Principles of Management CLEP Practice Exam 2025 – Your Comprehensive All-in-One Guide to Exam Success!

Question: 1 / 400

What can be a result of ineffective financial management in an organization?

Increased employee productivity

Enhanced customer satisfaction

Potential insolvency or financial distress

Ineffective financial management in an organization can lead to potential insolvency or financial distress. This occurs when an organization fails to properly manage its finances, including budgeting, cash flow, and financial forecasting. Poor financial decisions can deplete resources, lead to excessive debt, and ultimately make it difficult for a business to meet its obligations, pay its employees, or invest in critical operations. This state of financial instability can jeopardize the organization's survival, prompting a need for major restructuring or, in severe cases, bankruptcy.

In contrast, better financial management typically contributes to increased employee productivity, enhanced customer satisfaction, and improved market competitiveness, making these outcomes unlikely when financial management is ineffective.

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Improved market competitiveness

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