45 Lecture - Financial Management

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45 Lecture

MGT211

Midterm & Final Term Short Notes

Financial Management

Financial management refers to the process of planning, organizing, controlling, and monitoring an organization's financial resources. It involves making strategic decisions about how to allocate resources, invest funds, manage debt, and mitigat


Important Mcq's
Midterm & Finalterm Prepration
Past papers included

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  1. Which of the following is not a primary objective of financial management? a) Maximizing shareholder wealth b) Maximizing profits c) Minimizing risk d) Maximizing market share Answer: d) Maximizing market share

  2. The net present value (NPV) method is used to: a) Evaluate the profitability of a project b) Determine the payback period of a project c) Calculate the internal rate of return of a project d) None of the above Answer: a) Evaluate the profitability of a project

  3. The capital asset pricing model (CAPM) is used to calculate: a) The cost of debt b) The cost of equity c) The weighted average cost of capital (WACC) d) None of the above Answer: b) The cost of equity

  4. A company's current ratio is calculated by dividing its current assets by its: a) Total assets b) Long-term liabilities c) Current liabilities d) Shareholders' equity Answer: c) Current liabilities

  5. The time value of money refers to: a) The idea that money today is worth more than the same amount of money in the future b) The idea that money today is worth less than the same amount of money in the future c) The idea that money has the same value regardless of when it is received d) None of the above Answer: a) The idea that money today is worth more than the same amount of money in the future

  6. The debt-to-equity ratio is calculated by dividing a company's total liabilities by its: a) Total assets b) Shareholders' equity c) Net income d) Gross profit Answer: b) Shareholders' equity

  7. The quick ratio is a measure of a company's: a) Liquidity b) Solvency c) Profitability d) Efficiency Answer: a) Liquidity

  8. The goal of financial leverage is to: a) Increase a company's profitability b) Reduce a company's risk c) Maximize a company's market share d) Increase a company's return on investment (ROI) Answer: d) Increase a company's return on investment (ROI)

  9. The internal rate of return (IRR) is the discount rate that makes the: a) NPV of a project positive b) NPV of a project negative c) Payback period of a project equal to its useful life d) None of the above Answer: a) NPV of a project positive

  10. A company's cash flow statement shows: a) Its revenue and expenses over a period of time b) Its assets, liabilities, and equity at a specific point in time c) Its cash inflows and outflows over a period of time d) None of the above Answer: c) Its cash inflows and outflows over a period of time



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What is Financial Management? Ans: Financial Management is the process of planning, organizing, directing, and controlling financial activities like procurement and utilization of funds of an organization.

  2. What is the main objective of Financial Management? Ans: The main objective of Financial Management is to maximize shareholder’s wealth by increasing the value of the firm.

  3. What is Working Capital? Ans: Working Capital refers to the difference between current assets and current liabilities. It represents the operating liquidity available to a business.

  4. What is Capital Budgeting? Ans: Capital Budgeting is a process used to determine whether an organization's long-term investments such as new machinery, replacement of old machinery, etc., are worth pursuing or not.

  5. What is the Time Value of Money? Ans: Time Value of Money is the concept that the value of money changes over time due to various factors like inflation, interest rates, etc.

  6. What is Financial Leverage? Ans: Financial Leverage is the use of debt or other financial instruments to increase the potential return on investment.

  7. What is the difference between Accounting and Financial Management? Ans: Accounting is the process of recording, classifying, and summarizing financial transactions whereas Financial Management is concerned with planning, organizing, directing, and controlling financial activities.

  8. What are the different sources of finance? Ans: The different sources of finance are equity, debt, retained earnings, and hybrid securities.

  9. What is the role of Financial Management in mergers and acquisitions? Ans: Financial Management plays a crucial role in mergers and acquisitions by analyzing the financial viability of the deal, managing the financial risks, and determining the financing options.

  10. What is Risk Management? Ans: Risk Management is the process of identifying, assessing, and controlling risks that may impact an organization's financial performance. It helps in minimizing the potential negative impact of risks and maximizing the potential positive impact.

Financial management involves planning, organizing, directing, and controlling the financial activities of an organization. It is crucial for every business to effectively manage its finances to maximize profits and minimize risks. Financial management includes several key areas such as financial planning, budgeting, investment analysis, and risk management. Effective financial management requires a deep understanding of financial statements such as balance sheets, income statements, and cash flow statements. It also involves developing and implementing financial policies, strategies, and procedures to ensure the financial well-being of the organization. Financial managers use several tools to manage finances, such as ratio analysis, break-even analysis, and capital budgeting techniques. They must also stay up to date with financial regulations and laws that affect the organization. Financial management plays a critical role in the success of any organization. It helps in making informed business decisions, managing cash flow, allocating resources, and identifying potential risks and opportunities. Effective financial management can help organizations achieve their financial goals and maintain a competitive advantage in the market.

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