LESSON 1

Question 1

is the process of planning, organizing, directing, and controlling the financial resources of an organization.

Answer 1

Financial management

Question 2

plays a critical role in the success of a company.

Answer 2

Financial Management

Question 3

managing risk and ensuring that the company is not exposed to unnecessary financial risks.

Answer 3

Financial Management

Question 4

• is a broad field that involves the study of how individuals, businesses, and organizations manage money and resources over time. It encompasses a wide range of activities, including investing, borrowing, lending, budgeting, and managing risk.

Answer 4

Finance

Question 5

is an important field because it plays a crucial role in the functioning of the economy.

Answer 5

FINANCE

Question 6

is concerned with the financial operations of a company, such as raising capital, making investment decisions, and managing financial risks.

Answer 6

Corporate Finance

Question 7

corporations are responsible for analyzing financial data and making informed decisions about the use of company resources.

Answer 7

Financial Managers

Question 8

is focused on managing an individual’s personal financial resources, such as income, expenses, and investments.

Answer 8

Personal Finance

Question 9

includes various financial instruments such as stocks, bonds, derivatives, and other securities that are used to manage risk and return.

Answer 9

Finance

Question 10

the study of financial markets, institutions, and systems, as well as financial regulations and laws.

Answer 10

Finance

Question 11

Function of Financial Manager “Daily”

Answer 11

Daily:
cash management
(receipt and disbursement of funds) inventory control
short-term financing
foreign exchange hedging
Bank relations

Question 12

Function of Financial Manager “Occasionally”

Answer 12

Occasionally:
intermediate financing bond issues
leasing
stock issues
capital budgeting dividend decisions forecasting

Question 13

One of the primary goals of financial management is to maximize profits by increasing revenues and minimizing expenses.

Answer 13

Profit Maximization

Question 14

Another important goal of financial management is to maximize the wealth of the shareholders. This involves increasing the share price and paying dividends to shareholders.

Answer 14

Wealth Maximization

Question 15

Financial managers also need to manage financial risks by identifying and mitigating potential financial risks to the organization.

Answer 15

Risk Management

Question 16

Financial managers must allocate capital effectively to ensure that it is used efficiently and that the organization can achieve its strategic goals.

Answer 16

Effective Capital Allocation

Question 17

Financial managers must ensure that the organization’s financial operations are efficient and that resources are used effectively to minimize costs.

Answer 17

Efficient Operations

Question 18

Financial managers must ensure that the organization is financially sustainable in the long term by making decisions that balance short-term profitability with long-term growth and stability.

Answer 18

Long-Term Sustainability

Question 19

Goals of financial management

Answer 19

Profit Maximization
Wealth Maximization
Risk Management
Effective Capital Allocation
Efficient Operations
Long-Term Sustainability

Question 20

Roles of Financial Management

Answer 20

Financial Planning
Financial Control
Financial Reporting
Risk Management
Capital Management
Compliance

Question 21

This involves forecasting financial performance, analyzing financial data, and developing strategies to achieve financial targets.

Answer 21

Financial Planning

Question 22

This involves monitoring financial performance, identifying areas for improvement, and implementing changes to optimize financial operations.

Answer 22

Financial Control

Question 23

This involves analyzing financial data, preparing financial statements, and presenting financial information to stakeholders.

Answer 23

Financial Reporting

Question 24

This involves developing risk management strategies, analyzing risk factors, and implementing risk mitigation measures.

Answer 24

Risk Management

Question 25

This involves managing cash flows, investing capital in profitable projects, and raising capital through various financial instruments.

Answer 25

Capital Management

Question 26

This involves staying up-to-date with regulatory changes, implementing compliance measures, and managing relationships with regulatory bodies.

Answer 26

Compliance

Question 27

Functions of Financial Management:

Answer 27

Financial Planning Budgeting Financial Analysis Financing Investment decisions Risk Management Financial Reporting

Question 28

involves the development of financial goals, objectives, and strategies that align with the organization's overall strategic plan.

