ACC501Fundamentals of Auditing Management Online Solved Quizzes/MCQ's File No 1


1.The time between sale of inventory and collection of receivable.
a account receivable
b operation cycle
c inventory period
d none of above



6. Finance is vital for which of the following business activity (activities)?
A. Marketing Research
B. Product Pricing
C. Design of marketing and distribution channels
D. All of the given options
D. 
Finance is important for all departments of an organization. 

7. The most important item that can be extracted from financial statements is the actual ________ of the firm.
A. Net Working Capital
B. Cash Flow
C. Net Present Value
D. None of the given options
B.

8. 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?
A. 12%
B. 25%
C. 40%
D. 60%
C. 


Retention ratio = Net income – Dividend / Net income
= 250 – 150 / 250 = 0.4 or 40%

9. If a firm’s debt ratio is 45%, this means _____ of the firm’s assets are financed by equity financing.
A. 50%
B. 55%
C. 45%
D. Cannot be determined without more information
B. 
The equity portion plus the debt portion must add up to 100%
Debt ratio = Debt / Total Assets
45% = 45 / 45 + 55 
45% = 45%


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2. allow a bank to substitute its creditworthiness for the customer, for a fee is called___________-

a open bank account
b commercial draft
c promisory note
d  banker accetptance

3.Standard deviations for Investment A and Investment B are 25% and 12% respectively. This indicates that :
Select correct option:
Investment A is less volatile than Investment B
Investment B is equally volatile to Investment A
Investment A is more volatile than Investment BInvestment B is more volatile than Investment A

4. find the average 2%,5%,6%,8%
a 5%
b 5.25 %
c 6%
d 8%

14. In which type of business, all owners share in gains and losses and all have unlimited liability for all business debts?
A. Sole-proprietorship
B. General Partnership
C. Limited Partnerhsip
D. Corporation




15. Which of the following is measured by retention ratio?
A. Operating efficiency
B. Asset use efficiency
C. Financial policy
D. Dividend policy
D. 
Retention ratio determines how much amount of net income is retained for re-investment and how much is paid as dividend..

16. How many years will it take to pay off a Rs. 11,000 loan with a Rs. 1,241.08 annual payment and a 5% interest rate?
A. 6 years
B. 12 years
C. 24 years
D. 48 years

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17. Which one of the following terms refers to the risk arises for bond owners from fluctuating interest rates?
A. Fluctuations Risk
B. Interest Rate Risk 
C. Real-Time Risk
D. Inflation Risk


18. Which of the following set of ratios relates the market price of the firm's common stock to selected financial statement items?
A. Liquidity Ratios
B. Leverage Ratios
C. Profitability Ratios
D. Market Value Ratios



19. If a firm uses cash to purchase inventory, its quick ratio will:
A. Increase
B. Decrease
C. Remain unaffected
D. Become zero



20. Standard Corporation sold fully depreciated equipment for Rs.5,000. This transaction will be reported on the cash flow
statement as a(n):
A. Operating activity
B. Investing activity
C. Financing activity
D. None of the given options


1. Which of the following ratios are particularly interesting to short term creditors?
B. Long-term Solvency Ratios
C. Profitability Ratios
D. Market Value Ratios 

2. Financial policy is evaluated by which of the following?
A. Profit Margin
B. Total Assets Turnover
D. None of the given options
As this ratio determines how leveraged an organization is. Or how much an organization is relying on debt..

3. 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?
A. Sole-proprietorship
C. Corporation
D. None of the given options
Having more than 2 owners of a business entity is called “Partnership”. Having more than seven owners of a business entity is called corporation..
4. When the market's required rate of return for a particular bond is much less than its coupon rate, the bond is selling at:
B. Discount
C. Par
D. Cannot be determined without more information

If the bond's price is higher than its par value, it will sell at a premium because its interest rate is higher than current prevailing rates..

5. Which of the following statement is considered as the accountant’s snapshot of firm’s accounting value as of a particular date?
A. Income Statement
B. Balance Sheet
C. Cash Flow Statement
D. Retained Earning Statement
B. 

