QUIZ TO TEST LEARNING FROM THE ASS
1.
The key objective in financial management is to increase the:
(a)
(b)
(c)
(d)
2.
Effective financial management is indicated by the:
(a)
(b)
(c)
(d)
3.
attitude
lack of skills
marital inexperience
lack of knowledge
The financial manager deals with risk by:
(a)
(b)
(c)
(d)
6.
cash flow
return on equity
operating cash flow
SVA
Lack of creativity in financial management normally results from management's:
(a)
(b)
(c)
(d)
5.
overall health of the company
weight of the financial controller
profitability
high cash balance
For a "quoted" company, the key objective of financial management must always be to increase:
(a)
(b)
(c)
(d)
4.
liquidity of the business
amount of outside finance
long term value of the business
bonus of the CEO
avoiding it
providing for it at the level required by the chief executive
off-balance sheet financing
ignoring it
Control of working capital is the responsibility of the:
(a)
(b)
(c)
(d)
accountant
trade unions
all managers
finance manager
7.
Critical profit making factor of a business are important in financial management because they affect the:
(a)
(b)
(c)
(d)
8.
The critical skills of financial management are mainly:
(a)
(b)
(c)
(d)
9.
sources of finance
morale of the accountants
industry standards
key financial policies
accounting and pessimism
timing, relationships and creativity
accuracy and honesty
forecasting and astrology
The horizon of a CAPITAL INVESTMENT ANALYSIS project is normally:
(a)
(b)
(c)
(d)
the economic life of the project
the technical life of the project
simply a matter of management judgment
the tax life of the major asset
10. New investment in ... is usually very poorly controlled by management:
(a)
(b)
(c)
(d)
working capital
fixed assets
R&D
subsidiaries
11. Creative Accounting:
(a)
(b)
(c)
(d)
a method of accounting used in the advertising industry
a description given by chartered accountants to accounts prepared by anybody else
a work of classic art
an American expression for manipulating figures
12. To maintain credit from suppliers, a liquidity crisis:
(a)
(b)
(c)
(d)
pay on delivery
pay a little regularly to key suppliers
simply refuse to pay up
bring in the auditors, and blame them
13. Fixed assets are best financed by:
(a)
(b)
(c)
(d)
long term finance
equity
someone else
bank loans
14. The cheapest form of finance for working capital is normally:
(a)
(b)
(c)
(d)
field warehousing and theft
bank overdraft
convertible debentures
suppliers when discounts lost
15. Investment in inventory is high, therefore the financial manager must:
(a)
(b)
(c)
(d)
depend on the situation
cut the inventory
cut sales
defer payables
16. Extensive leasing of assets:
(a)
(b)
(c)
(d)
reduces costs
is a high contingent liability
is cheaper than purchase
makes the E:D ratio look worse
17. The equity: debt ratio:
(a)
(b)
(c)
(d)
must always be at least 2 : 1
depends on the attitude of the chief executive
indicates the "cushion" against loss by the creditors
is the same as the industry average
18. When sales expand:
(a)
(b)
(c)
(d)
more assets are not required with good WC management
generally more assets required
everybody is delirious
profits increase
19. In financial management what is more important, analysis of the past or forecasting of future cash flows:
(a)
(b)
(c)
(d)
analysis of the past
both equally
forecasting of future cash flows
neither
20. Factoring of receivables does not:
(a)
(b)
(c)
(d)
provide immediate cash flow
improve credit control
reduce profit margins
always damage company image
21. By not taking discount offered by suppliers on 2/10 days nett 30 day terms the cost of money is about:
(a)
(b)
(c)
(d)
24%
36%
8%
2%
22. Money borrowed short term until some form of long term finance is arranged is:
(a)
(b)
(c)
(d)
bridging finance
subordinated debt
a scam
a form of debenture
23. For management purposes, given only the following options, which would you choose:
(a)
(b)
(c)
(d)
profit figures three months old,
profit figures of recent origin prepared under pressure of time and accuracy
sales figures and bank account which are up to date
daily output in both physical and money terms
24. Operational cash flow is:
(a)
(b)
(c)
(d)
net profit plus depreciation
Earnings before interest and taxes (EBIT)
sales less cost of sales
EBIT less taxes and less changes in working capital and capital expenditure
25. For most companies, the health of a financial ratio is best related to:
(a)
(b)
(c)
(d)
financial managers
the weather
international standards
industry averages
26. SVA depends mainly upon:
(a)
(b)
(c)
(d)
reduced WC
the weather
dividend policy
new investment producing more than the cost of capital.
