Sample Question set - A&F Flashcards by Ramiro Cruz

Income is measured on the basis of which concept?

A. Entity concept
B. Accounting period concept
C. Going concern concept
D. Business entity concept

B. Accounting period concept

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Human resources will not appear in the balance sheet according to which concept?

A. Accrualconcept
B. Going concern concept
C. Money measurement concept
D. Business entity concept

C. Moneymeasurementconcept

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Fresh capital introduction will increase which from the given components?

A. AssetsandLiabilities
B. Assets and Equity
C. Liabilities and Equity and Bank Balance
D. Capitaland Liabilities

B. Assets and Equity

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Gopal is our debtor for Rs. 10,000. He became insolvent and only 60 paise in a Rupee is received from him. The balance of Rs. 4,000 would be entered to which account?

A. DebitdiscountA/c.
B. Credit discount A/c.
C. Debit bad debt A/c.
D. Credit bad debt A/c.

C. Debit bad debt A/c.

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Payment of Rs. 6,000 as wages to workmen for installation of a machine should be debited to which account?

A. WagesA/c.
B. Installation A/c.
C. Machinery A/c.
D. Repairs A/c.

C. Machinery A/c.

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Which of the following is recorded on the credit side of the Cash Book?

A. Credit Purchases
B. Salary paid
C. Dividend received
D. Cash Sales

B. Salary paid

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Certain resources are owned by the business with purpose of using it for generating future profit. What are they known as?

A. Capital
B. Asset
C. Liability
D. Surplus

B. Asset

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Where does Cash Account get classified under the golden rules of accounting principles?

A. Personal Account
B. Nominal Account
C. Real Account
D. Suspense Account

C. Real Account

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What is the difference between revenue received and cost of goods sold?

A. GrossProfit/Loss
B. Revenue
C. Cost of goods sold
D. Expenses

A. GrossProfit/Loss

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Total revenue from operations Rs.9,00,000; Cash revenue from operations Rs.3,00,000; Debtors Rs.1,00,000; B/R Rs.20,000. Debtors Turnover Ratio will be:

A. 5 Times
B. 6 Times
C. 7.5 Times
D. 9 Times

A. 5 Times

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Revenue from Operations Rs.6,00,000; Gross Profit 20%; Office Expenses Rs.30,000; Selling Expenses Rs.48,000. Calculate operating expense ratio.

A. 80%
B. 85%
C. 96%
D. 93%

D. 93%

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A firm has a capital of Rs. 10 lakhs, sales of Rs. 5 lakhs, gross profit of Rs. 2 lakhs and expenses of Rs. 1 lakh. What is the Gross Profit Ratio?

A. 0.5
B. 0.4
C. 0.2
D. 0.1

B. 0.4

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Which analysis is a system for determination of that level of activity where total cost equals total selling price?

A. Break even analysis
B. CVP analysis
C. Absorption costing
D. Marginal costing

A. Break even analysis

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15. What is the effect on total fixed cost if the level of activity increases by 20%?
A. Decreases by 20%
B. Increases by 20%
C. Increases by 40%
D. Does not change

D. Does not change

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Treasurers and Controllers are:

A. Financial Manager
B. CFO
C. CEO
D. CFO and CEO

A. Financial Manager

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17. Which concept of increasing the value of a business in order to increase the value of the shares?
A. Profit maximization
B. Wealth maximization
C. BothProfitandWealth
D. Neither Profit nor wealth

B. Wealth maximization

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What is Long Term Investment decision also referred to?

A. Working capital
B. Liquidity
C. Capital budgeting
D. Capital rationing

C. Capital budgeting

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The difference between present value of cash inflows and present value of cash outflows

A. Gross present value
B. Net Working Capital
C. Net present value
D. Fair Market Value

C. Net present value

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The process of finding the present value is the reverse of finding the?

A. Intrinsic Value
B. Nominal value
C. Future Value
D. Fair Value

C. Future Value

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If an organization deals with several products, its break-even point can be calculated with the help of:

A. Cash BEP
B. Composite BEP
C. Cost BEP
D. Simple BEP

B. Composite BEP

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The Excel function for calculating the present value of a single future cash flow is as follows: = P V (rate, nper, pmt, fv, type),. What does pmt stand for?

A. The recurring cash flow
B. The number of payment periods
C. The future value of the cash flow
D. The rate of interest

A. The recurring cash flow

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The cost of an equipment amounted to Rs 240,000 and the salvage value of Rs 30,000 at the end of 10 years. The annual cash flow amount to Rs 30,000. Compute the payback period.