5 what is standard deviation of thise averages 2%,5%, 7%
6.As the dividend is always same for a zero growth stock, so the stock can also be viewed as
7.Which of the following statement shows revenue, expense, and net worth as of a specific date?
a balance sheet
b income statement
c cashflow
d none of above
8. which of the following character is not a systematic risk
market risk
interest risk
inflation risk
strike call in a company
9.  A company has a two director and 1 shareholder which hav 25 power of share the voter for director is
a 100
b150
c50
d25

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10.An investment will be _________ if the IRR doesn’t exceeds the required return and _________ otherwise.Select correct option:
Accepted; rejected
Accepted; accepted
Rejected; rejected
Rejected; accepted

11. Which of the following is the overall return the firm must earn on its existing assets to maintain the value of the stock?
Select correct option:
IRR (Internal Rate of Return)
MIRR (Modified Internal Rate of Return)
WACC (Weighted Average Cost of Capital) AAR (Average Accounting Return)

12. Which of the following is the return that firm’s creditors demand on new borrowings ?
Select correct option:
Cost of debt Cost of preferred stock
Cost of common equity
Cost of retained earnings

13.In which type of projects, the unequal lives of the projects do affect the analysis ?
Select correct option:
Mutually exclusive
Dependent
IndependentCorrelated

14.Mr. Naveed has bought 100 shares of a corporation one year ago at Rs. 23 per share. Over the last year, he received a dividend of Rs. 1.50 per share. At the end of the year, the stock sells for Rs. 31. As per given information, what will be his total percentage return ?
Select correct option:
10.63%
20.20%
35.12%
41.30%

15.Which of the following is known as the group of assets such as stocks and bonds held by an investor ?
Select correct option:
Stock Bundle
Portfolio
Capital Structure
None of the given options

16. Suppose the initial investment for a project is Rs. 16 million and the cash flows are Rs. 4 million in the first year and Rs. 9 million in the second and Rs. 5 million in the third. The project will have a payback period of:
Select correct option:
2.6 Years
3.1 Years
3.7 Years
4.1 Years

17. find the cash cycle  inventory period is 38 days account payabel period is 50 days and average accoun receivable period is 30 days
a.68
b 18
c 80
d 118
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

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The preferred stock of a company currently sells for Rs. 25 per share. The annual dividend of Rs. 2.50 is fixed. Assuming a constant dividend forever, what is the rate of return on this stock?
Select correct option:
5.00 percent
7.00 percent
8.45 percent
10.0 percent

The relationship between real and nominal returns is described by the:
Select correct option:
M&M Proposition
Capital Asset Pricing Model
Fisher’s Effect
BCG Matrix

An investment should be accepted if the Net Present Value (NPV) is __________ and rejected if it is ________.
Select correct option:
Positive; positive
Positive; negative
Negative; negative
Negative; positive
Which of the following form of business organization is least regulated?
Select correct option:
Sole-proprietorship
General Partnership
Limited Partnership
Corporation

In which of the following procedure of voting for a company’s directors, each shareholder is entitled to one vote per share?
Select correct option:
Straight Voting
Proportional Voting
Cumulative Voting
None of the given options
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
Mr. Aslam owns 100 shares of a company and there are four directors to be elected. How much votes Mr. Aslam would have as per cumulative voting procedure?
Select correct option:
100 votes
200 votes
300 votes
400 votes

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A given rate is quoted as 9 percent APR, but the EAR is 9.38 percent. What is the compounding period?
Select correct option:
Semiannually
Quarterly
Monthly
Daily
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

Between the two identical bonds having different coupon, the price of the ________ bond will change less than that of ________ bond.
Select correct option:
Higher-coupon; lower-coupon
Lower-coupon; higher-coupon
Long-term; short-term
None of the given options

Which of the following financial statement shows both dollars and percentages in the report?
Select correct option:
Balance Sheet
Common-Size Statement
Income Statement
Relative Statement of Equity

A ___________ is an agent who arranges security transactions among investors.
Select correct option:
Broker
Dealer
Member
Specialist

If a firm uses cash to purchase inventory, its quick ratio will:
Select correct option:
Increase
Decrease
Remain unaffected
Become zero

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In which type of the market, securities are originally sold to the investors?
Select correct option:
Primary Market
Secondary Market
Tertiary Market
None of the given options

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

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

How many Rs. 190 annual payments must be invested at 12% to accumulate Rs. 57,921?
Select correct option:
14
28
32
56 (doubt)

1. 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?
A. Ordinary annuity
B. Annuity due
C. Perpetuity
D. None of the given options
Ordinary annuity.