27. In financial management the cash balance is:
(a)
(b)
(c)
(d)
the unnatural result of doing business
the key to liquidity
the result of working capital management
too low
28. Cash forecasting is designed to show the:
(a)
(b)
(c)
(d)
29
cash balance in five years time
same as the balance sheet
peak and duration of cash requirements
impossibility of surviving in the modern world
The key overall test of liquidity is measured by the ratio of:
(a)
(b)
(c)
(d)
equity to debt
current assets to current liabilities
quick assets to quick liabilities
stocks on cash or credit
30. Equity base of a company should be kept:
(a)
(b)
(c)
(d)
as low as possible
as high as possible
higher than the payables
as a cushion for creditors against loss
31. Financial statements are more reliable when they are:
(a)
(b)
(c)
(d)
audited
absolutely correct
three years late
prepared for tax purposes
32. "Sales increase but inventory stays at about same level"
(a)
(b)
(c)
(d)
. This is:
true
always false
not usually true
irrelevant to WC management
33. Cost of capital is the:
(a)
(b)
(c)
(d)
cost of equity minus debt
arithmetic average of cost of equity and cost of debt
long term interest rate
weighted average of cost of equity and cost of debt
34. When you are asked to examine a set of annual accounts with a view to making a valuation for acquisition purposes
- the first thing to do is:
(a)
(b)
(c)
(d)
find out who audited the accounts, and
ask yourself - why does the other guy want to sell
see how much cash is in the bank
order a check on all the assets, and make a judgement on the quality of profits
35. Annual cash flow is:
(a)
(b)
(c)
(d)
the decrease in bank borrowings over the year
retained profits plus depreciation,
the amount of new cash received during the year
a Xmas party bonus
35. EVA is achieved when:
(a)
(b)
(c)
(c)
OCF is positive
Cost of Capital is low
Cost od Capital is high
OCF is negative
37. Balance Sheet
Liabilities &
Owner's Equity
OE
LTL
CL
10
2
10
Assets
FA
OCA
Cash
22
20
1
1
22
Which statement is the most appropriate:
a)
b)
c)
d)
current assets are too high
equity is too high
liquidity is poor
fixed assets are too high
Note:
OCA = Inventories and Accounts Receivable
FA
=
Fixed Assets
CA
=
Current Assets
LTL =
Long-term Liabilities
OE
=
Owner's Equity
DRS =
Debtors (receivables)
38.
Balance Sheet
Liabilities &
Owner's Equity
OE
LTL
CL
Assets
Yr.1
60
20
20
100
20
40
100
160
Yr.2
FA
Inv.
Drs.
Cash
Which statement is the most appropriate:
(a)
(b)
(c)
(d)
39.
EVA is a:
a)
b)
c)
d)
40.
the material increase is in fixed assets
there is probably poor control of debtors
sales manager is sick
there is poor use of long-term funds
new tax on added value
concept similar to cost of capital
measure of value created by a business
measure of return on equity
Which of the following is not a key EVA driver?
a)
b)
c)
d)
operating profit margin
working capital
cost od capital
level of inflation
Yr.1
40
30
20
10
Yr.2
50
30
80
-
100
160
41.
Balance Sheet
Liabilities &
Assets
Owner's Equity
Cash
OCA
FA
2
2
18
CL
LTL
OE
22
2
18
2
22
Which statement is the most appropriate:
a)
b)
c)
d)
42.
current liabilities are to low
owners equity is too low
long-term liabilities are adequate
fixed assets are too high for the other current assets
Balance Sheet
Assets:
FA `
OCA
Cash
Yr.1
Yr.2
4
5
1
18
5
1
10
24
CL
LTL
(2)
(2)
(4)
(4)
OE
6
16
Less:
Which statement is the most appropriate:
a)
b)
c)
d)
increase in current assets is financed by liabilities
increase in fixed assets is financed by liabilities
increase in fixed assets is financed by receivables
increase in fixed assets is financed by owners equity
43.
