Chapter 1: Financial Statement

Question 1

What is the goal of Financial Management

Answer 1

Profit Maximization

Question 2

Funding

Answer 2

Money provided, especially by an organisation or government, for a particular purpose

Question 3

Production

Answer 3

The action of making or manufacturing from raw components or raw materials, or the process of being manufactured

Question 4

Sales

Answer 4

The exchange of commodity for money, the action of selling something

Question 5

Profit

Answer 5

A financial gain by the difference between the amount earned and the amount spent in buying, operating or producing something

Question 6

Dividends

Answer 6

A sum of money paid regularly by a company to its shareholders from its profits

Question 7

Stocks

Answer 7

An equity instrument carrying ownership interest

Question 8

Bonds

Answer 8

A debt instrument with a promise to pay back the money with interest

Question 9

What type of return do you receive when buying a stock of a company?

Answer 9

Dividends

Question 10

What type of return do you receive when buying a bond from a company?

Answer 10

Interest

Question 11

Is there a return guarantee when purchasing a stock?

Answer 11

No

Question 12

Is there a return guarantee when purchasing a bond?

Answer 12

Yes (Unless bankruptcy is declared)

Question 13

What additional benefits does someone with stock over a company receive?

Answer 13

Voting rights in the company

Question 14

What additional benefits does someone with a bond over a company receive?

Answer 14

Preferential treatment when bond matures

Question 15

Are company bonds, generally speaking, considered low risk or high risk?

Answer 15

High risk (generally)

Question 16

Are government bonds, generally speaking, considered low risk or high risk?

Answer 16

Low risk (generally)

Question 17

Financial Statement (FS)

Answer 17

Formal records of the financial activities and position of a business, person or other entity

Question 18

What are the components of the financial statement (FS)?

Answer 18

• The balance sheet
• The income statement
• The notes (Belgium: including social balance)
• The cash flow statement

Question 19

The balance sheet

Answer 19

A statement of the assets, liabilities and capital of a business or other organisation at a particular point in time, detailing balance and expenditure over the preceding period

Question 20

What are the components of the balance sheet?

Answer 20

• Assets
• Equity and Liabilities

Question 21

Assets

Answer 21

A useful or valuable thing, person or quality

Question 22

Equity

Answer 22

The value of the shares issued by a company

Question 23

Liabilities

Answer 23

Something that a company or individual owes

Question 24

What are the components of assets?

Answer 24

• Formation costs
• Fixed (non-current) assets
• Current assets

Question 25

Formation costs

Answer 25

Costs to start up a company

Question 26

What is the correct chronological order of Assets?

Answer 26

1) Formation costs 2) Fixed (non-current) assets 3) Current assets

Question 27

Fixed (non-current) assets

Answer 27

Assets that stay in company for longer than 1 year ( >1 yr )

Question 28

Current assets

Answer 28

Assets expected to convert within a year ( <1 yr )

Question 29

Provisions and delayed taxes

Answer 29

Likely future costs

Question 30

What is the correct chronological order for Equity and Liabilities?

Answer 30

1) Equity 2) Provisions and delayed taxes 3) Liabilities

Question 31

Tangible assets

Answer 31

Physical assets

Question 32

Intangible assets

Answer 32

Non-physical assets

Question 33

Financial assets

Answer 33

Liquid assets

Question 34

What are the components of equity and liabilities?

Answer 34

- Equity - Provisions and deferred taxes - Liabilities

Question 35

Subordinated loans

Answer 35

Loans with lesser priority

Question 36

Not-subordinated loans

Answer 36

Prioritised loans

Question 37

Depreciation

Answer 37

A reduction in the value of an asset over time, due in particular to usage of the asset