FINANCE & FINANCIAL STATEMENT ANALYSIS PART-1

Q.1:- Financial accounting

• is required for corporations but probably would not be done by other business entities.
• provides information primarily for external decision makers.
• has been practiced in this country for approximately the last 15 years.
• provides information primarily for the use of managers of the company.

Q.2:- An example of a semi-variable cost would be:

• Supervisor Salary
• Electricity costs
• Direct Material
• Insurance cost

Q.3:- The master budget does NOT contain which of the following?

• financial budget
• operating budget
• All of these
• sales budget

Q.4:- Costing can be used in the field of:

• Trading firms
• Service Industries
• Manufacturing Industries
• All of the above

Q.5:- For a business, an example of an internal decision maker is

• a supplier who sells goods to the company on an account
• one of the business's long-term customers.
• one of the business's managers.
• a loan officer at a bank.

Q.6:- For a business, a supplier

• is a company or individual to whom the business sells goods or services.
• makes loans to the company to help finance its activities.
• provides goods and services used by the business
• is a company or individual that owns shares of the business.

Q.7:- A responsibility center where the manager is accountable for only the revenues and costs is a(n)

• revenue center
• cost center
• investment center.
• profit center.

Q.8:- Sunk cost are generally –

• Relevant cost
• Production cost
• Variable cost
• Fixed cost

Q.9:- For EOQ which of the following is true:

• Ordering cost is equal to carrying cost
• Total cost is minimum
• Both A & B
• None of the above

Q.10:- The financial position of the business on a given date is reported on the

• Statement of Cash Flows
• Statement of Changes In Owner's Equity
• Income Statement
• Balance Sheet

Q.11:- The net profit or loss for a particular period of time is reported on the

• Statement of Changes In Owner's Equity
• Income Statement
• Balance Sheet
• Trial Balance

Q.12:- The investment of cash into the business results in a/an

• increase in cash and an increase in capital
• increase in cash and a decrease in capital
• increase in fees earned and an increase in capital
• decrease in cash and an increase in capital

Q.13:- The purchase of supplies for cash will result in a/an

• increase in cash and a decrease in capital
• increase in supplies and a decrease in cash
• increase in equipment and an increase in capital
• increase in equipment and an increase in capital

Q.14:- Services rendered for cash will result in a/an

• increase in fees earned and an decrease in capital
• decrease in cash and an increase in fees earned
• increase in cash and a decrease in capital
• increase in cash and an increase in fees earned

Q.15:- Cash is received from a client for office rental space.

• cash decreases and capital increases
• cash increases and rental fees earned increases
• cash decreases and withdrawals increases
• . cash increases and rental fees earned decreases

Q.16:- Keeping the records of the business separate from the personal records of the owner of the business is said to be adherence to which accounting principle or concept?

• Objectivity principle
• Realization principle
• Business entity principle
• Continuing-concern concept

Q.17:- Which of the following is a formal written promise to pay a definite sum of money on demand or at a fixed or determinable future date?

• Note payable
• Prepaid insurance policy
• Account payable
• Account receivable

Q.18:- The personal telephone bill of Junior Sample was paid by issuing a cheque from the business chequing account. No business calls had been made from Junior's personal phone. What account must be charged for this transaction?

• Telephone Expense
• Junior, Withdrawals
• Junior, Withdrawals
• Junior, Capital

Q.19:- Which of the following accounts is NOT a liability?

• Notes Payable
• Accounts Payable
• Salaries Payable
• Accounts Receivable

Q.20:- The resulting amount when total liabilities are subtracted from total assets is known as

• total revenue
• total expenses
• owner's equity or net assets
• net income or net loss

Q.21:- A broad rule adopted by the accounting profession as a guide in measuring, recording, and reporting the financial affairs and activities of a business is known as

• objectivity principle
• the basic accounting equation
• an accounting principle
• an accounting concept

Q.22:- Using a sales invoice as the basis for recording a sale of merchandise is an example of using which accounting principle or concept for recording transactions?

• Objectivity principle
• Recognition principle
• Continuing-concern concept
• Realization principle

Q.23:- Which of the following statements is true?

• the business entity principle does not apply to corporations
• a salary paid to a shareholder is an expense of the corporation
• a salary paid to a proprietor is an expense to the proprietorship
• a salary paid to a proprietor is an expense to the proprietorship

Q.24:- A sole proprietor recorded the payment of an account payable to an office supplies store. Recording the transaction will

• decrease an asset, decrease owner's equity
• decrease an asset, decrease owner's equity
• decrease an asset, decrease a liability
• A increase an asset, increase a liability

Q.25:- The - primary purpose of the balance sheet is to

• report the financial position of the reporting entity at a particular point in time.
• report the current value of the business.
• report the difference between cash inflows and cash outflows for the period.
• measure the net income of a business up to a particular point in time.

