FIN3701 EXAM PACK 2024/2025 QUESTIONS AND ANSWERS || VERIFIED
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FIN3701: Financial Management Practice Exam
Part 1: The Foundations of Financial Management (Questions 1-15)
1. What is the primary goal of the financial manager in a corporation?
a) Maximize sales and market share.
b) Minimize the number of employees.
c) Maximize the current share price (shareholder wealth).
d) Maximize the accounting profit.
Answer: c) Maximize the current share price (shareholder wealth).
2. The key decision-making responsibilities of financial management include
all of the following EXCEPT:
a) The investment decision.
b) The financing decision.
c) The dividend decision.
d) The marketing decision.
Answer: d) The marketing decision.
,3. Which of the following is an example of a capital budgeting decision?
a) Deciding whether to pay a dividend.
b) Determining the optimal level of inventory.
c) Deciding to expand into a new factory.
d) Establishing a target debt-to-equity ratio.
Answer: c) Deciding to expand into a new factory.
4. The term "agency problem" refers to:
a) The problem faced by a government agency.
b) The conflict of interest between managers and shareholders.
c) The difficulty in finding a reliable insurance agent.
d) The problem of raising capital for a new agency.
Answer: b) The conflict of interest between managers and shareholders.
5. Which form of business organization has the greatest ability to raise large
amounts of capital?
a) Sole Proprietorship.
b) Partnership.
c) Corporation.
d) Limited Liability Company.
Answer: c) Corporation.
,6. The statement that shows a firm's financial position at a specific point in
time is the:
a) Income Statement.
b) Statement of Cash Flows.
c) Balance Sheet.
d) Statement of Retained Earnings.
Answer: c) Balance Sheet.
7. Net Working Capital is defined as:
a) Total Assets minus Total Liabilities.
b) Current Assets minus Current Liabilities.
c) Fixed Assets minus Long-term Debt.
d) Cash and Marketable Securities.
Answer: b) Current Assets minus Current Liabilities.
8. Which of the following is a non-cash expense?
a) Interest Expense.
b) Depreciation.
c) Cost of Goods Sold.
d) Administrative Salaries.
Answer: b) Depreciation.
, 9. An increase in accounts receivable represents:
a) A source of cash.
b) A use of cash.
c) Neither a source nor a use of cash.
d) An increase in equity.
Answer: b) A use of cash.
10. Free Cash Flow (FCF) is calculated as:
a) Operating Cash Flow + Capital Expenditures.
b) Net Income + Depreciation.
c) Operating Cash Flow - Capital Expenditures.
d) EBIT - Taxes.
Answer: c) Operating Cash Flow - Capital Expenditures.
11. The financial ratio that measures a firm's ability to pay its short-term
obligations is known as:
a) Leverage ratio.
b) Profitability ratio.
c) Liquidity ratio.
d) Activity ratio.
Answer: c) Liquidity ratio.
FINANCIAL MANAGEMENT EXAM SOLUTIONS || 100% GUARANTEED
PASS <LATEST VERSION>
FIN3701: Financial Management Practice Exam
Part 1: The Foundations of Financial Management (Questions 1-15)
1. What is the primary goal of the financial manager in a corporation?
a) Maximize sales and market share.
b) Minimize the number of employees.
c) Maximize the current share price (shareholder wealth).
d) Maximize the accounting profit.
Answer: c) Maximize the current share price (shareholder wealth).
2. The key decision-making responsibilities of financial management include
all of the following EXCEPT:
a) The investment decision.
b) The financing decision.
c) The dividend decision.
d) The marketing decision.
Answer: d) The marketing decision.
,3. Which of the following is an example of a capital budgeting decision?
a) Deciding whether to pay a dividend.
b) Determining the optimal level of inventory.
c) Deciding to expand into a new factory.
d) Establishing a target debt-to-equity ratio.
Answer: c) Deciding to expand into a new factory.
4. The term "agency problem" refers to:
a) The problem faced by a government agency.
b) The conflict of interest between managers and shareholders.
c) The difficulty in finding a reliable insurance agent.
d) The problem of raising capital for a new agency.
Answer: b) The conflict of interest between managers and shareholders.
5. Which form of business organization has the greatest ability to raise large
amounts of capital?
a) Sole Proprietorship.
b) Partnership.
c) Corporation.
d) Limited Liability Company.
Answer: c) Corporation.
,6. The statement that shows a firm's financial position at a specific point in
time is the:
a) Income Statement.
b) Statement of Cash Flows.
c) Balance Sheet.
d) Statement of Retained Earnings.
Answer: c) Balance Sheet.
7. Net Working Capital is defined as:
a) Total Assets minus Total Liabilities.
b) Current Assets minus Current Liabilities.
c) Fixed Assets minus Long-term Debt.
d) Cash and Marketable Securities.
Answer: b) Current Assets minus Current Liabilities.
8. Which of the following is a non-cash expense?
a) Interest Expense.
b) Depreciation.
c) Cost of Goods Sold.
d) Administrative Salaries.
Answer: b) Depreciation.
, 9. An increase in accounts receivable represents:
a) A source of cash.
b) A use of cash.
c) Neither a source nor a use of cash.
d) An increase in equity.
Answer: b) A use of cash.
10. Free Cash Flow (FCF) is calculated as:
a) Operating Cash Flow + Capital Expenditures.
b) Net Income + Depreciation.
c) Operating Cash Flow - Capital Expenditures.
d) EBIT - Taxes.
Answer: c) Operating Cash Flow - Capital Expenditures.
11. The financial ratio that measures a firm's ability to pay its short-term
obligations is known as:
a) Leverage ratio.
b) Profitability ratio.
c) Liquidity ratio.
d) Activity ratio.
Answer: c) Liquidity ratio.
