1 Lecture - Introduction to financial management

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MGT201

Midterm & Final Term Short Notes

Introduction to financial management

Introduction to financial management refers to the basic principles and concepts of managing financial resources to achieve organizational objectives. It includes understanding financial statements, financial analysis techniques, and financial d


Important Mcq's
Midterm & Finalterm Prepration
Past papers included

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  1. Which of the following is not a primary financial objective of a firm? A) Maximizing shareholder wealth B) Maximizing profits C) Maximizing sales revenue D) Minimizing costs Answer: C

  2. Which of the following statements is true about financial management? A) It is primarily concerned with making a profit. B) It involves managing the use of money to maximize profits. C) It is the same as accounting. D) It only involves the use of financial data. Answer: B

  3. What is the primary role of financial managers in a firm? A) To make decisions that maximize shareholder wealth B) To make decisions that maximize profits C) To make decisions that minimize costs D) To make decisions that increase sales revenue Answer: A

  4. Which of the following is not a capital budgeting technique? A) Payback period B) Internal rate of return C) Net present value D) Financial statement analysis Answer: D

  5. What is the goal of financial statement analysis? A) To determine the future profitability of a firm B) To determine the market value of a firm's stock C) To evaluate the liquidity and solvency of a firm D) To determine the capital structure of a firm Answer: C

  6. Which of the following financial ratios measures a firm's ability to meet its short-term obligations? A) Debt-to-equity ratio B) Return on equity C) Current ratio D) Gross profit margin Answer: C

  7. What is the difference between the present value and future value of money? A) The present value is the amount of money that will be received in the future, while the future value is the amount of money that is currently available. B) The present value is the amount of money that is currently available, while the future value is the amount of money that will be received in the future. C) The present value is the amount of money that will be received in the future, while the future value is the amount of money that will be needed in the future. D) The present value is the amount of money that is currently available, while the future value is the amount of money that will be needed in the future. Answer: B

  8. What is the purpose of a cash budget? A) To determine the amount of cash that will be needed to start a new business B) To determine the amount of cash that will be needed to pay taxes C) To determine the amount of cash that will be available for operating expenses D) To determine the amount of cash that will be needed to finance capital expenditures Answer: C

  9. What is the difference between operating cash flow and free cash flow? A) Operating cash flow is the cash generated by a firm's operations, while free cash flow is the cash available to pay dividends and finance growth. B) Operating cash flow is the cash available to pay dividends and finance growth, while free cash flow is the cash generated by a firm's operations. C) Operating cash flow is the cash generated by a firm's operations, while free cash flow is the cash available to pay off debt. D) Operating cash flow is the cash available to pay off debt, while free cash flow is the cash generated by a firm's operations. Answer: A

  10. Which of the following is not a factor that affects a firm's cost of capital? A) Interest rates B) The firm's level of debt C) The firm's level of profitability D) The riskiness of the firm's investments Answer: C



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What is financial management? Explain its importance in an organization. Answer: Financial management is the process of managing an organization's financial resources, including planning, organizing, directing, and controlling financial activities. It is important in an organization as it helps in making financial decisions that are critical to its success.

  2. What is the difference between financial management and accounting? Answer: Accounting is the process of recording, classifying, and summarizing financial transactions, while financial management is concerned with planning and controlling an organization's financial resources.

  3. Explain the concept of time value of money. Answer: Time value of money refers to the idea that money received today is worth more than the same amount of money received in the future due to its potential earning capacity over time.

  4. What are the three main financial statements, and what information do they provide? Answer: The three main financial statements are the balance sheet, income statement, and cash flow statement. The balance sheet provides information on an organization's assets, liabilities, and equity. The income statement provides information on revenue, expenses, and profit or loss. The cash flow statement provides information on an organization's cash inflows and outflows.

  5. What is working capital, and why is it important? Answer: Working capital is the difference between an organization's current assets and current liabilities. It is important as it represents the funds that an organization can use to meet its short-term financial obligations and to support its daily operations.

  6. Explain the concept of financial leverage. Answer: Financial leverage refers to the use of debt to finance an organization's operations or investments. It can increase an organization's potential returns but also increases its financial risk.

  7. What is the role of a financial manager in an organization? Answer: The role of a financial manager in an organization is to manage the organization's financial resources, including planning, organizing, directing, and controlling financial activities.

  8. What is the difference between financial planning and budgeting? Answer: Financial planning involves developing long-term financial goals and strategies, while budgeting involves allocating financial resources to specific activities or projects within a given time frame.

  9. What is capital budgeting, and what are some methods used to evaluate investment opportunities? Answer: Capital budgeting is the process of evaluating investment opportunities and deciding which projects to pursue. Some methods used to evaluate investment opportunities include the payback period, net present value, and internal rate of return.

  10. What are some financial ratios used to analyze an organization's financial performance? Answer: Some financial ratios used to analyze an organization's financial performance include the current ratio, quick ratio, debt-to-equity ratio, return on equity, and earnings per share.

Introduction to Financial Management is an essential course for students pursuing degrees in business, finance, accounting, or related fields. This course introduces students to the fundamental concepts of financial management, including the time value of money, risk and return, financial statement analysis, capital budgeting, and more. The course provides students with a comprehensive understanding of how financial decisions are made in organizations. Students will learn how to analyze financial statements to evaluate a company's performance and make informed decisions about investments, financing, and dividend policies. The course also covers topics such as risk management, valuation techniques, and working capital management. By the end of the course, students will have a solid understanding of the principles and practices of financial management and be able to apply their knowledge to real-world situations. They will be equipped with the tools and techniques necessary to make informed decisions about the financial health of an organization, whether it is a small business or a large multinational corporation. Overall, Introduction to Financial Management is an essential course for anyone interested in pursuing a career in finance or accounting. It provides students with the foundational knowledge and skills they need to succeed in these fields and make a meaningful impact in the organizations they serve.

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