Q.26:- Financial accounting

• provides information primarily for external decision makers.
• is required for corporations but probably would not be done by other business entities.
• Cprovides information primarily for the use of managers of the company.
• D. has been practiced in this country for approximately the last 15 years.

Q.27:- An example of a semi-variable cost would be:

• Insurance cost
• Direct Material
• Supervisor Salary
• Electricity costs

Q.28:- The master budget does NOT contain which of the following?

• operating budget
• financial budget
• sales budget
• All of the above

Q.29:- Costing can be used in the field of

• Trading firms
• Service Industries
• Manufacturing Industries
• All of the above

Q.30:- For a business, an example of an internal decision maker is

• a supplier who sells goods to the company on an account.
• one of the business's long-term customers.
• one of the business's managers
• a loan officer at a bank.

Q.31:- For a business, a supplier

• is a company or individual that owns shares of the business.
• provides goods and services used by the business
• makes loans to the company to help finance its activities
• is a company or individual to whom the business sells goods or services.

Q.32:- A responsibility center where the manager is accountable for only the revenues and costs is a(n)

• profit center.
• investment center.
• revenue center.
• cost center.

Q.33:- Sunk cost are generally

• Production cost
• Variable cost
• Relevant cost
• Fixed cost

Q.34:- For EOQ which of the following is true

• Total cost is minimum
• Ordering cost is equal to carrying cost
• Both A & B
• None of the above

Q.35:- When we are comparing the financial ratio's of three it companies, we are said to be carrying out a ______________________________ analysis:

• Industry analysis
• Time series analysis
• None of the above
• Proforma analysis

Q.36:- ____________ standard of comparison indicates the direction of change for a company over the past few years.

• Proforma analysis
• Time series analysis
• Both of them
• None of the above

Q.37:- ________________ ratio indicates the no. of days a company can finance its business without receiving cash from outside

• Cash ratio
• Net working capital
• Interval measure
• Inventory ratio

Q.38:- The following condition needs to be fulfilled for a company to be considered having a strong financial position:

• none of them is true
• both the conditions are fulfilled
• A high debt-equity ratio
• Low proportion of shareholder equity

Q.39:- The following companies would be able to face adverse situations like recession favorably:

• None of the conditions are favorable
• Both the conditions are favorable
• A company with low operating expense ratio
• A company with low profit margin

Q.40:- Low levels of marketable securities are maintained for financing working capital according to the ___________________ .

• Hedging approach
• Conservative approach
• Restrictive approach
• Flexible approach

Q.41:- The asset side of a balance sheet flows in the following order:

• Can be arranged in any order.
• Cash, marketable securities, Accounts receivables, inventory, fixed assets.
• Cash, Accounts receivables, marketable securities, inventory, fixed assets.
• B. Cash, Accounts receivables, marketable securities, inventory, fixed assets

Q.42:- Accounts receivables are the same as:

• Trade creditor
• Bill receivables
• Sundry debtors
• All mean the same

Q.43:- Accounts receivables management is based on the following principal

• Cash is king
• As liquidity increases the return decreases
• All are true
• Too much liquidity prevents bankruptcy

Q.44:- Costs incurred in writing off accounts receivables due to non-payment is called

• Collection cost
• Opportunity cost
• Bankruptcy cost
• Bad debt

Q.45:- The following statements are true as regards inventory management:

• Maintaining huge amount of inventories requires huge investments
• Efficient inventory management is necessary to avoid unnecessary and inadequate investment
• Inventory management includes acquisition, storage, disposal of materials
• All are correct

Q.46:- Inventory term includes:

• Raw maw material + work-in-progress + Finished goods +machine spare parts + tables + chairs
• Raw maw material + work-in-progress + Finished goods +machine spare parts
• Raw maw material + work-in-progress + machine spare parts
• Raw maw material + work-in-progress + finished goods

Q.47:- Holding inventory to take advantage of changes in prices and getting quality discounts is regarded as the following motive:

• Transaction motive
• Financial motive
• Precautionary motive
• Speculative motive

Q.48:- The insurance paid against fire and theft of inventories is regarded as the following cost:

• Storage cost
• Capital cost
• Carrying cost
• Ordering cost

Q.49:- The level of inventory at which the inventory cost is minimum is regarded as:

• Re-order quantity
• Order point quantity
• Economic order quantity
• None of the above

Q.50:- A disbursement float is:

• Firms book balance
• Firms available balance
• The amount not debited
• The amount not credited