fixed costs are fully covered

The level of sales at which total revenue equals total costs

The point where total expenses exceed total revenue

The level of sales at which profits are maximized

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

The appropriate amount of inventory to maintain

The amount of debt financing a company should use

The total market value of a company’s stock

The cost of equity capital

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

Bonds payable

Accounts payable

Wages payable

Bank overdraft

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

Spreading investments across different assets to reduce risk

Increasing the company’s short-term liabilities

Reducing the company’s debt levels

Focusing on a single investment to maximize returns

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26. 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 efficiency of asset management

The total expenses as a percentage of revenue

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

Price-to-earnings ratio

Gross profit margin

Debt-to-equity ratio

Current ratio

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

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

Money has no value over time

Money depreciates in value at a fixed rate

The value of money remains constant over time

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

Current assets ÷ Current liabilities

Net income ÷ Shareholder equity

Total assets ÷ Total liabilities

Total revenue ÷ Total expenses

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

Increased marketing expenses

Company expansion into new markets

Market fluctuations in stock prices

High employee turnover

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

Retained earnings

Commercial paper

Shareholder equity

Long-term bonds

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

It is a form of long-term equity investment

It does not need to be repaid

The company must repay the principal along with interest

It requires giving up ownership in the company

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

The total cost incurred from financing a project

The current value of future cash inflows minus the investment

The future value of all future cash flows

The total revenue generated from an investment

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

Land

Cash

Equipment

Buildings

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

The profitability of a company

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

The proportion of assets financed by debt

The ratio of current liabilities to total liabilities

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

Deciding on the inventory turnover rate

Determining the balance between debt and equity financing

Deciding how much money to spend on marketing

Determining the product pricing strategy

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

Number of employees

Company’s brand recognition

The size of its physical assets

Market value of its stock

38. What is the "cost of capital"?

The total revenue generated by a company

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

The profit margin on goods sold

The cost of producing goods for sale

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

The potential for future growth

The efficiency of an investment in generating profit

The liquidity of a company’s assets

The company's debt-to-equity ratio

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

The company has minimal debt

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

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

Interest expense

Depreciation

Dividend payments

Sales revenue

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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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