CBA Financial Management

Question 1

What is the primary goal of financial management in a business?

Accepted Answer

Maximize shareholder wealth

Answer

The main goal of financial management is to maximize shareholder value while ensuring the company remains financially healthy.

Question 2

Which financial statement shows a company’s profitability over time?

Accepted Answer

Income statement

Answer

The income statement summarizes revenues and expenses to show net profit or loss over a specific period.

Question 3

What does the term 'working capital' refer to?

Accepted Answer

Current assets minus current liabilities

Answer

Working capital represents a company’s short-term financial health, calculated as current assets minus current liabilities.

Question 4

Why is budgeting important in financial management?

Accepted Answer

To manage expenses and forecast revenues

Answer

Budgeting helps plan and control spending, ensuring financial resources are allocated effectively to meet strategic goals.

Question 5

Which ratio measures a company’s ability to meet short-term obligations?

Accepted Answer

Current ratio

Answer

The current ratio compares current assets to current liabilities to assess short-term liquidity.

(CBA) Certified Business Administrator Practice Test