1. What is the primary goal of financial management? a) Maximizing sales b) Minimizing risk c) Maximizing shareholder wealth d) Minimizing expenses Answer: c) Maximizing shareholder wealth Rationale: The primary goal of financial management is to maximize shareholder wealth, as it reflects the overall value of the company and indicates the efficiency of management's ability to generate profits from the shareholders' investments. 2. Which financial statement reports a company's revenues and expenses? a) Balance sheet b) Income statement c) Statement of cash flows d) Statement of retained earnings Answer: b) Income statement Rationale: The income statement provides detailed information about a company's revenues, expenses, and net income over a specific period, reflecting the company's operational performance. 3. What is the significance of the time value of money in financial decision-making? a) It determines the financial viability of long-term projects. b) It helps in assessing the risk of investments. c) It accounts for inflation in project appraisals. d) All of the above Answer: d) All of the above Rationale: The time value of money is a fundamental concept in finance that recognizes the increased value of money received today compared to the same amount received in the future due to its potential earning capacity. 4. What does the 'cost of capital' represent? a) The cost of issuing new stocks or bonds b) The total operational costs of a company c) The opportunity cost of making an investment d) The interest paid on bank loans