Financial Management Set 11

Bachelor of Business Administration (BBA),

Master of Commerce (M.com),

Bachelor of Accounting and Finance (BAF),

Bachelor of Business Administration in Finance (BBA Finance),

Cost Accounting

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This set of Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Financial Management Set 11

Q1 | Payment to creditors is a manifestation of cash held for:
  • Transactionery Motive,
  • Precautionary Motive,
  • Speculative Motive,
  • All of the above.
Answer: Transactionery Motive,
Q2 | If the closing balance of receivables is less than the opening balance for a month thenwhich one is true out of
  • Collections>Current Purchases,
  • Collections>Current Sales,
  • Collections
  • Collections < Current Sales.
Answer: Collections>Current Sales,
Q3 | If the average balance of debtors has increased, which of the following might notshow a change in general?
  • Total Sales,
  • Average Payables
  • Current Ratio
  • Bad Debt loss
Answer: Average Payables
Q4 | Securitization is related to conversion of
  • Receivables,
  • Stock,
  • Investments,
  • Creditors.
Answer: Receivables,
Q5 | 80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8.What is the Average collection period (360 days a year) and Average Debtors of the firm?
  • 45 days and 1,00,000
  • 360 days and 1,00,000,
  • 45 days and 8,00,000
  • 360 days and 1,25,000
Answer: 45 days and 1,00,000
Q6 | In response to market expectations, the credit pence r j been increased from 45 days to60 days. This would result in
  • Decrease in Sales,
  • Decrease in Debtors,
  • Increase in Bad Debts,
  • Increase in Average Collection Period.
Answer: Increase in Average Collection Period.
Q7 | If a company sells its receivable to another party to raise funds, it is known as
  • Securitization
  • Factoring,
  • Pledging
  • None of the above.
Answer: Factoring,
Q8 | Cash Discount term 3/15, net 40 means
  • 3% Discount if payment in 15 days, otherwise full payment in 40 days,
  • 15% Discount if payment in 3 days, otherwise full payment 40 days,
  • 3% Interest if payment made in 40 days and 15%,interest thereafter,
  • None of the above.
Answer: 3% Discount if payment in 15 days, otherwise full payment in 40 days,
Q9 | If the sales of the firm are . 60,00,000 and the average debtors are . 15,00,000 thenthe receivables turnover is
  • 4 times
  • 25%
  • 400%
  • 0.25 times
Answer: 4 times
Q10 | If cash discount is offered to customers, then which of the following would increase?
  • Sales
  • Debtors
  • Debt collection period
  • All of the above
Answer: Sales
Q11 | Receivables Management deals with
  • Receipts of raw materials
  • Debtors collection,
  • Creditors Management
  • Inventory Management
Answer: Debtors collection,
Q12 | Which of the following is related to Receivables Management?
  • Cash Budget
  • Economic Order Quantity,
  • Ageing schedule
  • All of the above.
Answer: Ageing schedule
Q13 | EOQ is the quantity that minimizes
  • Total Ordering Cost
  • Total Inventory Cost,
  • Total Interest Cost
  • Safety Stock Level
Answer: Total Ordering Cost
Q14 | ABC Analysis is used in
  • Inventory Management
  • Receivables Management
  • Accounting Policies,
  • Corporate Governance.
Answer: Inventory Management
Q15 | If no information is available, the General Rule for valuation of stock for balancesheet is
  • Replacement Cost
  • Realizable Value,
  • Historical Cost
  • Standard Cost
Answer: Historical Cost
Q16 | In ABC inventory management system, class A items may require
  • Higher Safety Stock
  • Frequent Deliveries
  • Periodic Inventory system
  • Updating of inventory records.
Answer: Higher Safety Stock
Q17 | Inventory holding cost may include
  • Material Purchase Cost
  • Penalty charge for default,
  • Interest on loan,
  • None of the above
Answer: None of the above
Q18 | Use of safety stock by a firm would
  • Increase Inventory Cost
  • Decrease Inventory Cost,
  • No effect on cost
  • None of the above
Answer: Increase Inventory Cost
Q19 | Which of the following is true for a company which uses continuous review inventorysystem
  • Order Interval is fixed
  • Order Interval varies,
  • Order Quantity is fixed
  • Both (a) and (c)
Answer: Order Quantity is fixed
Q20 | ABC Analysis is useful for analyzing the inventories:
  • Based on their Quality
  • Based on their Usage and value
  • Based on Physical Volume
  • All of the above
Answer: Based on their Usage and value
Q21 | If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit perannum, then EOQ
  • (2AO/C) 2
  • 2AO/C
  • 2A÷OC
  • 2AOC
Answer: 2AO/C
Q22 | Inventory is generally valued as lower of
  • Market Price and Replacement Cost
  • Cost and Net Realizable Value
  • Cost and Sales Value
  • Sales Value and Profit.
Answer: Cost and Net Realizable Value
Q23 | Which of the following is not included in cost of inventory?
  • Purchase cost
  • Transport in Cost,
  • Import Duty,
  • Selling Costs.
Answer: Selling Costs.
Q24 | Cost of not carrying sufficient inventory is known as
  • Carrying Cost
  • Holding Cost
  • Total Cost
  • Stock-out Cost
Answer: Stock-out Cost
Q25 | Which of the following is not a benefit of carrying inventories
  • Reduction in ordering cost,
  • Avoiding lost sales,
  • Reducing carrying cost,
  • Avoiding Production Shortages.
Answer: Reducing carrying cost,
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