Made By Armaan Makhani

[email protected]
Date :25-11-2010
ACC 501 Quiz Conference lecture 1 to 18

1. Which of the following issue is NOT covered by “Investment” area of finance?

Select correct option:

Best mixture of financial investment

International aspects of corporate finance
Associated risks and rewards
Pricing financial assets

2. Period costs include which of the following?

Select correct option:

Selling expense
Raw material
Direct labor
Manufacturing overhead

3. Product costs include which of the following?

Select correct option:

Selling expenses
General expenses
Manufacturing overhead
Administrative expenses

4. Financial policy is evaluated by which of the following?

Select correct option:

Profit Margin
Total Assets Turnover
Debt-equity ratio
None of the given options

5. Cash flow from assets involves which of the following component(s)?

Select correct option:

Operating cash flow

Capital spending
Change in net working capital
All of the given options

6. Which of the following refers to the cash flows that result from the firm’s day-to-day
activities of producing and selling?
 Select correct option:

Operating Cash Flows

Investing Cash Flows
Financing Cash Flows
All of the given options

7. Finance is vital for which of the following business activity (activities)?

Select correct option:

Marketing Research
Product Pricing
Design of marketing and distribution channels
All of the given options

8. Which of the following costs are reported on the income statement as the cost of goods
sold?
Select correct option:

Product cost
Period cost
Both product cost and period cost
Neither product cost nor period cost

9. Standard Company had net sales of Rs. 750,000 over the past year. During that time,
average receivables were Rs. 150,000. Assuming a 365-day year, what was the average
collection period?
Select correct option:

5 days
36 days
48 days
73 days

750000/150000=5
365/5=73days

10. Which of the following terms refers to the use of debt financing?
Select correct option:

Operating Leverage
Financial Leverage
Manufacturing Leverage
None of the given options

11. In which type of market, new securities are traded?

Select correct option:

Primary market
 Secondary market
Tertiary market
None of the given options

12. Which of the following ratios are particularly interesting to short-term creditors?
Select correct option:

Liquidity Ratios
Long-term Solvency Ratios
Profitability Ratios
Market Value Ratios

13. shows the sources from which cash has been generated and how it has been spent
during a period of time?
Select correct option:

Income Statement
Balance Sheet
Cash Flow Statement
Owner’s Equity Statement

14. Standard Corporation sold fully depreciated equipment for Rs. 5,000. This transaction
will be reported on the cash flow statement as a(n):
Select correct option:

Operating activity
Investing activity
Financing activity
None of the given options

15. me: Quick Ratio is also known as:

Select correct option:

Current Ratio
Acid-test Ratio
Cash Ratio

16. of the following statement measures performance over a specific period of time?
Select correct option:

Income Statement
Balance Sheet
Cash Flow Statement
Retained Earning Statement

17. A portion of profits, which a company retains itself for further expansion, is known as:
Select correct option:

Dividends
 Retained Earnings
Capital Gain
None of the given options

18. Net Income after taxation differs from Net Cash Flow from operations because:
Select correct option:

Depreciation expense is shown in the Cash Flow Statement and not in the Income Statement
Non-cash items are included in the Income Statement, but not in the Cash Flow Statement
Cash sales are shown in the Cash Flow Statement but not in the Income Statement
Cash expenses are shown in the Cash Flow Statement but not in the Income Statement

19. Which of the following statement shows assets, liabilities, and net worth as of a specific
date?
Select correct option:

Income Statement
Balance Sheet
Owner’s Equity Statement
Cash Flow Statement

20. A portion of profits, which a company retains itself for further expansion, is known as:
Select correct option:

Dividends
Retained Earnings
Capital Gain
None of the given options

21. Which one of the following is NOT a liquidity ratio?

Select correct option:

Current Ratio
Quick Ratio
Cash Coverage Ratio
Cash Ratio

22. Which of the following ratio gives an idea as to how efficient management is at using its
assets to generate earnings?
Select correct option:
Profit Margin
Return on Assets
Return on Equity
Total Assets Turnover

