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ACC501 Solved MCQ's For Mid Term
(Lecture
1 to 18)
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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
ACC501 Solved MCQ's For Mid Term by Getready
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
ACC501 Solved MCQ's For Mid Term by Getready
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