MBA Finance 1

Question 1

What does the Weighted Average Cost of Capital (WACC) represent?

Accepted Answer

The blended cost of a firm's equity and debt financing weighted by their proportions

Answer

WACC blends the cost of equity and debt proportionally to reflect the overall required return for the firm's capital structure.

Question 2

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

Accepted Answer

Income Statement

Answer

The Income Statement (Profit & Loss Statement) reports revenues, costs, and expenses to show net income or loss over a specific period.

Question 3

What is the Net Present Value (NPV) rule for capital budgeting decisions?

Accepted Answer

Accept projects with NPV greater than zero

Answer

A positive NPV indicates that a project generates more value than its cost, so it should be accepted to maximize shareholder wealth.

Question 4

Which ratio measures a company's ability to meet short-term obligations using its most liquid assets?

Accepted Answer

Quick Ratio

Answer

The Quick Ratio excludes inventory from current assets, providing a stricter measure of short-term liquidity than the Current Ratio.

Question 5

What is the primary goal of financial management in a publicly traded corporation?

Accepted Answer

Maximize shareholder wealth

Answer

The primary goal of financial management is to maximize shareholder wealth, typically measured by the market value of the firm's stock.

MBA - Degree Master of Business Administration Practice Test