23. Which of the following is an example of capital spending?

Select correct option:

Purchase of Fixed Assets

Decrease in Net Working Capital
Increase in Net Working Capital
None of the given options

24. Which of the following is measured by profit margin?

Select correct option:

Operating efficiency
Asset use efficiency
Financial policy
Dividend policy

25. Who of the following make a broader use of accounting information?

Select correct option:

Accountants
Financial Analysts
Auditors
Marketers

26. Which of the following set of ratios is used to assess a business's ability to generate
earnings as compared to its expenses and other relevant costs incurred during a specific
period of time?
Select correct option:

Liquidity Ratios
Leverage Ratios
Profitability Ratios
Market Value Ratios

27. A company having a current ratio of 1 will have __________ net working capital.
Select correct option:

Positive
Negative
zero
None of the given options

28. which of the following is not a form of business organization

Select correct option:

sole proprietorship
partnership
joint stock company
cooperative Society

29. Which of the following ratios are intended to address the firm’s financial leverage?
Select correct option:

Liquidity Ratios
Long-term Solvency Ratios
Asset Management Ratios
Profitability Ratios

30. The accounting definition of income is:

Select correct option:

Income = Current Assets – Current Liabilities

Income = Fixed Assets – Current Assets
Income = Revenues – Current Liabilities
Income = Revenues – Expenses

31. Which of the following item(s) is(are) not included while calculating Operating Cash
Flows?
Select correct option:

Depreciation
Interest
Expenses related to firm’s financing of its assets
All of the given options

32. Suppose market value exceeds book value by Rs. 250,000. What will be the after-tax
proceeds if there is a tax rate of 34 percent ?
Select correct option:

Rs. 105,600
Rs. 148,500
Rs. 165,000
Rs. 225,000
Solution=250000*34%=85000
250,000-85000=165000

33. When a corporation wishes to borrow from public on a long-term basis, it does so by
issuing or selling:
Select correct option:

Debt securities or bonds lec 17

Common Stocks
Preferred Stock
All of the given options

34. Which of the following set of ratios is used to assess a business's ability to generate
earnings as compared to its expenses and other relevant costs incurred during a specific
period of time?
Select correct option:

Liquidity Ratios
Leverage Ratios
Profitability Ratios
Market Value Ratios

35. In which type of market, used securities are traded?

Select correct option:

Primary market
Secondary market
Tertiary market
None of the given options

36. Who of the following make a broader use of accounting information?

Select correct option:

Accountants
Financial Analysts lec 2
Auditors
Marketers

37. Which of the following is (are) a non-cash item(s) ?

Select correct option:

Revenue
Expenses
Depreciation
All of the given options

38. What will be the coupon value of a Rs. 1,000 face-value bond with a 10% coupon rate?
Select correct option:

Rs. 100
Rs. 510
Rs. 1,000
Rs. 1,100

Solution:
=1000/10
=100

39. Which of the following comes under the head of discounted cash flow criteria for capital
budgeting decisions?
Select correct option:

Payback Period lec 28

Net Present Value
Average Accounting Return
None of the given options

40. Period costs include which of the following?

Select correct option:

Selling expense
Raw material
Direct labor
Manufacturing overhead

41. The value of net working capital will be greater than zero when:
Select correct option:

Current Assets > Current Liabilities

Current Assets < Current Liabilities
Current Assets = Current Liabilities
None of the given options

42. According to Du Pont Identity, ROE is affected by which of the following?

Select correct option:
Operating efficiency
Asset use efficiency
Financial Leverage
All of the given options
43. Which of the following issue is NOT covered by “Investment” area of finance?
Select correct option:
Best mixture of financial investment
International aspects of corporate finance
Associated risks and rewards
Pricing financial assets

44. Standard Corporation sold fully depreciated equipment for Rs. 5,000. This transaction
will be reported on the cash flow statement as a(n):
Select correct option:
Operating activity
Investing activity
Financing activity
None of the given options