A. 10 Years
B. 5 Years
C. 8 Years
D. 7 Years

C. 8 Years

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25. What is the formula to calculate Weighted Average Cost of Capital?
A. kc = kd - Wd + ke ∗ We
B. kc= kd+ Wd+ ke∗We
C. kc= kd- Wd- ke∗We
D. kc = kd ∗ Wd + ke ∗ We

D. kc = kd ∗ Wd + ke ∗ We

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26. Which factor is in favor of using more of debt capital?
A. Tax advantage
B. Debt equity norms
C. Leverage effect
D. Security of assets

Study These Flashcards

A. Tax advantage

``` 27. The tax benefit is present in which of the following sources of capital : A. Cost of Equity B. Cost of Debt C. Cost of Preference Shares D. Cost of Retained Earnings ```

B. Cost of Debt

``` 28. Which net working capital will arise when current liabilities exceed current assets? A. Positive B. Excessive C. Negative D. Summative ```

C. Negative

29. The firm’s investment in current assets is also referred by what? A. Zero working capital B. Gross working capital C. Net working capital D. Distinctive working capital

B. Gross working capital

``` 30. Which of these is not a suggestive Working Capital financing options? A. Factoring B. Line of Credit C. Invoice Discounting D. Long-term loan against fixed assets ```

D. Long-term loan against fixed assets

``` 1. Which is the first book of entry? A. Ledger B. Journal C. Subsidiary book D. Trial balance ```

B. Journal

``` 2. 'The loyalty of workers being intangible cannot be quantified, and thus the same can find no place in the books of accounts'. This is an example of which accounting principle? A.Money measurement concept B. Separate Business Entity C. Cost concept D. Matching concept ```

A.Money measurement concept

``` 3. What is the independent accounting body based in London, known as? A. ICAI B. ASB C. IASB D. GAAP ```

C. IASB

``` 4. What is the collective process of recording, processing, classifying, and summarizing the business transactions in financial statements is known as? A. Accounting period B. Accounting Cycle C. Accounting equation D. Book-keeping cycle ```

B. Accounting Cycle

5. What is the golden rule of nominal account? A. Debit the receiver, credit the giver B. Debit what comes in, credit what goes out C. Debit all expenses and losses, credit all incomes and gains D. Debit all incomes and gains, credit all expenses and losses

C. Debit all expenses and losses, credit all incomes and gains

``` 6. Which is the secondary book of accounts in which all the business transactions would ultimately find their place under various accounts in a duly classified form? A. Ledger B. Journal C. Subsidiary Book D. Trial Balance ```

A. Ledger

``` 7. Which date? is a statement containing all ledger accounts' debit and credit balances on a particular A. Ledger B. Journal C. Subsidiary Book D. Trial Balance ```

D. Trial Balance

``` 8. A firm bought a machinery for Rs.38,000 on 1-4-2019 and its life was estimated to be 8 years. Its break up value at the end of the period was Rs.6,000. Find out the amount of Depreciation. A. Rs.4,000 B. Rs.2,000 C. Rs.3,000 D. Rs.1,000 ```

A. Rs.4,000

``` 9. Which book maintains the record of banks deposits and withdrawals? A. Pass book B. Cash book C. Purchase book D. Sales book ```

A. Pass book

10. Which statement is a summary of banking and business activity that reconciles an entity’s bank account with its financial records? A. Financial Statement B. Bank Reconciliation Statement C. Financial statement and Bank Reconciliation Statement D. Neither financial statement nor Bank Reconciliation Statement

B. Bank Reconciliation Statement

11. In cash book, bank charges of Rs.5,000 was not recorded. Name the correct cash book adjustment. A. It will be credited in cash book B. It will be debited in cash book C. No adjustment needed in the cash book D. Charges will be added to the cash book balance

A. It will be credited in cash book

Which of the following statements are true about Ratio Analysis? A) Ratio analysis is useful in financial analysis. B) Ratio analysis is helpful in communication and coordination. C) Ratio Analysis is not helpful in identifying weak spots of the business. D) Ratio Analysis is helpful in financial planning and forecasting. A. A,B and D B. A, C and D. C. A,B and C D. A,B,C and D

A. A,BandD

13. Which of the following is not true about ratio analysis? A. It is affected by price level changes B. It is difficult to evolve a standard ratio C. It can give false and misleading results D. It is not useful in iter-firm and intra-firm comparison

D. It is not useful in iter-firm and intra-firm comparison

``` 14. Which ratio is computed to determine the rate at which the amount is collected from the debtors? A. Inventory turnover ratio B. Working capital turnover C. Quick ratio D. Debtors turnover ratio ```

D. Debtors turnover ratio

``` 15. Which ratio is calculated on the basis of elements drawn from either the Trading or Profit and Loss Account, like Gross Profit Ratio, etc.? A. Accounting ratio B. Income statement ratio C. Balance Sheet ratio D. Composite ratio ```

B. Income statement ratio

``` 16. Which ratios are calculated on the basis of elements which belong both to the Trading and Profit and Loss Account as well as to the Balance Sheet, like Debtors Turnover Ratio, etc.? A. Accounting ratios B. Income statement ratios C. Balance Sheet ratios D. Composite ratios ```

