BBM Financial Management

Question 1

Which financial statement shows a company's revenues and expenses over a specific period?

Accepted Answer

Income Statement

Answer

The income statement (profit and loss statement) reports revenues, expenses, and net profit over an accounting period.

Question 2

What does the debt-to-equity ratio measure?

Accepted Answer

The proportion of financing from creditors vs. shareholders

Answer

The debt-to-equity ratio compares total liabilities to shareholders' equity, indicating how much of the firm is financed by debt versus equity.

Question 3

Which capital budgeting method accounts for the time value of money?

Accepted Answer

Net Present Value

Answer

Net Present Value (NPV) discounts future cash flows to present value, directly incorporating the time value of money.

Question 4

What is working capital?

Accepted Answer

Current assets minus current liabilities

Answer

Working capital equals current assets minus current liabilities and represents a firm's short-term liquidity position.

Question 5

Which type of cost remains constant regardless of production volume?

Accepted Answer

Fixed cost

Answer

Fixed costs, such as rent and salaries, do not change with the level of output within a relevant range.

BBM - Business Management Degree Practice Test