Balance Sheet
Liabilities &
Assets
Owner's Equity
OE
LTL
CL
Yr.1
6
2
2
Yr.2
13
2
12
10
27
Profit and Loss Account
Yr.1
Sales
20
GP
10
NP
4
FA
OCA
Cash
Yr.1
4
5
1
10
Yr.2
40
20
7
Which statement is the most appropriate:
a)
b)
c)
d)
44.
stock and debtors increase is financed by liabilities
stock and debtors increase is financed by equity and liabilities
stock and debtors increase is due to sales expansion
profit margins are increasing
Balance Sheet ... have a care now ....!
Assets
Yr.1 Yr.2
4
5
5
10
1
1
10
16
FA
OCA
Cash
Less:
CL
Net assets
(2)
8
(10)
6
OE
LTL 2
6
-
6
Financing
8
6
Which statement is the most appropriate
a)
b)
c)
d)
sales increase led to an increase in debtors and stock
cash balance is too low
liabilities are too high in relation to sales
significant increase in fixed assets is financed by liabilities
Yr.2
4
22
1
27
45.
Balance Sheet
Liabilities &
Owner's Equity
OE
LTL
CL -
Assets
22
-
FA
OCA
Cash
22
10
11
1
22
Which statement is the most appropriate:
a)
b)
c)
d)
46.
current assets are too high
SVA is too high
owners equity is too high
fixed assets are too high
Balance Sheet
Liabilities &
Owner's Equity
Assets
OE 10
LTL 2
CL 10
22
FA
OCA
Cash
18
2
2
22
Which statement is the most appropriate:
a)
b)
c)
d)
47.
long-term liabilities are too low for the cash
a FOREX or a DUREX problem
liquidity is satisfactory
owners equity is too low for fixed assets
Balance Sheet (Careful!)
Assets
Cash
OCA
FA
Liabilities & Owners Equity
1
20
1
22
CL
LTL
OE
Which statement is the most appropriate:
a)
b)
c)
d)
liquidity is OK
Owners equity is too low
current liabilities are well managed
LBO is the answer
20
2
22
48.
In the capital asset pricing model (CAPM) the Beta coefficient measures the:
a)
b)
c)
d)
49.
bankruptcy risk of the company
dividend yield
relative volatility of the company share price in relation to the stock market index.
ratio of market value to book value
Balance Sheet
Liabilities &
Owner's Equity
OE
LTL
CL
2
Assets
Yr.1
6
2
8
Yr.2
8
2
10
18
FA
OCA
Cash
Operating Statement
Sales
GP
NP
Yr.1
20
10
Yr.2
21
10
2
2
Which statement is the most appropriate:
a)
b)
c)
d)
stock and debtors are too high in relation to OE
stock and debtors are too high in relation to gross profit
margins are improving
stock and debtors are too high in relation to sales
Yr.1
4
5
1
10
Yr.2
5
10
3
18
50.
Balance Sheet
Liabilities &
Owner's Equity
OE
LTL
CL
Assets
Yr.1
60
20
20
Yr.2
60
140
40
100
240
Yr.1
100
40
20
Yr.2
150
60
30
FA
Stock
DRS
Cash
Yr.1
40
30
20
10
100
Yr.2
180
20
30
10
240
Yr.1
40
30
20
10
100
Yr.2
50
100
20
10
180
Income Statement
Sales
GP
NP
The material change between year I and II is:
a)
b)
c)
d)
51.
increase in sales
increase in fixed assets
SVA
reduction in profit margin
Balance Sheet
Liabilities &
Owner's Equity
OE
LTL
CL
Assets
Yr.1
60
20
20
Yr.2
65
20
95
100
180
FA
Stock
DRS
Cash
Which statement is the most appropriate:
a)
b)
c)
d)
52.
increase in fixed assets is financed by equity
increase in SVA
increase in stock is mainly financed by liabilities
increase in sales is mainly financed by the workers
Which of the following is never good security for a banker:
(a)
(b)
(c)
(d)
bills receivable
inventory
goodwill and reputation
accounts payable
53.
