Finance Quiz

pavanrachakonda9
Quiz by pavanrachakonda9, updated more than 1 year ago
pavanrachakonda9
Created by pavanrachakonda9 over 6 years ago
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Description

Exam on Finance

Resource summary

Question 1

Question
Which of the following would not improve the Current ratio ?
Answer
  • Borrow short term to finance additional fixed assets
  • Issue long-term debt to buy inventory
  • Sell common stock to reduce current liabilities
  • Sell fixed assets to reduce accounts payable

Question 2

Question
ABC had sales last year of $265 million, including cash sales of $25 million. If its average collection period was 36 days, its ending accounts receivable balance is closest to
Answer
  • $26.1 million
  • $23.7 million
  • $7.4 million
  • $18.7 million

Question 3

Question
Which of the following statements (in general) is correct
Answer
  • The higher the tax rate for a firm, the lower the interest coverage ratio
  • The lower the total debt-to-equity ratio, the lower the financial risk for a firm
  • An increase in net profit margin with no change in sales or assets means a poor ROI
  • A low receivables turnover is desirable

Question 4

Question
Debt-to-total assets (D/TA) ratio of XYZ is .4. What is its debt-to-equity (D/E) ratio
Answer
  • 0.2
  • 0.6
  • 0.667
  • 0.333

Question 5

Question
Cash 10,000 Accounts Receivable 30,000 Inventory 80,000 Prepaid Insurance 6,000 Long Term Assets 200,000 Accounts Payable 30,000 Wages Payable 5,000 Long Term Liabilities 70,000 Equity 196,000 What is the Working capital of the company
Answer
  • 91000
  • 85000
  • 221000
  • None

Question 6

Question
A company had Sales (all on credit) of $830,000 and Cost of Goods Sold of $525,000. At the beginning of the year its Accounts Receivable were $80,000 and its Inventory was $100,000. At the end of the year its Accounts Receivable were $86,000 and its Inventory was $110,000. What is the inventory turnover ratio for the year
Answer
  • 4.8
  • 5.0
  • 7.9

Question 7

Question
What does an increasing collection period for accounts receivable suggest about a firm's credit policy
Answer
  • The firm is probably losing qualified customers
  • The credit policy may be too lenient
  • The collection period has no relationship to a firm's credit policy
  • The credit policy is too restrictive

Question 8

Question
Operating Income does not include
Answer
  • Research and Development
  • Cost of Goods Sold
  • Interest paid
  • Depriciation

Question 9

Question
A company XYZ has a loan of 10,000, Sales of 1,00,000, Days sales outstanding of 36.5, Accounts payable of 5,000 and a Net block of 25,000. What is its Net worth (Considering all sales are in credit)
Answer
  • 15,000
  • 20,000
  • 25,000
  • 30,000

Question 10

Question
In a balance sheet Unearned Revenue fall under ___________ and prepaid Expenses fall under____________
Answer
  • Liabilities, Assets
  • Liabilities, Liabilities
  • Assets, Liabilities
  • Assets, Assets

Question 11

Question
Cash - 500, Accounts Receivable - 200, Net Block - 100, Goodwill - 20, Accounts Payable - 100, Accrued Liabilities - 100, Long term Debt - 100, Quick ratio - 4.5. What is the inventory value
Answer
  • 100
  • 150
  • 200
  • 250

Question 12

Question
A company PK has the following structure to their shareholders Equity. Equity at par (10 rupees each) - 1000, Retained Earnings - 900, Share premium - 100, Revaluation Reserve - 100. What is the maximum dividend that can be paid with the existing structure
Answer
  • 9
  • 10
  • 11
  • 12

Question 13

Question
A company ABC is considering to pay a stock dividend then which among the mentioned increases and decreases respectively.
Answer
  • Equity at par value, Revaluation Reserve
  • Revaluation Reserve, Share premium Reserve
  • Share premium Reserve, Retained Earnings
  • Retained Earnings, Equity at par value

Question 14

Question
A gain or loss that is unusual and infrequent is considered as
Answer
  • Discontinued operation
  • Extraordinary item
  • Change in accounting principle
  • None