Answer 28

Financial Planning

Question 29

Involves the development of a detailed financial plan that outlines the organization's anticipated income, expenses, and capital expenditures over a specific period.

Answer 29

Budgeting

Question 30

involves the interpretation and evaluation of financial data to assess the organization's financial performance, identify trends, and make informed decisions about resource allocation.

Answer 30

Financial Analysis

Question 31

involves the procurement of financial resources required to achieve the organization's financial goals.

Answer 31

Financing

Question 32

involve the allocation of financial resources to various projects or investments to generate returns.

Answer 32

Investment decisions

Question 33

involves the identification, assessment, and mitigation of financial risks to the organization.

Answer 33

Risk management

Question 34

involves the preparation and dissemination of financial information to stakeholders.

Answer 34

Financial reporting

Question 35

Activities of Financial Management

Answer 35

1.Capital Budgeting 2. Capital Structure 3. Working Capital Management

Question 36

is the process of evaluating and selecting long-term investment projects that involve significant expenditures of resources, such as money, time, and personnel.

Answer 36

Capital budgeting

Question 37

The capital budgeting process typically involves the following steps:

Answer 37

Identifying potential investment projects Evaluating the potential projects Prioritizing the projects Selecting the projects Implementing and monitoring the projects

Question 38

This can be done by brainstorming, market research, or other methods to generate a list of potential projects.

Answer 38

Identifying potential investment projects

Question 39

This involves assessing each project's potential profitability, risks, and other factors. Methods used to evaluate projects include net present value (NPV), internal rate of return (IRR), payback period, and profitability index.

Answer 39

Evaluating the potential projects

Question 40

Once the potential projects have been evaluated, they can be ranked according to their potential return on investment, risk, or other criteria.

Answer 40

Prioritizing the projects

Question 41

Based on the results of the evaluation and prioritization, the organization can choose which projects to pursue.

Answer 41

Selecting the projects

Question 42

Once a project has been selected, it is implemented and monitored to ensure that it stays on track and achieves its goals.

Answer 42

Implementing and monitoring the projects

Question 43

refers to the mix of debt and equity financing used by a business or organization to finance its operations and investment activities.

Answer 43

Capital Structure

Question 44

key concepts related to capital structure

Answer 44

Debt Financing Equity Financing Leverage cost of capital capital structure

Question 45

involves borrowing money from lenders such as banks, bondholders, or other financial institutions.

Answer 45

Debt financing

Question 46

involves selling ownership shares in the company to investors such as shareholders or venture capitalists

Answer 46

Equity financing

Question 47

refers to the use of debt financing to finance a company's operations and investment activities.

Answer 47

Leverage

Question 48

is the average cost of all sources of financing used by a company, including debt and equity.

Answer 48

Cost of capital

Question 49

refers to the various models and frameworks used to determine the optimal mix of debt and equity financing for a company.

Answer 49

Capital structure theory

Question 50

refers to the way a business or organization finances its short-term assets and liabilities. Working capital is the difference between a company's current assets (such as cash, inventory, and accounts receivable) and its current liabilities (such as accounts payable and short-term loans

Answer 50

Working capital structure

Question 51

Working Capital Structure

Answer 51

Current assets Current liabilities The working capital ratio Working capital management The cash conversion cycle

Question 52

are assets that can be easily converted into cash within one year, such as cash, inventory, and accounts receivable

Answer 52

Current assets

Question 53

are debts and obligations that are due within one year, such as accounts payable, short-term loans, and accrued expenses.

Answer 53

Current liabilities

Question 54

(also known as the current ratio) is a measure of a company's ability to meet its short-term financial obligations.

Answer 54

The working capital ratio

Question 55

involves managing a company's current assets and liabilities to ensure that it has enough cash and liquidity to meet its short-term obligations. This may involve strategies such as inventory management, accounts receivable management, and accounts payable management.

Answer 55

Working capital management

Question 56

.is a measure of the time it takes for a company to convert its investment in inventory and accounts receivable into cash. It is calculated by subtracting the number of days of accounts payable from the sum of the number of days of inventory and accounts receivable.

Answer 56

The cash conversion cycle