In responding to a loan request, the bank's first attention is whether the:
(a)
(b)
(c)
(d)
54.
In practice the main security for the bank loan is the:
(a)
(b)
(c)
(d)
55.
it is not ethical
the interest rate is too high
the bank may require payment if conditions broken
the bank will ask repayment "on demand"
Liquidation values are:
(a)
(b)
(c)
(d)
58.
they are inefficient
its bad for their image
they can't afford high interest rates
they may soon have higher losses
The best reason for not using a bank to finance the purchase of a fixed asset is because:
(a)
(b)
(c)
(d)
57.
cash in hand
face of the client
reputation of the customer
size of the safe
Banks do not like to lend to companies making losses because;
(a)
(b)
(c)
(d)
56.
client is an old one or a new one
amount is too high
security is adequate
purpose is legal
dependent upon the way assets are sold
more than book values
always stable but low
the same as book values
"If the company cannot repay the loan on demand then the bank has practical alternative but to liquidate the
company". This statement is:
(a) always true
(b) generally true
(c) not possible
(d) false
59.
A "company doctor" is a man who:
(a) gives medical treatment to staff
(b) treats the chief executive for financial ulcers
(c) is under contract for legal services
(d) something else
60.
If a banks sells a defaulting company it will often get a good price because it:
(a) can afford to wait
(b) can finance the purchase
(c) knows the buyer's reputation
(d) is on INTERNET
61.
In inflation the important factor for the banker in considering a bank loan increase is:
(a)
(b)
(c)
(d)
62.
Net profit plus depreciation is:
(a)
(b)
(c)
(d)
63.
cash flow
operating cash flow
funds flow
cost of capital for the year
Visit the bank manager when:
(a)
(b)
(c)
(d)
64.
payback
"gilt edge" security
age of the chief executive
government fiscal controls
you need a lot of money
you don;t need money yet
no-one else will lend the money you need
you need money desperately
If a company needs 80,000 but the bank lends only 40,000, then the bank is:
(a) unwise
(b) conservative and mean
(c) forgetful
(d) wise
65.
A large increase in payables is a:
(a) source of funds
(b) source of worry
(c) decrease in cash
(d) usually a good thing
66.
"The difference between sources and uses of funds, usually results in an increase or decrease in working capital".
This statement is:
(a) true
(b) unethical
(c) meaningless
(d) false
67.
Which of the following is not a source of funds:
(a)
(b)
(c)
(d)
68.
Cost of capital is:
(a)
(b)
(c)
(d)
69.
expanded credit from suppliers
sale of shares or stock
increase in "excess of the cost of investment in subsidiaries over its net book value"
borrowing from a bank
SVA
hurdle rate for new investment
EVA
cost of equity
In year I the net profit was 1000 (after depreciation of ;200). In year 2 the net profit was 950 (depreciation 300).
The change in the source of funds from profits in year 2 was:
(a) plus 1000
(b) plus 50
(c) minus 50
(d) no change from year 1
70.
Cash flow is the key to all except:
(a)
(b)
(c)
(d)
71.
Funds flow is used in financial management to show:
(a)
(b)
(c)
(d)
72.
sources and uses of cash
what to do now
key management decisions on fund sources and uses
needs for the next month
Cash flow forecasting is normally:
(a)
(b)
(c)
(d)
73.
SVA
cost of capital
EVA
liquidity
shorter in time than funds flow
briefer than funds flow
easier than funds flow
detailed
A difficult problem in financial management is to determine if the cash need is:
(a) exactly right
(b) short term or long term
(c) short term
(d) unreasonable
74.
How should we safely finance a long term capital project where profitability fluctuates considerably:
(a)
(b)
(c)
(d)
75.
supplier long term credit
off-shore companies
equity
bank loans
The parties who might be interested in financial reports are limited to:
(a)
(b)
(c)
(d)
management and shareholders
management, government and Commercial Crime Unit
management, government and bank
even more parties
QUIZ ANSWERS
1. c a d a b 6. c d b a a
11. d b a d a
16. b c b c d
21. b a b a d
26. d c c a d 31. a c d b c
36. a a b c d
41. b b a b c
46. d b c b d
51. c d a c d 56. c a d d b
61. d a b a a
66. a c b b c
71. c a b c d