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This set of Management Accounting Multiple Choice Questions & Answers (MCQs) focuses on Analysis & interpretation of financial statement Set 2

Q1 | Operating ratio is calculated by
  • (operating cost/gross sales) *100
  • (operating cost/net sales) *100
  • none of the above
Q2 | The financial decision making that relates to current assets or short term asset is known as__________________.
  • working capital
  • non-working capital
  • venture capital
  • all of the above
Q3 | In what order should current assets be present on a statement of financial position?
  • cash, bank, trade receivables, inventories
  • trade receivables, bank, cash, inventories
  • inventories, cash, bank, trade receivables
  • inventories, trade receivables, bank, cash
Q4 | If value of opening inventories increases, what happens to the value of gross profit?
  • decreases
  • increases
  • stays the same
  • gets closer to net profit
Q5 | What does the statement of comprehensive income show?
  • the liquidity position of a business at a point in time
  • the value of assets bought by a business over a period point in time
  • the profit or loss made by a business over a period of time
  • the value of a business at a point in time
Q6 | Depreciation is applied to non-current assets in the statement of financial position in order to
  • show a profitability valuation of the non-current assets
  • show a true and fair value of the non-current assets
  • show how the non-current assets are affected by inflation
  • show what the non-current assets could make if leased out
Q7 | What would be the most likely impact on trade receivables days if invoice discounting wasoffered to and accepted by a large customer of a business?
  • trade receivables days would no longer exist
  • trade receivables days would reduce
  • trade receivables days would increase
  • trade receivable days would not be affected
Q8 | ___________in accounting, is when the costs to acquire an asset are expensed over the life ofthat asset rather than in the period it was incurred?
  • purchasing.
  • capitalization.
  • selling.
  • financing
Q9 | Capitalization is the sum of a corporation’s stock, long term debts &________?
  • liquid liability
  • retained earnings
  • fixed asset.
  • short term debts.
Q10 | __________ is a situation in which actual profits of a company are not sufficient enough topay interest on debentures, on loans and pay dividends on shares over a period of time?
  • under capitalization
  • over capitalization
  • market capitalization
  • none of the above
Q11 | Asset structure = _________+__________.
  • current asset+fixed asset
  • tangible asset+fixed asset
  • fixed asset+current asset
  • intangible asset+current asset
Q12 | In finance, "working capital" means the same thing as __________.
  • total assets.
  • fixed assets.
  • current assets.
  • current assets minus current liabilities.
Q13 | In deciding the appropriate level of current assets for the firm, management is confrontedwith_____________.
  • a trade-off between profitability and risk.
  • a trade-off between liquidity and marketability.
  • a trade-off between equity and debt.
  • a trade-off between current assets and profitability.
Q14 | Permanent working capital ___________.
  • varies with seasonal needs.
  • includes fixed assets.
  • is the amount of current assets required to meet a firm\s long-term minimum needs.
  • includes accounts payable.
Q15 | Net working capital refers to ___________.
  • total assets minus fixed assets.
  • current assets minus current liabilities.
  • current assets minus inventories.
  • current assets.
Q16 | To financial analysts, "gross working capital" means the same thing as ________.
  • fixed assets.
  • current assets.
  • working capital.
  • cost of capital.
Q17 | An example of fixed asset is________.
  • live stock.
  • value stock.
  • income stock.
  • all of the above.
Q18 | Which one of the following is not the determinant of the working capital?
  • size of the firm
  • operating cycle
  • terms of credit
  • competitors
Q19 | Permanent working capital ___
  • will vary at all times
  • will vary with volumes
  • fixed at all times
  • fluctuates according to the season
Q20 | Which one of the following is not a method to find working capital requirement?
  • percent of sales method
  • working capital components method
  • operating cycle method
  • physical method
Q21 | The Capital used for meeting routine and repetitive expenses of day to day businessoperations is called____.
  • reserve capital
  • working capital
  • fixed capital
  • regular capital
Q22 | Gross working capital represents __________.
  • total current liabilities
  • the excess of current assets over current liabilities
  • total current assets
  • total liquid assets
Q23 | Net working capital is the excess of current assets over ________.
  • current liabilities
  • long term liabilities
  • contingent liabilities
  • fixed liabilities
Q24 | A positive (net) working capital will arise when current assets exceed _________.
  • fixed liabilities
  • contingent liabilities
  • long term liabilities
  • current liabilities
Q25 | The net working capital, being the difference between current assets and current liabilities isa _______.
  • misleading concept
  • quantitative concept
  • qualitative concept
  • none of the above