Question 1

The concept of risk-return trade-off is best described by which of the following?
A) It is important only at the lowest management levels.
B) It relates to higher risk requiring greater return.
C) It will be more likely to influence the financial activities in an international company than a national one.
D) It will be more likely to influence the financial activities in a service provider than a manufacturer.

Accepted Answer

The risk-return trade-off states that higher returns are expected for taking on higher levels of risk. This principle applies to all levels of management and all types of companies, whether they are national or international, or a service provider or a manufacturer.

Question 2

Esselte is one of the world's leading producers of office supplies.The company forecasts that its profits will double by the year 2012,and its financial manager will need to determine what should be done with the increased earnings.This forecast is part of which of the following activities?
A) the company's marketing plan
B) the company's strategic plan
C) the company's operating plan
D) the company's production budget

Accepted Answer

The company's strategic plan involves long-term goals and forecasts for the company's growth and profitability, which aligns with the forecast of doubling profits by 2012. This would involve decisions on how to allocate resources and invest in the company's future. Marketing plans focus on promoting products and services, operating plans involve short-term goals and budgets, and production budgets specifically deal with the production process.

Question 3

Financial managers are best described by which of the following?
A) They focus on profit maximization.
B) They track how money is flowing into and out of the company.
C) They play such an important organizational role that they often are called operations managers.
D) They are not typically involved in long-term strategic planning.

Accepted Answer

Financial managers are primarily responsible for tracking the flow of money into and out of the company. They are concerned with managing budgets, forecasting future financial needs, and making investment decisions. While they do consider profit, their focus is not solely on profit maximization. They are also not typically referred to as operations managers, as that is a distinct role within a company. Financial managers are often involved in long-term strategic planning as they must ensure the financial stability and success of the organization.

Question 4

Long-term forecasts that cover two to ten years and take a broader view of the company's financial activities are known as which of the following?
A) tactical plans
B) operating plans
C) strategic plans
D) projected plans

Accepted Answer

Long-term forecasts that cover two to ten years and take a broader view of the company's financial activities are known as strategic plans. Tactical plans cover a shorter time frame and focus on specific actions to achieve goals, while operating plans outline the day-to-day activities and processes necessary to implement tactical plans. Projected plans are not a commonly used term in financial forecasting.

Question 5

As part of the task of managing cash flows,financial managers perform which of the following activities?
A) They collect financial data.
B) They present financial data.
C) They oversee the collection of accounts receivable.
D) They hire the accountants.

Accepted Answer

Financial managers oversee the collection of accounts receivable in order to manage cash flows. While they may collect and present financial data, they typically do not hire accountants.

Question 6

In finance,what is the potential for loss?
A) the leverage
B) the risk
C) the business chance
D) the factoring

Accepted Answer

The potential for loss is commonly known as risk in finance. It refers to the probability of losing money on an investment or business venture. Therefore, option B is the correct choice. The other options, such as leverage, business chance, and factoring, are relevant concepts in finance but do not specifically denote the potential for loss.

Question 7

Which of the following are forecasts of the company's inflows and outflows of cash?
A) fiscal budgets
B) revenue budgets
C) operating budgets
D) cash budgets

Accepted Answer

The forecasts of the company's inflows and outflows of cash are captured in the cash budgets. Fiscal budgets are the estimates of the government's revenue and expenses, revenue budgets are the estimates of the company's expected revenue, and operating budgets are the estimates of the company's expenses for its operations.

Question 8

Which of the following do financial managers use to describe the inflow and outflow of cash?
A) cash flows
B) financial flows
C) revenue streams
D) sales revenues

Accepted Answer

Financial managers use the term "cash flows" to describe the inflow and outflow of cash. This refers to the movement of money into and out of a business, which is a crucial element in determining a company's financial health and performance.

Question 9

Which type of management is used to determine the most effective ways to acquire and use funds to achieve the company's goals?
A) corporate management
B) operations management
C) financial management
D) accounting management

Accepted Answer

Financial management is the type of management that deals with acquiring and effectively using funds to achieve the company's goals. Corporate management involves setting overall strategy and direction for the company, operations management focuses on efficient production and delivery of goods or services, and accounting management deals with recording and reporting financial transactions.

Question 10

European Airlines forecast that its profits will increase by 2-4 percent for flights between Europe and Canada during the next 12 months.This prediction is part of which of the following activities?
A) the company's economic forecast
B) the company's marketing plan
C) the company's production budget
D) the company's operating budget

Accepted Answer

The answer of European Airlines forecast that its profits will...

Question 11

Financial management is best described by which of the following?
A) It is typically performed by a company's CEO.
B) It uses financial statements prepared by accountants to make financial decisions.
C) Its purpose is to collect and present financial data.
D) It is completely different from accounting.

Accepted Answer

Financial management utilizes financial statements prepared by accountants but involves making decisions based on that data, such as budgeting and investment strategies. While the CEO may be involved in financial management decisions, it is not solely their responsibility. Financial management is closely related to accounting, but they are not completely separate entities.

Question 12

The primary goal of the financial manager is best described by which of the following?
A) He or she concentrates on short-term growth strategies.
B) He or she develops new goods and services for the company.
C) He or she ensures all employees get paid on a regular schedule.
D) He or she maximizes the value of the company to its owners.

Accepted Answer

The primary goal of a financial manager is to maximize the value of the company to its owners through effective financial management, such as managing cash flow, investments, and financing decisions. Short-term growth strategies (A) may not necessarily lead to long-term success, while developing new goods and services (B) is typically the role of the product development team. Ensuring employees get paid are important, but this is typically the responsibility of the human resources department (C).

