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MCQ Practice Test 2 (9648)

The document contains 17 multiple choice questions testing knowledge of concepts related to finance, accounting, and business management. The questions cover topics such as managing working capital, cash budgeting, time value of money calculations, flexible budgets, sources of finance, capital budgeting, and components of master budgets.

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Melvin
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441 views4 pages

MCQ Practice Test 2 (9648)

The document contains 17 multiple choice questions testing knowledge of concepts related to finance, accounting, and business management. The questions cover topics such as managing working capital, cash budgeting, time value of money calculations, flexible budgets, sources of finance, capital budgeting, and components of master budgets.

Uploaded by

Melvin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MCQ practice test

QUESTION 1
The purpose of managing current assets and current liabilities is to
(a)  achieve as low a level of current assets as possible.
(b)  achieve as low a level of current liabilities as possible.
(c)  achieve a balance between liquidity and risk that contributes to the firm’s value.
(d)  achieve as high a level of current liabilities as possible.

QUESTION 2
Which of the following describes the cash budget?
A) It aids in planning to ensure the company has adequate inventory and cash on hand.
B) It captures the variable and fixed expenses of the business.
C) It depicts the breakdown of sales based on terms of collection.
D) It helps in planning to ensure the business has adequate cash.

QUESTION 3
In 8 years, you will be needing ₤10,000 to fund your son’s higher education. How much must
you deposit annually in the bank paying 6% interest to have the funds ready by then ?  
a.   ₤1202.45          
b.   ₤1010.41                                                                                                     
c.   ₤1064.18                                                                                                                  
      d.   ₤1152.12

QUESTION 4
A flexible budget is
A. Budget that is reviewed on a month by month basis
B. Budget that will be changed at the end of the month to reflect the actual costs of a department
C. Budget that can be adjusted to reflect different costs at different activity levels
D. Budget that comprises variable costs only

QUESTION 5
External sources of finance do not include:
a.      debentures
b.      retained earnings
c.      leasing
d.      overdrafts

QUESTION 6
Henry purchased a boat for $35,000, made a down payment of $5,000, and agreed to pay the
rest in five equal annual payments that include principal payments plus 13 percent of
compound interest on the unpaid balance. What will be the amount of each payment ?

a.  $7856.74                                                                                                                  
b.  $8278.66                                                                                                                  
c.  $8529.44                                                                                                          
d.  $7915.62

QUESTION 7
Which of the following describes the cash budget?
a. It aids in planning to ensure the company has adequate inventory and cash on hand.
b. It captures the variable and fixed expenses of the business.
c. It depicts the breakdown of sales based on terms of collection.
d. It helps in planning to ensure the business has adequate cash.

QUESTION 8
Which of the following is a source of short term finance?

a) Bank Overdraft                                                                                                                            
b) debt factoring                                                                                                                              
c) Invoice discounting                                                                                                    
d) All of the above        

QUESTION 9
What functional role do management accountants play in the budgeting process?
a. They audit the financial statements
b. They decide what bonuses should be paid to the staff
c. They facilitate and co-ordinate the budgeting process

d. They set targets for other managers

QUESTION 10
A fixed budget is:
a. A budget that is set for a specified level of activity
b. A budget that itemises the fixed costs of a department
c. A budget that ignores inflation
d. A budget that never changes

QUESTION 11
Which of the following is not a method of issuing ordinary shares:
a.    issue by tender
b.    auction
c.    intermediary offer
d     placing

QUESTION 12
A firm has an average age of inventory of 90 days, an average collection period of 40 days, and
an average payment period of 30 days. The firm’s operating cycle is _________ days.
(a)  110
(b)  130
(c)  120
(d)  70

QUESTION 13
A firm has an operating cycle of 120 days, an average collection period of 40 days, and an
average payment period of 30 days. The firm’s average age of inventory is _________ days.
(a)  80
(b)  50
(c)  90
(d)  70

QUESTION 14
A firm has an average age of inventory of 60 days, an average collection period of 45 days, and
an average payment period of 30 days. The firm’s cash conversion cycle is _________ days.
(a)  15
(b)  45
(c)  75
(d)  135

QUESTION 15
The Accept-Reject Decision is a fundamental decision in capital budgeting. Under this decision
a.   all dependent projects that meet the minimum investment criteria are executed  
b.   all attractive projects that look good should be accepted and implemented    
c.   all independent projects regardless of their flaws or attractions are selected      
       d.  all independent projects that satisfy minimum investment criteria are accepted

QUESTION 16
The master budget will comprise:
a. All the production, selling and cost budgets for the organisation
b. The cash budget, the budgeted profit and loss account and the budgeted balance sheet
c. The cash budget
d. The budgeted profit and loss account and the budgeted balance sheet

QUESTION 17
The term 'budgetary period' relates to:
a. The subdivisions of the main budget
b. The period for which the budget is prepared
c. A specific year for which the budget has been prepared
d. The period in which the budget is finalised

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