D. Composite ratios

17. From the following information, find out P/V Ratio. Fixed Cost = Rs.40,000; Profit = Rs.20,000; and BEP = Rs.80,000 A. 25% B. 50% C. 75% D. 40%

B. 50%

``` 18. Which analysis is a system for determination of that level of activity where total cost equals total selling price? A. Break Even analysis B. CVP analysis C. Absorption costing D. Marginal costing ```

A. Break Even analysis

19. A student wants to save money in order to pay for his college fees after a few years. In order to have an increase in the future value of the amount, he should check that the interest rate should be flexible and change. How should the interest rate change? A. It should increase over time B. It should decreases over time C. It should first increase and then decrease over time D. It should first decrease and then increase over time

A. It should increase over time

``` 20. Assume that a development bank issues bonds to raise funds of value Rs.20,00,000. If the bank has the lump sum bond liability after 10 years with interest at the rate of 10%, what is the annual amount the bank needs to save as sinking fund to fulfil the requirement after 10 years? (Note: FVIFA10%, 10 = 15.937) A. Rs.2,00,000 B. Rs.2,25,494 C. Rs.1,25,494 D. Rs.1,00,000 ```

C. Rs.1,25,494

21. Which of the following statements is most correct? A. The future value of an annuity due is greater than an otherwise identical ordinary annuity. B. A reduction in the discount rate will increase the future value of an otherwise identical cash flow stream. C. Continuous compounding will result in a higher present value relative to an otherwise identical investment that is compounded monthly at the same nominal rate. D. The FVIFA (i%, N periods) equals the sum of the PVIF (i%, n) for n=1 to N periods.

A. The future value of an annuity due is greater than an otherwise identical ordinary annuity.

``` 22. A firm needs to raise funds for a new market expansion. Which of the following is considered to costliest source of funds? A. Equity share capital B. Retained earnings C. Long-term loans D. Preference share capital ```

A. Equity share capital

23. A firm following is a CORRECT statement regarding a firm's Weighted Average Cost of Capital (WACC)? is evaluating its market value with respect to the capital structure. Which one of the A. An increase in the market risk premium will tend to decrease a firm's WACC B. A 5 percent increase in a firm's debt-equity ratio will tend to increase the firm's WACC C. A reduction in the risk level of a firm will tend to increase the firm's WACC D. The WACC can be used as the required return for all new projects with similar risk to that of the existing firm

D. The WACC can be used as the required return for all new projects with similar risk to that of the existing firm

``` 24. How do the firms refer to the minimum rate of return to be earned in order to satisfy its investor? A. Average Return on Investment B. Weighted Average Cost of Capital C. Net Profit ratio D. Average Cost of Lending ```

B. Weighted Average Cost of Capital

25. Which of the following statements is NOT TRUE about working capital management? A. Gross working capital is an amount invested in total asset of an enterprise B. Working capital management is concerned with management of capital C. Working capital management looks into raising of funds for day-to-day activities D. Shortage of working capital reduces return on investment

A. Gross working capital is an amount invested in total asset of an enterprise

``` 26. A firm has a total sales of Rs.1,00,000 which includes cash sales of Rs.20,000. If the total of bills receivable and debtors is Rs.11,000; what is the Average Aollection Period of debtors, in closest number of days, for the firm? (Assume number of days in a year = 365) A. 55 days B. 50 days C. 40 days D. 2655 days ```

B. 50 days

27. When a company decides to raise funds by issuing long term securities, which among the following is TRUE regarding the offer price of a company’s security? A. Offer price of a company’s security is usually discussed under Capital Budgeting B. Offer price of a company’s security is usually discussed under Capital Structure C. Offer price of a company’s security is usually discussed under Working Capital Management D. Offer price of a company’s security is usually discussed under Marketing Management

B. Offer price of a company’s security is usually discussed under Capital Structure

``` 28. Operating profit (EBIT) of the firm is Rs.4,50,000. The contribution is recorded as Rs.7,00,000. If the Financial leverage of the firm is found out to be 1.125, what is the Combined Lleverage of the firm? A. Combined Leverage = 17.4 B. Combined Leverage = 1.74 C. Combined Leverage = 7.2 D. Combined Leverage =0.72 ```

B. Combined Leverage = 1.74

``` 29. If a firm wants to pay dividends, which one of the following is NOT a a very good reason for paying dividends? A. Investor preference for dividends B. Information signaling C. Temporary excess cash D. Clientele effect ```

C. Temporary excess cash

``` 30. For any dividend decision, the firm needs to finalize the proportion of earnings that are paid to common shareholders in the form of a cash dividend. What is this proportion referred to as? A. Retention rate B. 1 plus the retention rate C. Growth rate D. Dividend payout ratio ```

D. Dividend payout ratio

Sample Question set - A&F Flashcards

(58 cards)