Question 15

Question
Assets are usually mentioned on the balance sheet at what price
Answer
  • Current market value
  • Cost
  • Expected selling price
  • none

Question 16

Question
The primary objective of the matching principle is to
Answer
  • provide timely information to external decision makers
  • provide full disclosure
  • recognize expenses in the same period as the related revenue
  • All the above

Question 17

Question
Basic earnings per share is calculated as
Answer
  • (Net income - dividends) / Weighted Average no. shares outstanding
  • (Net income - preferred dividends) / Weighted Average no. shares outstanding
  • Net income / common shares outstanding
  • None

Question 18

Question
Which of the following is not a current asset
Answer
  • Accumulated depriciation
  • Accounts Receivable
  • Notes Receivable
  • Inventory

Question 19

Question
A firm is purchased for more than fair value of its assets the excess is
Answer
  • written off against the retained earnings on the balance sheet
  • treated as an extraordinary item
  • considered as goodwill
  • considered as a loss in the Income statement

Question 20

Question
As a general rule, revenue is normally recognized when it is
Answer
  • measurable and received
  • measurable and earned
  • realizable and earned
  • realizable and received

Question 21

Question
The company has procured Furniture worth 500 and Vehicle worth 200 on 1st April 2005. The net block of a company is as follows (Written down value method) 31st Mar 2005 Furniture - 1000 Land - 1500 Building - 1800 Vehicle - 2000 31st Mar 2006 Furniture - 1200 Land - 1200 Building - 1620 Vehicle - 1650 If no other assets are purchased during the year what is the Net block on 31st Mar 2007
Answer
  • 4570
  • 4860
  • 4620
  • 4760

Question 22

Question
Which one of these actions might improve gross profit but increase overheads
Answer
  • Increase the shareholder dividend by 10%
  • Negotiate better prices from a supplier
  • Higher advertising for a new product
  • Increase selling price by 5%

Question 23

Question
In Which among the following circumstances may result in increase of gross profit and decrease in gross margin
Answer
  • Major suppliers agree better purchase prices
  • Problems with quality require greater reworking of output
  • Slow moving stocks are sold at a significant discount
  • Sales of low margin products are replaced with high margin ones

Question 24

Question
A firm makes a gross profit of 550,000, and has overheads of 250,000. If the interest costs are 25,000 and a tax of 20% is payable, What is the PAT
Answer
  • 300,000
  • 220,000
  • 275,000
  • 178,000

Question 25

Question
If during the accounting period the assets increased by 5000 and the owners equity increased by 1000, then liabilities must have
Answer
  • increased by 6000
  • increased by 4000
  • decreased by 6000
  • decreased by 4000

Question 26

Question
A firm has a lower asset turnover ratio than the industry average, which implies
Answer
  • The firm is less likely to avoid insolvency in the short run than other firms in the industry
  • The firm is less profitable than other firms in the industry
  • The firm has lower spending on new fixed assets than other firms in the industry
  • The firm is utilizing assets less efficiently than other firms in the industry

Question 27

Question
Which one of the following lists are the Current Liabilities of a company
Answer
  • Accounts Payable, Notes Payable, Accrued Expenses and Income Taxes Payable
  • Accounts Payable, Notes Payable, Accrued Expenses and Prepaid Expenses
  • Accounts Payable, Notes Payable, Accrued Expenses but not Income Taxes Payable
  • Accounts Payable, Notes Payable, Income Taxes Payable but not Accrued Expenses

Question 28

Question
Which is correct about Preferred Stock
Answer
  • It is reserved only for preferred customers or investors
  • It is always worth more than common stock
  • It has priority over common stock in the event of the dissolution of the company
  • It cannot be owned by full time employees of the company

Question 29

Question
What will be the operating profit and retained earnings for the company with the below mentioned information Sales=10,000 , COGS=6,000 , SG&A=1,000 , Depreciation=500 , Interest=100, Income Tax=100 , Extraordinary Expense=300 , Dividends=100
Answer
  • 2500,1900
  • 2500,2300
  • 2000,2000
  • 2000,2200
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