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3. The conflict of interest between stockholders and management is known as:
A. Agency problem
B. Interest conflict
C. Management conflict
D. Agency cost
Agency problem.

4. Which of the following form of business organization is least regulated?
A. Sole-proprietorship
B. General Partnership
C. Limited Partnership
D. Corporation
Sole-proprietorship.

5. Which of the following ratios are intended to address the firm’s financial leverage?
A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Asset Management Ratios
D. Profitability Ratios
Long Term Solvency Measures
· These ratios are intended to address the firm’s long-run ability to meet its obligations, or its financial leverage..

6. Balance Sheet is based upon which of the following formula?
A. Assets = Liabilities – Stockholder’s equity
B. Assets + Liabilities = Stockholder’s equity
C. Assets + Stockholder’s equity = Liabilities
D. Assets = Liabilities + Stockholder’s equity
Assets = Liabilities + Stockholder’s equity.
2. During the accounting period, sales revenue is Rs. 25,000 and accounts receivable increases by Rs. 8,000. What will be the amount of cash received from customers for the period?
A. Rs. 33,000
B. Rs. 25,000
C. Rs. 17,000
D. Rs. 8,000
Right Answer: 17,000

Ref: Amount of cash received = total revenue increased - account receivable increased
= 25,000 - 8000 = 17,000.

One would be indifferent between taking and not taking the investment when:
Select correct option:
NPV is greater than Zero
NPV is equal to Zero (doubt)
NPV is less than Zero
All of the given options
SNT Corporation has policy of paying a Rs. 6 per share dividend every year. If this policy is to continue indefinitely, what will be the value of a share of stock at a 15% required rate of return?
Select correct option:
Rs. 30
Rs. 40
Rs. 50
Rs. 60

21. A portion of profits, which a company distributes among its shareholders, is known as:
A. Dividends
B. Retained Earnings
C. Capital Gain
D. None of the given options

Which of the following is the difference between current assets and current liabilities?
Surplus Asset
Short-term Ratio
Working Capital
Question No: 2 ( Marks: 1 ) - Please choose one
Which of the following statement is considered as the summary of the effect of
revenues and expenses over a period of time?
Income Statement
Balance Sheet
Cash Flow Statement
Retained Earning Statement
Question No: 3 ( Marks: 1 ) - Please choose one
If sales revenue was Rs. 100,000 , accounts receivable decreased by R s.4,000, and inventory increased by Rs. 3,000, cash received from customers would be:
Rs. 107,000
Rs. 104,000
Rs. 101,000
Rs. 93,000

1.The time between sale of inventory and collection of receivable.
a account receivable
b operation cycle
c inventory period
d none of above

2. allow a bank to substitute its creditworthiness for the customer, for a fee is called___________-

a open bank account
b commercial draft
c promisory note
d  banker accetptance

3.Standard deviations for Investment A and Investment B are 25% and 12% respectively. This indicates that :
Select correct option:
Investment A is less volatile than Investment B
Investment B is equally volatile to Investment A
Investment A is more volatile than Investment B
Investment B is more volatile than Investment A


4. find the average 2%,5%,6%,8%
a 5%
b 5.25 %
c 6%
d 8%

5 what is standard deviation of thise averages 2%,5%, 7%
6.As the dividend is always same for a zero growth stock, so the stock can also be viewed as
7.Which of the following statement shows revenue, expense, and net worth as of a specific date?

