Financial Management Test

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Financial Management Test - 5

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Weekly Quiz Competition

Question 1
1 / -0

A fixed asset should be financed through:

A
a short-term liability

B
a long-term liability

C
a mix of long and short-term liabilities

D
None of these

Solution

Fixed assets remains in the business for more than one year. Decision to invest in fixed assets are irrevocable. Therefore these assets should be financed by Fixed Capital. These decisions are called capital budgeting decisions. Management of fixed capital involves allocation of firm's capital to different long term assets.
Question 2
1 / -0

Current assets of a business firm should be financed through:

A
long-term liability only

B
current liability only

C
both types (i.e. long and short term liabilities)

D
None of these

Solution

Current assets are those assets which, in the normal routine of the business, get converted into cash or cash equivalents within one year e.g. inventories, debtors etc. Hence these should be financed by both long term and short term libility.
Question 3
1 / -0

What is the main function of financial management?

A
Financial Planning

B
Allocation of Net Profits

C
Procurement of Funds

D
All of these

Solution

Financial management is concerned with management decisions relating to optimal procurement of funds, investment of funds in long term and short term assets of the firm. It is wider in scope as it includes financial planning also.
Question 4
1 / -0

Which of the following is not a financial Decision?

A
Staffing Decision

B
Investment Decision

C
Financing Decision

D
Dividend Decision
Solution
Financial decisions include:
- Investment decision
- Financing decision
- Dividend decision
Question 5
1 / -0

Which of the following is not concerned with Long-term Investment decision?

A
Purchase of fixed asset

B
Launching a new product line

C
Advertisement campaign

D
Day to day working

Solution

Investment decision relates to how the firm's funds are invested in different assets. The firm invests its funds in acquiring fixed assets as well as current assets. When decisions are taken regarding fixed assets then it is called capital budgeting decisions.
Question 6
1 / -0

Long term investment decision is also known as _____________

A
Working Capital

B
Dividend Decision

C
Capital Budgeting

D
None of these

Solution

Long term investment decision involves committing the finance on a long term basis. It is also known as capital budgeting decision.
Question 7
1 / -0

Short-term Investment Decision is also known as ____

A
Capital Budgeting

B
Dividend Decision

C
Working capital

D
None of these

Solution

Short term investment decisions are the decisions related with the bills receivables, inventories, levels of cash and debtors etc. These decisions are also known as working capital decisions.
Question 8
1 / -0

Which of the following is not concerned with the Long term investment decision

A
Research and Development Programme

B
Opening a new branch

C
Inventory management

D
Management of fixed capital

Solution

Long term investment decisions are also called capital budgeting decisions which include purchase of land and building, plant and machinery,change of technology, research and development and expenditure of advertising campaign etc. Inventory management comes under working capital management decisions.
Question 9
1 / -0

Which of the following affects capital budgeting decision?

A
Rate of Return

B
Cash Flow of the Project

C
Investment Criteria and interest rate

D
All of these
Solution
- These decisions are based on expected rate of return and risks involved from each proposal
- When a proposal involves huge cash flow in return it expects to generate cash flows
- Capital budgeting techniques are applied to each proposal before selecting a particular project. Amount of investment, interest rate etc should keep in mind.
Question 10
1 / -0

Short term investment decisions affect the ___________

A
Long term profitability

B
Day to Day working of business

C
Purchase of fixed assets

D
Large amount of funds for future

Solution

Short term investment decisions are also called working capital decisions. These are concerned with the decisions about the inventories, debtors, bills receivable and level of cash etc. It affects the day to day working of the business.

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Re-Attempt Weekly Quiz Competition

Financial Management Test - 5

Result

Financial Management Test - 5

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SHARING IS CARING

Question 1

a short-term liability

a long-term liability

a mix of long and short-term liabilities

None of these

Solution

Question 2

long-term liability only

current liability only

both types (i.e. long and short term liabilities)

None of these

Solution

Question 3

Financial Planning

Allocation of Net Profits

Procurement of Funds

All of these

Solution

Question 4

Staffing Decision

Investment Decision

Financing Decision

Dividend Decision

Solution

Question 5

Purchase of fixed asset

Launching a new product line

Advertisement campaign

Day to day working

Solution

Question 6

Working Capital

Dividend Decision

Capital Budgeting

None of these

Solution

Question 7

Capital Budgeting

Dividend Decision

Working capital

None of these

Solution

Question 8

Research and Development Programme

Opening a new branch

Inventory management

Management of fixed capital

Solution

Question 9

Rate of Return

Cash Flow of the Project

Investment Criteria and interest rate

All of these

Solution

Question 10

Long term profitability

Day to Day working of business

Purchase of fixed assets

Large amount of funds for future

Solution

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