FINANCE & FINANCIAL STATEMENT ANALYSIS PART-2

Q.1:- Financial accounting

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

Q.2:- For a business, an example of an internal decision maker is

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

Q.3:- 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.4:- The purchase of supplies for cash will result in a/an

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

Q.5:- . 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
• Continuing-concern concept
• Business entity principle

Q.6:- The resulting amount when total liabilities are subtracted from total assets is known as

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

Q.7:- The - primary purpose of the balance sheet is to

• 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.
• report the financial position of the reporting entity at a particular point in time.

Q.8:- Costing can be used in the field of:

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

Q.9:- 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.10:- When we are comparing the financial ratio's of three it companies, we are said to be carrying out a ______________________________ analysis:

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

Q.11:- The following condition needs to be fulfilled for a company to be considered having a strong financial position:

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

Q.12:- The asset side of a balance sheet flows in the following order:

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

Q.13:- Costs incurred in writing off accounts receivables due to non-payment is called

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

Q.14:- The insurance paid against fire and theft of inventories is regarded as the following cost:

• Storage cost
• Capital cost
• TUK,F
• Carrying cost

Q.15:- The net float of cash management is positive when:

• The firms collection float is more than the disbursement float
• The firms disbursement float is more than the collection float
• None of the statements are correct
• Both the situations are correct

Q.16:- ___________________ approach is use of more short-term funds warranted by the matching plan

• None of the above
• Aggressive
• Matching
• Conservative

Q.17:- Which of the following errors will cause an imbalance in the trial balance?

• Omission of a transaction in the journal
• Listing the balance of an account with a debit balance in the credit column of the trial balance
• Posting an entire journal entry twice to the ledger
• Posting a credit of € 720 to Trade and other payables as a credit of € 720 to Trade and other receivables

Q.18:- Office equipment of € 1,733 has been wrongly posted to purchases of raw materials. The adjustment to correct the above would be:

• Debit PPE €1,733; credit Trade payables €1,733
• Debit Inventory (Raw material) €1, 733; credit Trade payables €1,733
• Debit PPE €1,733; credit Inventory (Raw material) €1,733
• Debit Inventory (Raw material) €1, 733; credit PPE €1,733

Q.19:- The market price of a share of common stock is determined by:

• individuals buying and selling the stock
• the president of the company
• the stock exchange on which the stock is listed.
• the board of directors of the firm.

Q.20:- The focal point of financial management in a firm is:

• the minimization of the amount of taxes paid by the firm.
• the number and types of products or services provided by the firm.
• the dollars profits earned by the firm.
• the creation of value for shareholders

Q.21:- The decision function of financial management can be broken down into the_____ decisions.

• financing and dividend
• investment, financing, and asset management
• capital budgeting, cash management, and credit management
• financing and investment

Q.22:- Which of the following is termed as Investment Decision?

• Raising funds
• Distributing returns earned from the assets to shareholders
• Investing funds in assets
• All of the above

Q.23:- Required assets of the business can be:

• None of the above
• Both a and b
• Short term assets
• Long term assets

Q.24:- Which of the following function is included in financing decision'?

• Ensuring optimum finance mix which maximizes shareholder's wealth
• All of the above
• Fixed assets of the business
• None the of above

Q.25:- There is deterioration in the management of working capital of XYZ ltd. What does it refer?

• Sales has decreased
• The profitability has gone up
• The Capital Employed has reduced
• Debtors collection period has increased

Q.26:- Financial Leverage arises because of:

• Interest Cost
• Manufacturing cost
• Fixed cost of production
• Variable Cost

Q.27:- When n = 1, this interest factor equals one for any positive rate of interest.

• None of the above
• FVIFA
• FVIF
• PVIF

Q.28:- The proposal is accepted if the profitability index is:

• More than 1
• More than 5
• Less than 10
• Less than 100

Q.29:- The decision rule is considered the "best" inprinciple.

• net presentvalue
• average accountingreturn
• paybackperiod
• internal rate ofreturn

Q.30:- Risk which arises from all activities of contingent liabilities and assets is considered as:

• Off balance sheet risk
• Income statement risk
• Balance of payment risk
• Balance of trade risk

Q.31:- Credits are used to record increases in:

• Revenues, liabilities, and owner's capital
• Revenues, owner's drawings, and assets
• Assets, revenues, liabilities, and owner's capital
• Expenses, liabilities, and owner's capital

Q.32:- An increase in assets may have an equivalent:

• Increase in other assets
• Increase in liabilities
• Decrease in liabilities
• Decrease in capital

Q.33:- Which of the following will not alter the total net assets of an enterprise?

• Receipts of interest from investments
• Charging depreciation on buildings
• Drawings by the owner
• Payments to trade payables

Q.34:- A profitability index of .85 for a project means that:

• the payback period is less than one year.
• the project returns 85 cents in present value for each current dollar invested.
• the project's NPV is greater than zero.
• the present value of benefits is 85% greater than the project's costs.