a balance sheet
b income statement
c cashflow
d none of above
8. which of the following character is not a systematic risk
market risk
interest risk
inflation risk
strike call in a company
9.  A company has a two director and 1 shareholder which hav 25 power of share the voter for director is
a 100
b150
c50
d25

10.An investment will be _________ if the IRR doesn’t exceeds the required return and _________ otherwise.
Select correct option:
Accepted; rejected
Accepted; accepted
Rejected; rejected
Rejected; accepted

11. Which of the following is the overall return the firm must earn on its existing assets to maintain the value of the stock?
Select correct option:
IRR (Internal Rate of Return)
MIRR (Modified Internal Rate of Return)
WACC (Weighted Average Cost of Capital) 
AAR (Average Accounting Return)


12. Which of the following is the return that firm’s creditors demand on new borrowings ?
Select correct option:
Cost of debt 
Cost of preferred stock
Cost of common equity
Cost of retained earnings


13.In which type of projects, the unequal lives of the projects do affect the analysis ?
Select correct option:
Mutually exclusive
Dependent
Independent
Correlated


14.Mr. Naveed has bought 100 shares of a corporation one year ago at Rs. 23 per share. Over the last year, he received a dividend of Rs. 1.50 per share. At the end of the year, the stock sells for Rs. 31. As per given information, what will be his total percentage return ?
Select correct option:
10.63%
20.20%
35.12%
41.30%


15.Which of the following is known as the group of assets such as stocks and bonds held by an investor ?
Select correct option:
Stock Bundle
Portfolio
Capital Structure
None of the given options


16. Suppose the initial investment for a project is Rs. 16 million and the cash flows are Rs. 4 million in the first year and Rs. 9 million in the second and Rs. 5 million in the third. The project will have a payback period of:
Select correct option:
2.6 Years
3.1 Years
3.7 Years
4.1 Years


17. find the cash cycle  inventory period is 38 days account payabel period is 50 days and average accoun receivable period is 30 days
a.68
b 18
c 80

d 118




12. If you plan to save Rs. 5,000 with a bank at an interest rate of 8%, what will be the worth of your amount after 4 years if interest is compounded annually?
A. Rs. 5,400
B. Rs. 5,900
C. Rs. 6,600
D. Rs. 6,802
D. 
FV = PV * (1+ i) ^n
= 5,000 (1+0.08) ^4
= 6802

13. Which of the following statement is TRUE regarding debt?
A. Debt is an ownership interest in the firm.
B. Unpaid debt can result in bankruptcy or financial failure.
C. Debt provides the voting rights to the bondholders.
D. Corporation’s payment of interest on debt is fully taxable.
B. 

14. 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?
A. Rs. 300,000
B. Rs. 500,000
C. Rs. 800,000
D. Rs. 1100,000
C. 
Assets = Liabilities + Owner’s Equity
= 300,000 + 500,000
= 800,000

15. Which of the following measure reveals how much profit a company generates with the money shareholders have invested?
A. Profit Margin
B. Return on Assets
C. Return on Equity
D. Debt-Equity Ratio
C. 

16. If you have Rs. 850 and you plan to save it for 4 years with an interest rate of 10%, what will be the future value of your savings?
A. Rs. 1,000
C. Rs. 1,331
D. Rs. 1,464

FV = PV * (1+ i) ^n
= 850 * (1+0.1)^4
= 1244

17. In case of international business which of the given factor(s) must be considered?
A. Role of foreign exchange
B. Balance of payments
C. Attitude of Governments


18. Which of the following refers to the difference between the sale price and cost of inventory?
A. Net loss
B. Net worth
D. Markdown
Mark up/margin is the extra amount charged by business to it customer to earn profit. It’s the difference between sales price and cost.

19. Who of the following make a broader use of accounting information?
A. Accountants
B. Financial Analysts
C. Auditors
D. Marketers
B. 
20. Rule of 72 for finding the number of periods is fairly applicable
to which of the following range of discount rates?
A. 2% to 8%
B. 4% to 25%
D. 10% to 50%
This rule is fairly applicable to discount rates in 5% to 20% range. Finding the Number of Periods:.




