1. What is the primary goal of financial management?

A) Maximizing profits

B) Minimizing risks

C) Maximizing shareholder wealth

D) Minimizing operational costs

Answer: C) Maximizing shareholder wealth

Rationale: The primary goal of financial management is to maximize

shareholder wealth, which is reflected in the market value of the

company's shares. This approach aligns the interests of management with

those of the shareholders.

2. Which financial statement reports a firm's financial performance over a

specific accounting period?

A) Balance Sheet

B) Income Statement

C) Cash Flow Statement

D) Statement of Retained Earnings

Answer: B) Income Statement

Rationale: The income statement provides a summary of the company's

financial performance over a specific period, typically a quarter or a year,

including revenues, expenses, and profits.

3. What is the concept of 'time value of money' in finance?

A) Money loses value over time due to inflation.

B) Money can earn interest, so it is worth more in the future.

C) The value of money is constant over time.

D) Money is more valuable when invested in long-term assets.

Answer: B) Money can earn interest, so it is worth more in the future.

Rationale: The time value of money is a core principle of finance that

reflects the idea that a sum of money is worth more now than the same

sum will be in the future due to its potential earning capacity.

4. What does the 'cost of capital' represent?

A) The total expenses of a company

B) The cost of a company's debt and equity financing

C) The operational costs of producing goods

D) The cost of long-term assets