45. Balance sheet for a company reports current assets of Rs. 700,000 and current liabilities
of Rs. 460,000. What would be the Current Ratio for the company if there is an
inventory level of Rs. 120,000?
Select correct option:
1.01
1.26
1.39
1.52
Solution= 700000/460000=1.52

46. In which type of business, all owners share in gains and losses and all have unlimited
liability for all business debts?
Select correct option:
Sole-proprietorship
General Partnership pg 6
Limited Partnerhsip
Corporation

47. a firm uses cash to purchase inventory, its current ratio will:
Select correct option:

Increase
Decrease
Remain unaffected
Become zero

48. Which of the following is a special case of annuity, where the stream of cash flows
continues forever?
Select correct option:

Ordinary Annuity
Special Annuity
 Annuity Due
Perpetuity

49. Which of the following is an example of positive covenant?

Select correct option:
Maintaining any collateral or security in good condition
Limiting the amount of dividend according to some formula
Restricting pledging assets to other lenders
Barring merger with another firm

50. Which of the following refers to the difference between the sale price and cost of
inventory?
Select correct option:
Net loss
Net worth
Markup
Markdown

51. Which of the following allows a company to repurchase part or all of the bond issue at a
stated price?
Select correct option:
Repayment
Seniority
Call provision
Protective covenants

52. ____________ shows the sources from which cash has been generated and how it has
been spent during a period of time?
Select correct option:
Income Statement
Balance Sheet
Cash Flow Statement
Owner’s Equity Statement

53. Which of the following is a cash flow from financing activity?

Select correct option:
Cash outflow to the government for taxes
Cash outflow to shareholders as dividends
Cash outflow to lenders as interest
Cash outflow to purchase bonds issued by another company

54. Which of the following form of business organization is least regulated?

Select correct option:
Sole-proprietorship
General Partnership
Limited Partnership
Corporation
 55. The principal amount of a bond at issue is called:
Select correct option:
Par value
Coupon value
Present value of an annuity
Present value of a lump sum

56. Which of the following relationships holds TRUE if a bond sells at a discount?
Select correct option:
Bond Price < Par Value and YTM > coupon rate
Bond Price > Par Value and YTM > coupon rate
Bond Price > Par Value and YTM < coupon rate
Bond Price < Par Value and YTM < coupon rate

57. When a corporation wishes to borrow from public on a long-term basis, it does so by
issuing or selling:
Select correct option:
Debt securities or bonds
Common Stocks
Preferred Stock
All of the given options

58. Which of the following item provides the important function of shielding part of income
from taxes?
Select correct option:

Inventory
Supplies
Machinery
Depreciation

59. A firm reports total liabilities of Rs. 300,000 and owner’s equity of Rs. 500,000. What
would be the total worth of the firm’s assets?
Select correct option:

Rs. 300,000
Rs. 500,000
Rs. 800,000
Rs. 1100,000
sol
Asset= liabilities+ capital so 300+500=800,000

60. Which of the following forms of business organizations is created as a distinct legal
entity owned by one or more individuals or entities?
Select correct option:
 Sole-proprietorship
General Partnership
Limited Partnership
Corporation

61. in which form of Business, owners have limited libility.

Select correct option:

sole proprietorship
partnership
joint stock company
none of the above

62. Which of the following equation is known as Cash Flow (CF) identity?
Select correct option:
CF from Assets = CF to Creditors – CF to Stockholder
CF from Assets = CF to Stockholders – CF to Creditors
CF to Stockholders = CF to Creditors + CF from Assets
CF from Assets = CF to Creditors + CF to Stockholder

63. The difference between current assets and current liabilities is known as:
Select correct option:
Surplus Asset
Short-term Ratio
Working Capital
Current Ratio

