Financial Management Questions

Financial Management Questions

100 word answers per question

1. What is the cycle of money? Who participates in the cycle of money? What is the objective of a financial transaction?

2. What is the difference between the primary market and the secondary market?

3. In what type of accounting system must debits always equal credits? What is the accounting identity? What is the connection between “debits always equal credits” and the accounting identity?

4. What is the difference between a current asset and a long-term asset? What is the difference between a current liability and a long-term liability? What is the difference between a debtor’s claim and an owner’s claim?

5. What are the two parameters for selecting investments in the finance world? How do investors try to get the most out of their investments with regard to these two parameters?

6. What is a positive correlation between two assets’ returns? What is a negative correlation between two assets’ returns? Which correlation is better for reducing the variance of a portfolio made up of two assets?

7. What is a line of credit? Why would a bank require a company with a line of credit to have a zero balance in its line of credit for at least sixty days a year?

8. Why are cash management and cash budgeting important to a company’s survival?