What is the primary goal of financial management in an organization?
- A) Minimizing taxes
- B) Maximizing shareholder wealth
- C) Increasing employee wages
- D) Reducing production costs
- Answer: B) Maximizing shareholder wealth
Which financial statement provides a snapshot of a company’s financial position at a specific point in time?
- A) Income statement
- B) Statement of cash flows
- C) Balance sheet
- D) Statement of retained earnings
- Answer: C) Balance sheet
The process of planning and controlling the budget is known as:
- A) Financial accounting
- B) Budgeting
- C) Auditing
- D) Bookkeeping
- Answer: B) Budgeting
What is the purpose of a cash flow statement?
- A) To show the company’s profitability
- B) To report the company’s financial position
- C) To provide information about cash inflows and outflows
- D) To list the company’s assets and liabilities
- Answer: C) To provide information about cash inflows and outflows
Which type of budget is designed to adjust or change in response to the volume of activity?
- A) Static budget
- B) Flexible budget
- C) Capital budget
- D) Operating budget
- Answer: B) Flexible budget
The portion of a company’s profits paid out to shareholders is known as:
- A) Retained earnings
- B) Dividends
- C) Interest
- D) Capital gains
- Answer: B) Dividends
What is the primary purpose of financial forecasting?
- A) To ensure compliance with accounting standards
- B) To predict future revenues, expenses, and financial outcomes
- C) To determine historical financial performance
- D) To audit financial records
- Answer: B) To predict future revenues, expenses, and financial outcomes
Which budgeting method involves starting from zero and justifying all expenses for each new period?
- A) Incremental budgeting
- B) Activity-based budgeting
- C) Zero-based budgeting
- D) Value proposition budgeting
- Answer: C) Zero-based budgeting
What is working capital?
- A) The total amount of fixed assets
- B) The difference between current assets and current liabilities
- C) The company’s total debt
- D) The company’s net income
- Answer: B) The difference between current assets and current liabilities
Which financial metric is used to evaluate the profitability of a company?
- A) Current ratio
- B) Return on equity (ROE)
- C) Debt-to-equity ratio
- D) Inventory turnover ratio
- Answer: B) Return on equity (ROE)
What is the purpose of a capital budget?
- A) To manage day-to-day operating expenses
- B) To plan for long-term investments and major expenditures
- C) To control cash flow
- D) To forecast sales revenue
- Answer: B) To plan for long-term investments and major expenditures
Which of the following is considered a variable cost?
- A) Rent
- B) Salaries
- C) Raw materials
- D) Depreciation
- Answer: C) Raw materials
Which ratio measures a company’s ability to meet its short-term obligations with its most liquid assets?
- A) Current ratio
- B) Quick ratio
- C) Debt-to-equity ratio
- D) Gross profit margin
- Answer: B) Quick ratio
The budget that details the expected revenues and expenses for the upcoming period is known as:
- A) Capital budget
- B) Operating budget
- C) Cash budget
- D) Master budget
- Answer: B) Operating budget
What is the break-even point?
- A) The level of sales at which total revenues equal total costs
- B) The minimum profit a company can achieve
- C) The maximum loss a company can incur
- D) The point where variable costs exceed fixed costs
- Answer: A) The level of sales at which total revenues equal total costs
Which financial document is used to project future cash receipts and disbursements?
- A) Balance sheet
- B) Income statement
- C) Cash flow forecast
- D) Retained earnings statement
- Answer: C) Cash flow forecast
What is the main objective of cost-benefit analysis in budgeting?
- A) To compare the costs and benefits of different projects
- B) To increase company profits
- C) To reduce employee expenses
- D) To enhance customer satisfaction
- Answer: A) To compare the costs and benefits of different projects
Which type of budgeting involves adjusting budgets based on actual performance throughout the year?
- A) Fixed budgeting
- B) Rolling budgeting
- C) Traditional budgeting
- D) Project-based budgeting
- Answer: B) Rolling budgeting
What does the term ‘leverage’ refer to in financial management?
- A) The use of assets to generate income
- B) The ratio of debt to equity in a company’s capital structure
- C) The total amount of equity in the company
- D) The company’s profitability margin
- Answer: B) The ratio of debt to equity in a company’s capital structure
Which financial statement summarizes a company’s revenues and expenses over a specific period, showing the net profit or loss?
- A) Balance sheet
- B) Statement of cash flows
- C) Income statement
- D) Retained earnings statement
- Answer: C) Income statement

Financial management and budgeting MCQs

Library Sciences MCQs

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