Q: What is financial management ?
A: Financial management involves planning, organizing, and controlling an organization's financial resources to achieve its financial goals and objectives.
Q: What is the primary goal of financial management ?
A: The primary goal of financial management is to maximize shareholder wealth, often measured by the stock price or the market value of the company.
Q: What is working capital management ?
A: Working capital management refers to the management of a company's short-term assets and liabilities to ensure it has enough liquidity to meet its short-term obligations.
Q: What is the difference between financial forecasting and budgeting ?
A: Financial forecasting predicts future financial outcomes, while budgeting involves setting specific financial targets and allocating resources to achieve those targets.
Q: What are the key components of a financial statement?
A: The key components of a financial statement include the balance sheet, income statement, and cash flow statement.
Q: What is the purpose of a balance sheet ?
A: The balance sheet provides a snapshot of a company's financial position at a specific point in time, showing its assets, liabilities, and equity.
Q: How do you calculate the debt-to-equity ratio ?
A: The debt-to-equity ratio is calculated by dividing total debt by shareholders' equity. It measures a company's leverage or financial risk.
Q: What is the time value of money (TVM), and why is it important in financial management ?
A: TVM is the concept that money has different values at different points in time. It's important because it helps assess the profitability and risk of financial decisions, such as investments or loans.
Q: What is capital budgeting, and what methods are commonly used for it ?
A: Capital budgeting is the process of evaluating and selecting long-term investment projects. Common methods include the net present value (NPV), internal rate of return (IRR), and payback period.
Q: What is diversification, and why is it important in investment management ?
A: Diversification involves spreading investments across different assets or asset classes to reduce risk. It's important because it can help mitigate the impact of individual investment losses.
Q: What is the purpose of financial risk management ?
A: Financial risk management aims to identify, assess, and mitigate risks that could negatively impact a company's financial performance, such as market risk, credit risk, and liquidity risk.
Q: What is the role of the Chief Financial Officer (CFO) in an organization ?
A: The CFO is responsible for overseeing the financial activities of the company, including financial planning, budgeting, reporting, and risk management.
Q: How does inflation affect financial planning and investment decisions ?
A: Inflation erodes the purchasing power of money over time, so financial planning and investment decisions must account for its impact to ensure that returns outpace inflation.
Q: What is a dividend policy, and how does it affect shareholders ?
A: Dividend policy refers to the decisions a company makes regarding the distribution of profits to shareholders. It can impact shareholder income and the company's stock price.
Q: What are the advantages and disadvantages of debt financing for a company ?
A: Advantages of debt financing include tax benefits and the ability to leverage investments, but it also involves interest payments and increases financial risk.
Q: What is the difference between accounting profit and economic profit ?
A: Accounting profit is the difference between revenues and explicit costs, while economic profit considers both explicit and implicit costs, including the opportunity cost of capital.
Q: What are the key principles of risk management in finance ?
A: Key principles of risk management include risk identification, assessment, mitigation, monitoring, and continuous improvement of risk management strategies.
Q: What is the role of financial markets in the economy ?
A: Financial markets facilitate the allocation of capital by connecting borrowers and lenders, allowing individuals and businesses to raise funds and invest.
Q: What is a financial ratio analysis, and how is it used in financial management?
A: Financial ratio analysis involves using financial ratios to assess a company's financial health and performance, aiding in decision-making and benchmarking against competitors.
Q: How can a company optimize its working capital?
A: To optimize working capital, a company can manage its inventory efficiently, negotiate favorable payment terms with suppliers, and accelerate the collection of accounts receivable, among other strategies.