Question 13

In seeking a balance between the opportunity for profit and the potential for loss,a financial manager is dealing with which of the following concepts?
A) potential profit trade-off
B) sales-profit trade-off
C) risk-return trade-off
D) profit-loss trade-off

Accepted Answer

The concept being referred to is the risk-return trade-off, which involves balancing the potential profit with the level of risk or potential for loss. This is a fundamental concept in finance and is at the heart of investment decision-making. The other options presented are not directly relevant to this concept.

Question 14

Which of the following are formal written forecasts of revenues and expenses that set spending limits based on operational forecasts?
A) profit and loss statements
B) business predictions
C) budgets
D) financial forecasts

Accepted Answer

Budgets are formal written forecasts of revenues and expenses that set spending limits based on operational forecasts. Profit and loss statements and financial forecasts are types of financial reports that may be included in a budget, but they are not necessarily the same as a budget. Business predictions is not a commonly used term in the context of financial forecasting and budgeting.

Question 15

Short-term forecasts that project revenues,costs of goods,and operating expenses over a one-year period are known as which of the following?
A) supervised plans
B) internal plans
C) operating plans
D) strategic plans

Accepted Answer

Short-term forecasts that project revenues, costs of goods, and operating expenses over a one-year period are typically part of an organization's operating plan, which outlines specific activities and targets to achieve the company's overall strategic goals. Supervised plans and internal plans are not specific terms related to forecasting or planning, and strategic plans typically cover longer periods of time and focus on broader objectives.

Question 16

Financial managers constantly strive for a balance between which of the following?
A) common and preferred shares
B) economic responsibility and social responsibility
C) cash and marketable securities
D) the opportunity for profit and the potential for loss

Accepted Answer

Financial managers need to balance the opportunity for profit with the potential for loss. In order to achieve their financial goals, managers have to take calculated risks, but they need to be conscious of potential losses and take steps to mitigate them. This requires balancing the potential for profit with the potential for risk.

Question 17

In finance,what is the opportunity for profit?
A) the value
B) the risk
C) the potential
D) the return

Accepted Answer

The opportunity for profit in finance is typically measured by the return. This refers to the amount of money that an investment or business venture can generate over time. While factors such as value, risk, and potential are all important considerations when assessing the viability of an investment, the ultimate goal is typically to maximize the return on investment (ROI) in order to generate the greatest possible profit. Therefore, the best choice is D.

Question 18

Hannah Perez keeps track of day-to-day operational data to make sure her employer has enough cash to run the business.She will determine if and when the company she works for should open a second distribution centre.Perez is which type of manager?
A) accounting
B) financial
C) operations
D) analysis

Accepted Answer

Hannah Perez is responsible for keeping track of day-to-day operational data and ensuring that her employer has enough cash to run the business. This indicates that she is a financial manager, as opposed to an accounting manager, who would focus more on financial reporting and compliance, or an operations manager, who would focus more on overseeing the production or delivery of goods or services. The term "analysis manager" is not a commonly used job title and does not seem to fit the description of Perez's role.

Question 19

The financial planning process begins with which of the following?
A) budgeting
B) expert systems
C) financial forecasts
D) brainstorming

Accepted Answer

Financial planning typically starts with financial forecasts, which involve projecting revenues, costs, and other financial details into the future to guide budgeting, investment, and other financial decisions.

Question 20

Lowell Arden bought and sold shares for a profit.The profit Arden earned on his investment in shares is known as which of the following?
A) investment return
B) investment certainty
C) investment risk
D) investment probability

Accepted Answer

The profit earned on an investment in shares is commonly referred to as investment return.

Quiz 18: Finance Maximizing the Value

The concept of risk-return trade-off is best described by which of the following?

Esselte is one of the world's leading producers of office supplies.The company forecasts that its profits will double by the year 2012,and its financial manager will need to determine what should be done with the increased earnings.This forecast is part of which of the following activities?

Financial managers are best described by which of the following?

Long-term forecasts that cover two to ten years and take a broader view of the company's financial activities are known as which of the following?

As part of the task of managing cash flows,financial managers perform which of the following activities?

In finance,what is the potential for loss?

Which of the following are forecasts of the company's inflows and outflows of cash?

Which of the following do financial managers use to describe the inflow and outflow of cash?

Which type of management is used to determine the most effective ways to acquire and use funds to achieve the company's goals?

European Airlines forecast that its profits will increase by 2-4 percent for flights between Europe and Canada during the next 12 months.This prediction is part of which of the following activities?

Financial management is best described by which of the following?

The primary goal of the financial manager is best described by which of the following?

In seeking a balance between the opportunity for profit and the potential for loss,a financial manager is dealing with which of the following concepts?

Which of the following are formal written forecasts of revenues and expenses that set spending limits based on operational forecasts?

Short-term forecasts that project revenues,costs of goods,and operating expenses over a one-year period are known as which of the following?

Financial managers constantly strive for a balance between which of the following?

In finance,what is the opportunity for profit?

Hannah Perez keeps track of day-to-day operational data to make sure her employer has enough cash to run the business.She will determine if and when the company she works for should open a second distribution centre.Perez is which type of manager?

The financial planning process begins with which of the following?

Lowell Arden bought and sold shares for a profit.The profit Arden earned on his investment in shares is known as which of the following?