ACCA Financial Management (F9) Certification Practice Exam

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Prepare for the ACCA Financial Management (F9) Certification Exam with engaging quizzes and interactive content. Dive deep into financial management concepts and boost your exam confidence with questions that come with detailed explanations.

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What does market capitalisation refer to in financial terms?

The total liabilities of a company
The sum of retained earnings
The total value of a company's issued shares
The profit margin of a company

The correct answer is: The total value of a company's issued shares

Market capitalisation refers to the total value of a company's issued shares, calculated by multiplying the current share price by the total number of outstanding shares. This measure provides an understanding of the company's size and is commonly used by investors to assess the market value of a company. It reflects how the market perceives the value of the company based on its stock price and can influence investment decisions. A higher market capitalisation often indicates a more established company, while a lower market capitalisation may indicate a smaller or emerging business. In contrast, the other options pertain to different financial metrics that do not relate to market capitalisation. Total liabilities provide insight into the company’s debt obligations, retained earnings reflect a company's accumulated profits that are retained for reinvestment or debt repayment, and profit margin measures how much of every dollar of revenue is profit. Understanding market capitalisation is vital for evaluating investment opportunities and gauging a company's financial health and market position.