Multiple Choice Questions

1. What is financial management primarily concerned with?

- A) Managing day-to-day operational tasks

- B) Managing the financial resources of an organization

- C) Marketing and sales activities

- D) Human resource management

2. Which of the following is NOT a major area of financial management?

- A) Budgeting

- B) Marketing

- C) Risk management

- D) Financial planning

3. Which type of risk involves the impact of external market conditions on a company's financial
performance?

- A) Liquidity risk

- B) Credit risk

- C) Market risk

- D) Operational risk

4.What is the purpose of financial forecasting?

- A) To increase company debt

- B) To estimate future income and expenses

- C) To reduce employee salaries

- D) To expand the company’s marketing efforts

5. Which function of financial management focuses on maintaining the correct balance between equity
and debt?

- A) Cash management

- B) Financial reporting

- C) Financial control

- D) Capital structure management

6. What is liquidity risk?

- A) The risk of not having enough short-term assets to cover short-term liabilities

- B) The risk of a decline in market share

- C) The risk of high interest rates on loans

- D) The risk of theft in a company

7. What is the purpose of financial control?

- A) To maximize expenses

- B) To regulate the company’s debt levels

- C) To ensure that resources are used efficiently

- D) To increase financial risks

8. What does a financial manager do in financial reporting?

- A) Prepares reports about a company's financial situation

- B) Sets sales targets

- C) Oversees product development

- D) Manages human resources

9. Why is budgeting important in financial management?

- A) It helps in resource allocation and managing company expenditures

- B) It increases operational risk

- C) It only tracks the company's revenue

 - D) It is not important in financial management

10. What is the significance of cash management in financial management?

- A) It involves managing customer relationships

- B) It focuses on managing the cash flows of an organization

- C) It deals with employee performance evaluations

- D) It is unrelated to financial management

11. Which of the following is a primary goal of financial management?

- A) Maximizing shareholder wealth

- B) Minimizing employee turnover

- C) Increasing customer satisfaction

- D) Reducing production costs

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

- A) The allocation of funds for daily expenses

- B) The allocation of funds for long-term investments

- C) The reduction of operational costs

- D) The management of payroll

13. Which of the following is NOT a key function of financial management?

- A) Financial planning

- B) Marketing strategy development

- C) Risk management

- D) Cash management

14. What is the role of a financial manager in risk management?

- A) Ignoring potential risks

- B) Identifying and mitigating financial risks

 - C) Increasing company risk for higher returns

- D) Focusing solely on profit without considering risks

15. In financial management, what does 'working capital' refer to?

- A) The capital invested in long-term assets

- B) The capital used in daily operations

- C) The profit earned by the company

- D) The amount of debt a company has

16. What is the main concern of operational risk in financial management?

- A) Market fluctuations

- B) Internal processes and external events that disrupt operations

- C) Changes in credit policies

- D) Loss of shareholder confidence

17. What does 'financial leverage' involve?

- A) Increasing a company’s debt to finance growth

- B) Reducing company expenses

- C) Issuing more shares to increase equity

- D) Investing in short-term securities

18. Which of the following is a method of managing financial risk?

- A) Reducing employee salaries

- B) Implementing compensatory controls

- C) Ignoring external market trends

- D) Increasing the company’s operational risk

19. Which of the following best describes 'capital structure'?

- A) The mix of debt and equity a company uses to finance its operations
 - B) The total amount of money invested in a company

- C) The company’s strategy for growth

- D) The process of budgeting for short-term needs

20. Which financial management area is concerned with tracking a company’s cash inflows and
outflows?

- A) Budgeting

- B) Cash management

- C) Financial control

- D) Risk management

21. What is the primary objective of financial control?

- A) Increasing company liabilities

- B) Ensuring efficient use of resources

- C) Maximizing employee benefits

- D) Minimizing cash flow

22. Which of the following is an example of a financial report?

- A) Marketing plan

- B) Income statement

- C) Employee handbook

- D) Operational manual

23. Which method is commonly used for budgeting in uncertain financial environments?

- A) Static budgeting

- B) Flexible budgeting

- C) Incremental budgeting

- D) Zero-based budgeting
24. Which type of decision-making in financial management focuses on capital allocation?

- A) Investment decisions

- B) Financing decisions

- C) Dividend decisions

- D) Working capital decisions

25. Which of the following best defines 'financial reporting'?

- A) Recording daily transactions

- B) Communicating financial information to stakeholders

- C) Managing cash flow

- D) Controlling the budget

26. Which aspect of financial management ensures that the company has enough funds to operate
daily?

- A) Budgeting

- B) Cash management

- C) Financial control

- D) Risk management

27. What does 'dividend decision' refer to in financial management?

- A) Deciding how much of the company’s earnings will be paid out to shareholders

- B) Choosing which projects to invest in

- C) Managing the company’s debt

- D) Determining the company’s capital structure

28. What is the role of financial forecasting in an organization?

- A) To increase expenses

- B) To predict future financial outcomes and guide planning

- C) To ensure compliance with regulations

 - D) To monitor daily transactions

29. Which of the following is an essential part of risk management?

- A) Ignoring potential risks

- B) Identifying and mitigating risks

- C) Increasing company liabilities

- D) Reducing company assets

30. What is the ultimate goal of financial management?

- A) Minimizing costs

- B) Maximizing shareholder wealth

- C) Reducing company size

- D) Increasing employee benefits

Gap-Filling Questions (20 Questions)

1. Fixed assets such as buildings and machinery gradually ………………….because they depreciate over
time.

2. The process of converting an asset into an expense is known as …………………

3. The most common method of depreciation is the ……………..method.

4. The reducing balance method charges ……………….amounts of an asset’s value each year.

5. …………………….involves decisions about investing in long-term assets.

6. …………….refers to the capital used in daily operations of a business.

7. The primary goal of financial management is to maximize ……………..

8. Financial planning includes analyzing previous ……………………….to prepare for future expenses.

9. ………………………..is essential for maintaining liquidity in a company.

10. ………………..affects stock performance and business investments.

11. ……………involves the risk of not having enough cash to meet obligations.

12. ……………………..affects the company’s ability to borrow at favorable rates.

13. Financial reporting includes preparing the company’s …………………..

14………………..is used to regulate and optimize the company’s expenses.

15. ………………..determines the portion of profits to be distributed to shareholders.

16. ………………….focuses on capital allocation to maximize returns.

17. The financial manager’s role in budgeting involves allocating funds for ………………

18. …………………category includes risks like cyber-attacks and natural disasters.

19. ………………..involves developing strategies to mitigate financial risks.

20. …………………management involves balancing equity and debt.

Open Questions (5 Questions)

1. Explain the role of financial management in ensuring the long-term success of a company.

2. What are the four major areas of financial management and how do they interrelate

3. Discuss the importance of risk management in financial decision-making.

4. How does financial forecasting contribute to better decision-making in an organization?

5. Compare and contrast financial control and financial reporting