7. Quick Ratio is also known as:
A. Current Ratio
B. Acid-test Ratio
C. Cash Ratio
D. None of the given options
Acid-test Ratio.

8. Which of the following is a special case of annuity, where the stream of cash flows continues forever?
A. Ordinary Annuity
B. Special Annuity
C. Annuity Due
D. Perpetuity
Perpetuity.

9. 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?
A. Rs. 1,000 because it has the higher future value
B. Rs. 1,000 because you receive it sooner
C. Rs. 1,050 because it is more money
D. Either because both options are of equal value
.
10. Which of the following ratios are particularly interesting to shortterm creditors?
A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Profitability Ratios
D. Market Value Ratios
Liquidity Ratios.

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1. AST Company has a current ratio of 4:3. Current Liabilities reported by the company are Rs. 30,000. What would be the Net Working Capital for the company?
A. Rs. 40,000
B. (–Rs. 40,000)
C. Rs. 10,000
D. (–Rs. 10,000)
C .
Current ratio = Current Assets / Current Liabilities
4:3 =? / 30,000
If 1/3 of 100% is 30,000 then .

2. In which form of Business, owners have limited liability.
A. sole proprietorship
B. partnership
C. joint stock company
D. none of the above
C .
Share holders of a company have the liability up to the number of shares purchased or amount invested only.

3. Which of the following item provides the important function of shielding part of income from taxes?
A. Inventory
B. Supplies
C. Machinery
D. Depreciation
D.
Depreciation expenses are deducted from net income for tax purpose..

4. The process of determining the present value of a payment or a stream of payments that is to be received in the future is known as:
A. Discounting
B. Compounding
C. Factorization
D. None of the given options
A.
Future value is discounted back at the given interest rate to find out the current worth of the amount to be received in future..

5. 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?
A. 8.42 years
B. 10.51 years
C. 15.75 years
D. 18.78 years
B.
Using financial calculator, Put PV =6000, Rate = 5%, FV, 10,000 and solve for Nper. 10.47 Close to the 10.51.

6. Which of the following equation is known as Cash Flow (CF)
identity?
A. CF from Assets = CF to Creditors – CF to Stockholder
B. CF from Assets = CF to Stockholders – CF to Creditors
C. CF to Stockholders = CF to Creditors + CF from Assets
D. CF from Assets = CF to Creditors + CF to Stockholder
D.
It’s the accounting equation
Assets = Liability + Equity.

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7. In which of the following type of annuity, cash flows occur at the beginning of each period?
A. Ordinary annuity
B. Annuity due
C. Perpetuity
D. None of the given options
A. 
Annuity due is paid at the end of the year that’s why its called annuity due..

8. Between the two identical bonds having different maturity periods, the price of the ______ bond will change less than that of ______ bond.
A. long-term; short-term
B. short-term; long-term
C. lower-coupon; higher-coupon
D. None of the given options
B. 
The longer the time to maturity, all else being equal, increases duration. Higher duration = higher sensitivity to interest rate changes.
Interest rates higher = price lower..

9. Which of the given area is NOT addressed by Business Finance?
A. Financing
B. Investing
C. Managing day today expenses
D. None of the given options1
D. 
All of the given areas are addressed by Business Finance..

10. Which of the following form of business organization is least regulated?
A. Sole-proprietorship
B. General Partnership
C. Limited Partnership
D. Corporation
A. 
They don’t have any obligation to be regulated according to business laws..

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11. Which of the following is measured by profit margin?
A. Operating efficiency 
B. Asset use efficiency
C. Financial policy
D. Dividend policy
A. 
Profit margin ratio is calculated to determine how efficiently the business is generating cash from operations (below taxes and interest).

12. A company having a current ratio of 1 will have ________ net working capital.
A. Positive
B. Negative
C. zero
D. None of the given options
C. 
NWC = CA – CL
If Current ratio = 1:1, its means assets are equal to liabilities.
So, net working capital is zero..

13. Business Finance addresses which of the following?
A. Capital budgeting
B. Capital structure
C. Working capital management
D. All of the given options
D. .



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