Online Access Free Financial-Management Practice Test

Why would a company choose to maintain a certain level of cash as a reserve balance?

• A.To cover the cost of repurchasing shares from the stock market
• B.To distribute as dividends at the end of the fiscal year
• C.To safeguard against unforeseen expenses and maintain liquidity
• D.To pay for major capital expenditures without external financing

Why might a firm's net income not equal its cash flows from operations for a period?

• A.Cash flows from operations are calculated for tax purposes only and may not align with actual income earned.
• B.Net income projects future earnings, while cash flows from operations deal with past cash transactions.
• C.Net income represents profits from investing activities only, while cash flows from operations reflect all earnings.
• D.Net income may reflect noncash charges and revenue recognition that differ from a firm's actual cash flows.

What does a high inventory turnover ratio indicate about a company's inventory management?

• A.The company has efficient inventory management.
• B.The company has too little inventory.
• C.The company's inventory is obsolete.
• D.The company has excess inventory.

What does a beta of less than 1 signify in the capital asset pricing model (CAPM)?

• A.The investment has a return that is independent of the market.
• B.The investment is risk-free.
• C.The investment has lower risk than the market.
• D.The investment has higher risk than the market.

What is the purpose of the Sarbanes-Oxley Act requirement for the board of directors to effectively represent shareholders?

• A.To represent shareholders' interests in good faith
• B.To increase stock prices
• C.To ensure the board's financial gain
• D.To manage daily operations