10+ Questions and Answers About Finance

Questions
NAME :
CLASS :
DATE :

1. Which ONE of the following is a cost control?
A pricing policy B expense minimisation
C sales objectives D sales mix

2. Which of the following is a type of short-term external source of funds?
A mortgages B leasing
C overdraft D debentures

3. What is ONE method of controlling current liabilities?
A having a tight policy on allowing trade credit
B selling accounts receivable at a discount
C making interest and loan repayments on time
D offering discounts for cash and early payment

4. Which term refers to the extent to which the current assets of a business exceed the current liabilities of that business?
A profitability B liquidity
C solvency D growth

5. A company issues shares directly to investors,usually an institution, rather than making a public offering.
What type of equity finance is this?
A placement B new issue
C rights issue D share purchase plan

6. What is the role of the Australian Securities Exchange (ASX)?
A to make markets for the sale and purchase of shares
B to regulate the operation of companies
C to investigate breaches of the Corporations Act
D to supervise the banking system

7. Which ONE of the following relates to the ability of a business to pay its debts as they fall due?
A profitability B growth
C efficiency D liquidity

8. Bill’s Building Supplies has sold goods totaling $50 000 to a number of builders on 90 days’ credit. The business now finds that it has a short-term cash flow problem. What is the appropriate solution to this problem?
A negotiate a term loan with a finance company
B sell the debts and lease them back
C sell the accounts receivable to a finance company
D extend trade credit to the builders

9. Which financial institution is most likely to issue debentures as a method of raising finance?
A investment bank B unit trust
C superannuation fund D public company

10. Which ONE of the following items would be found in the income statement of a business?
A accounts payable B equipment
C investments D gross profit

11. A business has current liabilities of $200 000 million and current assets of $250 000 million.
Which of the following statements correctly describes the position of the business?
A The business has a current ratio of 0.8:1 and does not have a liquidity problem
B The business has a current ratio of 1.25:1 and has a liquidity problem
C The business has a current ratio of 0.8:1 and has a liquidity problem
D The business has a current ratio of 1.25:1 and does not have a liquidity problem

12. Which of the following is a characteristic of equity finance?
A The finance must be repaid at a future date
B Suppliers of finance have no rights of ownership over the business
C Suppliers of finance have prior claim on assets in the event of liquidation
D The returns to the suppliers of finance are called dividends

13. The managers of a business pursue an objective of having adequate cash flow. What possible conflict of objectives can result from this action?
A a conflict between the objectives of profitability and growth
B a conflict between the objectives of efficiency and growth
C a conflict between managers and shortterm creditors of the business
D a conflict between managers and shareholders of the business

Answer Key
1. b 2. c 3. c 4. c
5. a 6. a 7. d 8. c
9. d 10. d 11. d 12. d
13. d

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