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 dividend is a payment made by a company to its shareholders out of its profits or reserves.

Question 2

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

Accepted Answer

Interest coverage ratio

Answer

The interest coverage ratio = EBIT ÷ Interest Expense, showing how many times the company can cover its interest payments from operating profit.

Question 3

What does EBITDA stand for?

Accepted Answer

Earnings Before Interest, Taxes, Depreciation, and Amortization

Answer

EBITDA measures core operating profitability before non-cash charges (depreciation, amortization) and financing costs.

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

An IPO is the process by which a private company raises capital by offering shares to the public for the first time on a stock exchange.

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

A bond is a fixed-income debt security where the issuer borrows capital from investors and pays periodic interest (coupon) until maturity.

Finance for Non-Finance Managers Practice Test