64. A borrower is able to pay Rs. 40,000 in 5 years. Given a discount rate of 12 percent,
what amount of money the lender should lend?
Select correct option:
Rs. 14,186
Rs. 18,256
Rs. 22,697
Rs. 28,253

solution

40000*1/(1+0.12)^5=22697.07

65. Which of the following statement is considered as the accountant’s snapshot of firm’s
accounting value as of a particular date?
Select correct option:
Income Statement
Balance Sheet
Cash Flow Statement
Retained Earning Statement
 66. The principal amount of a bond at issue is called:
Select correct option:
Par value
Coupon value
Present value of an annuity
Present value of a lump sum

67. Which of the following statement about bond ratings is TRUE?

Select correct option:
Bond ratings are typically paid for by a company’s bondholders.
Bond ratings are based solely on information acquired from sources other than the bond
issuer.
Bond ratings represent an independent assessment of the credit-worthiness of bonds.
None of the given options

68. Which of the following is the acronym for GAAP?

Select correct option:
Generally Applied Accountability Principles
General Accounting Assessment Principles
Generally Accepted Accounting Principles
General Accepted Assessment Principles

69. Which of the following is NOT an internal use of financial statements information?
Select correct option:
Planning for the future through historic information
Evaluation of performance through profit margin and return on equity
Evaluation of credit standing of new customer
None of the given options

70. A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000. What is
the retention ratio for the firm?
Select correct option:
12 %
25 %
40 %
60 %

Solution

Net income-dividend / net income *100

250000-150000/250000*100=40%

A company having a current ratio of 1 will have __________ net working capital.
Select correct option:

Positive
Negative
zero
None of the given options
 71. A portion of profits, which a company distributes among its shareholders, is known as:
Select correct option:

Dividends
Retained Earnings
Capital Gain
None of the given options

72. Which of the following is(are) the basic area(s) of Finance?

Select correct option:

Financial institutions
International finance
Investments
All of the given options

73. Which of the following ratios is NOT from the set of Asset Management Ratios?
Select correct option:

Inventory Turnover Ratio

Receivable Turnover
Capital Intensity Ratio
Return on Assets

74. You just won a prize, you can either receive Rs. 1000 today or Rs. 1,050 in one year.
Which option do you prefer and why if you can earn 5 percent on your money?
Select correct option:

Rs. 1,000 because it has the higher future value

Rs. 1,000 because you receive it sooner
Rs. 1,050 because it is more money
Either because both options are of equal value

75. Which of the following terms refers to the use of debt financing?
Select correct option:

Operating Leverage
Financial Leverage
Manufacturing Leverage
None of the given options
b
76. You need Rs. 10,000 to buy a new television. If you have Rs. 6,000 to invest at 5 percent
compounded annually, how long will you have to wait to buy the television?
Select correct option:

8.42 years
10.51 years
 15.75 years
18.78 years
6000(1+5%)^10.51=around 10,000

77. Which of the following is an example of positive covenant?

Select correct option:

Maintaining firm’s working capital at or above some specified minimum level

Furnishing audited financial statements periodically to the lender
Maintaining any collateral or security in good condition
Restricting selling or leasing assets

78. Which of the following is measured by retention ratio?

Select correct option:

Operating efficiency
Asset use efficiency
Financial policy
Dividend policy

79. Which of the following statement shows assets, liabilities, and net worth as of a specific
date?
Select correct option:

Income Statement
Balance Sheet
Owner’s Equity Statement
Cash Flow Statement
Armaan: b

80. Product costs include which of the following?

Select correct option:

Selling expenses
General expenses
Manufacturing overhead
Administrative expenses

81. An account was opened with an investment of Rs. 3,000 ten years ago. The ending
balance in the account is Rs. 4,100. If interest was compounded, how much
compounded interest was earned?
Select correct option:

Rs. 500
Rs. 752
Rs. 1,052
Rs. 1,100
4100-3000=1100

82. What is the effective annual rate of 7 percent compounded monthly?

Select correct option:

7.00 percent
7.12 percent
7.19 percent
7.23 percent

83. Which of the following cash flow activities are reported in the Cash Flow Statement and
Income Statement?
Select correct option:

Operating Activities
Investing Activities
Financing Activities
All of the given options

