Finance for Non-Finance Managers Business Finance and Funding 2

Question 1

What is a dividend?

Accepted Answer

A portion of profits distributed to shareholders

Answer

A fee paid to the company's lenders

Answer

A penalty for early loan repayment

Answer

An expense deducted from revenue

Question 2

Which financial metric measures a company's ability to service its debt from operating earnings?

Accepted Answer

Interest coverage ratio

Answer

Return on equity

Answer

Earnings per share

Answer

Price-to-earnings ratio

Question 3

What does EBITDA stand for?

Accepted Answer

Earnings Before Interest, Taxes, Depreciation, and Amortization

Answer

Earnings Before Income Tax, Depreciation, and Amortization

Answer

Equity Before Interest, Taxes, Debt, and Assets

Answer

Expenses Before Income Tax, Deductions, and Adjustments

Question 4

Initial Public Offering (IPO) refers to:

Accepted Answer

The first time a private company sells shares to the public on a stock exchange

Answer

A company's first loan from a commercial bank

Answer

The first dividend payment made to shareholders

Answer

A merger between two publicly listed companies

Question 5

Which of the following best describes a bond?

Accepted Answer

A debt instrument where the issuer borrows money and pays interest to bondholders

Answer

An ownership stake in a company

Answer

A type of derivative used to hedge currency risk

Answer

An agreement to buy goods at a fixed future price

Question 6

Gearing (financial leverage) is considered HIGH when:

Accepted Answer

A large proportion of the company's capital comes from debt

Answer

The company finances mostly through equity

Answer

The company has no long-term liabilities

Answer

Retained earnings exceed total debt