ZAI Quiz : ACCA Foundations – FFM, Quiz 1

This is a ZAI Quiz based on ACCA FFM – Foundations in Financial Management:

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ZAI Quiz – Foundations in Financial Management (FFM)

1. Which of the following is a primary objective of financial management?
A) Maximizing revenue
B) Minimizing costs
C) Maximizing shareholder wealth
D) Maximizing sales volume

2. What is meant by the ‘time value of money’?
A) Money loses value in inflation
B) Money today is worth more than the same amount in the future
C) Money grows only when invested in stocks
D) Money is static in value over time

3. Which of the following is a short-term source of finance?
A) Debentures
B) Equity shares
C) Bank overdraft
D) Preference shares

4. What is the formula for calculating Net Present Value (NPV)?
A) Total income – total costs
B) Present value of inflows – initial investment
C) Return on investment / cost of capital
D) Profit x capital employed

5. Which financial ratio measures a company’s ability to meet short-term obligations?
A) Gearing ratio
B) Interest cover ratio
C) Current ratio
D) Return on capital employed

6. What is meant by ‘diversification’ in portfolio theory?
A) Investing in one high-performing asset
B) Reducing risk by investing in a variety of assets
C) Increasing investment in one industry
D) Avoiding foreign investments

7. Which of the following best describes working capital?
A) Fixed assets + long-term liabilities
B) Current assets – current liabilities
C) Total assets – total liabilities
D) Equity capital + retained earnings

8. Which is considered a capital budgeting technique?
A) Contribution margin analysis
B) Payback period
C) Break-even point
D) Trade receivable days

9. A company with high financial gearing is said to have:
A) High liquidity
B) Low operating costs
C) High levels of debt in capital structure
D) High cash reserves

10. What is a benefit of using equity finance over debt finance?
A) No interest obligation
B) Higher tax deductibility
C) Easier to repay
D) Increased gearing

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Answers:

1. C) Maximizing shareholder wealth
2. B) Money today is worth more than the same amount in the future
3. C) Bank overdraft
4. B) Present value of inflows – initial investment
5. C) Current ratio
6. B) Reducing risk by investing in a variety of assets
7. B) Current assets – current liabilities
8. B) Payback period
9. C) High levels of debt in capital structure
10. A) No interest obligation