84. Which of the following term refers to establish of a standard to follow for comparison?
Select correct option:

Benchmarking 48
Standardizing
Comparison
Evaluation

85. Which of the following is measured by profit margin?

Select correct option:

Operating efficiency pg 44
Asset use efficiency
Financial policy
Dividend policy

86. Rule of 72 for finding the number of periods is fairly applicable to which of the
following range of discount rates?
Select correct option:

2% to 8%
4% to 25%
5% to 20%
10% to 50%

87. Which of the following refers to a conflict of interest between principal and agent?
Select correct option:

Management Conflict
 Interest Conflict
Agency Problem
None of the given options

88. Which of the following is a series of constant cash flows that occur at the end of each
period for some fixed number of periods?
Select correct option:

Ordinary annuity 63
Annuity due
Perpetuity
None of the given options

89. Which of the following area of finance deals with stocks and bonds?
Select correct option:

Financial institutions
International finance
Investments
All of the given options

90. 7:03 AM Which of the following is NOT an external use of financial statements
information?
Select correct option:

Evaluation of credit standing of new customer

Evaluation of financial worth of supplier
Evaluation of potential strength of the competitor
Evaluation of performance through profit margin and return on equity

91. Which of the following is(are) the basic area(s) of Finance?

Select correct option:

Financial institutions
International finance
Investments
All of the given options

92. If a firm has a ROA of 8 percent, sales of Rs. 100,000, and total assets of Rs. 75,000.
What is the profit margin?
Select correct option:

4.30%
6.00%
10.70%
16.73%
solution
Net income =ROA*total asset
Net income=8%*75000=6000
 Profit margin=net income/ sales*100
Profit margin=6000/100000*100= 6%

93. Which of the following is the process of planning and managing a firm’s long-term
investments?
Select correct option:

Capital Structuring
Capital Rationing
Capital Budgeting
Working Capital Management

94. Which of the following refers to the cash flows that result from the firm’s day-to-day
activities of producing and selling?
Select correct option:

Operating Cash Flows

Investing Cash Flows
Financing Cash Flows
All of the given options
95. Quick Ratio is also known as:
Select correct option:

Current Ratio
Acid-test Ratio
Cash Ratio
None of the given options

96. Mr. Y and Mr. Z are planning to share their capital to run a business. They are going to
employ which of the following type of business?
Select correct option:

Sole-proprietorship
Partnership
Corporation
None of the given options

97. If you have Rs. 30 in asset A and Rs. 120 in another asset B, the weights for assets A and
B will be __ and __ respectively.
Select correct option:

20%; 80%
37%; 63%
63%; 37%
80%; 20%

98. When corporations borrow, they generally promise to: I. Make regular scheduled
interest payments II. Give the right of voting to bondholders III. Repay the original
amount borrowed (principal) IV. Give an ownership interest in the firm
 Select correct option:
I and II
I and III
II and IV
I, III, and IV

99. Which of the following is NOT included in a bond indenture?

Select correct option:
The basic terms of bond issue
The total amount of bonds issued
A personal profile of the issuer
A description of the security
100. What would be the present value of Rs. 10,000 to be received after 6 years at a
discount rate of 8 percent?
Select correct option:

Rs. 6,302
Rs. 9,981
Rs. 14,800
Rs. 15,869
101. Which of the following statement is TRUE regarding debt?
Select correct option:

Debt is an ownership interest in the firm.

Unpaid debt can result in bankruptcy or financial failure.
Debt provides the voting rights to the bondholders.
Corporation’s payment of interest on debt is fully taxable.

102. The preferred stock of a company currently sells for Rs. 25 per share. The annual
dividend of Rs. 2.50 is fixed. Assuming a constant dividend forever, what is the rate of
return on this stock?
Select correct option:

5.00 percent
7.00 percent
8.45 percent
10.0 percent

103. Which of the following is a special case of annuity, where the stream of cash flows
continues forever?
Select correct option:

Ordinary Annuity
Special Annuity
Annuity Due
Perpetuity