MGT201 Midterm Preparation by ZB

Q1. Which of the following is the primary goal of financial management?

1. Maximizing profits
2. Minimizing costs
3. Maximizing shareholder wealth
4. Maximizing market share

Answer: c) Maximizing shareholder wealth

Q2. The term "working capital" refers to:

1. Long-term assets
2. Current assets and current liabilities
3. Fixed assets
4. Shareholder equity

Answer: b) Current assets and current liabilities

Q3. Which financial statement shows the financial position of a company at a specific point in time?

1. Income statement
2. Statement of cash flows
3. Balance sheet
4. Statement of retained earnings

Answer: c) Balance sheet

Q4. The concept of time value of money is based on the principle that:

1. Money loses value over time
2. A rupee today is worth more than a rupee tomorrow
3. Inflation has no impact on money
4. Interest rates remain constant

Answer: b) A rupee today is worth more than a rupee tomorrow

Q5. Which of the following is an example of a non-cash expense?

1. Salaries
2. Depreciation
3. Rent
4. Interest expense

Answer: b) Depreciation

Q6. A bond selling at a price above its par value is called:

1. Discount bond
2. Premium bond
3. Callable bond
4. Convertible bond

Answer: b) Premium bond

Q7. The discount rate at which the net present value (NPV) of a project becomes zero is called:

1. Cost of capital
2. Internal rate of return (IRR)
3. Break-even point
4. Payback period

Answer: b) Internal rate of return (IRR)

Q8. The formula for calculating net working capital is:

1. Total assets - Total liabilities
2. Current assets - Current liabilities
3. Fixed assets - Current liabilities
4. Cash - Accounts payable

Answer: b) Current assets - Current liabilities

Q9. Which of the following represents the cost of equity?

1. Interest expense
2. Dividends paid to shareholders
3. Cost of retained earnings
4. Weighted average cost of capital

Answer: b) Dividends paid to shareholders

Q10. An investment with high risk typically offers:

1. Low return
2. Medium return
3. High return
4. Guaranteed return

Answer: c) High return

Q11. What is the primary purpose of a financial ratio analysis?

1. To ensure compliance with tax laws
2. To interpret financial statements
3. To manage employee salaries
4. To calculate interest rates

Answer: b) To interpret financial statements

Q12. Which one is a long-term source of financing?

1. Trade credit
2. Bank overdraft
3. Bonds
4. Accounts payable

Answer: c) Bonds