What is the primary goal of financial management?
The main objective of financial management is to maximize shareholder wealth by making sound investment and financing decisions.
Why is budgeting important in accounting?
Budgeting helps organizations plan for future expenses, allocate resources effectively, and monitor financial performance.
What role does the balance sheet play in financial analysis?
The balance sheet provides a snapshot of a company's financial position at a specific time, showing assets, liabilities, and equity.
What does the income statement show?
The income statement summarizes revenues and expenses, indicating the company’s profitability over a period.
How does cash flow management support operations?
Proper cash flow management ensures that a business has enough liquidity to meet short-term obligations and invest in growth.
What is the purpose of financial ratios?
Financial ratios help evaluate a company’s performance in areas like profitability, liquidity, efficiency, and solvency.
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What is GAAP in accounting?
Generally Accepted Accounting Principles (GAAP) provide standardized rules and guidelines for financial reporting in the U.S.
Why is internal control important in accounting?
Internal control systems help prevent fraud, ensure accuracy in financial reporting, and maintain compliance with regulations.
How does depreciation affect financial statements?
Depreciation allocates the cost of tangible assets over time, affecting net income and asset value.