Eli accounting

Finance is the science and art of managing

Money

Which of the following is NOT a scope of finance?

Industrial Finance

Finance mainly focuses on

Decisions about raising and using funds

Accounting mainly focuses on

Summarizing transactions

The main objective of financial management is to

Maximize shareholder wealth

Which is NOT an objective of financial management?

Eliminate competition

Which decision deals with debt vs. equity choices?

Financing Decision

Capital budgeting refers to

Choosing profitable projects

Dividend decisions involve

Allocation of earnings between retention and distribution

Working Capital Management focuses on:

Managing cash, receivables, and inventory

Which form of business is owned by one person?

Sole Proprietorship

Which form of business has ownership through shares?

Corporation

Who has ultimate authority in a corporation?

Shareholders

Which corporate body is responsible for policy-making?

Board of Directors

Which officer is responsible for daily management?

CEO

A financial system facilitates the flow of

Funds

Which is NOT a financial institution?

Coca-cola

Stocks and bonds are examples of

Financial Instruments

Which market deals with short-term securities?

Money Market

The secondary market is where

Existing securities are traded

Horizontal analysis is also known as

Trend Analysis

Vertical analysis expresses items as a percentage of

A base figure like sales or total assets

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

Liquidity Ratios

Current Ratio formula is

Current Assets ÷ Current Liabilities

Quick Ratio formula is

(Current Assets – Inventory – Prepaid Expenses) ÷ Current Liabilities

Cash Ratio formula is

Cash ÷ Current Liabilities

Gross Profit Margin is calculated as

Gross Profit ÷ Net Sales

Which ratio shows net income relative to sales?

Net Profit Margin

Return on Assets (ROA) measures

Net Income ÷ Total Assets

Return on Equity (ROE) measures

Net Income ÷ Equity

Debt-to-Equity Ratio formula is

Debt ÷ Equity

Equity Ratio formula is

Equity ÷ Total Assets

Debt Ratio formula is

Total Liabilities ÷ Total Assets

Interest Coverage Ratio formula is

Operating Income ÷ Interest Expense

Efficiency ratios generally measure

Asset utilization

Asset Turnover formula is

Net Sales ÷ Average Total Assets

Fixed Asset Turnover formula is

Net Sales ÷ Average Fixed Assets

Inventory Turnover is

COGS ÷ Average Inventory

Days’ Sales in Inventory (DSI) formula is

365 ÷ Inventory Turnover

Accounts Receivable Turnover formula is:

Net Sales ÷ Average Accounts Receivable

Average Collection Period (ACP) formula is

365 ÷ Receivable Turnover

Accounts Payable Turnover formula is

COGS ÷ Average Accounts Payable

Days of Payables formula is

365 ÷ Accounts Payable Turnover

Operating Cycle formula is

ACP + DSI

Cash Conversion Cycle formula is

OC – Days of Payables

Which ratio indicates how many times inventory is sold during a period?

Inventory Turnover

Which ratio measures how well fixed assets generate sales?

Fixed Asset Turnover

A higher Current Ratio generally indicates

Better short-term liquidity

A higher Debt-to-Equity ratio means

Company relies more on debt financing

Horizontal Analysis is mainly used to

Evaluate changes in financial figures over time