HSC Business Studies 2000-2015 - Finance Questions

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Question 1 of 78

What is a source of new capital for a public company?

Select one of the following:

Primary market of the Australian Securities Exchange
Secondary market of the Australian Securities Exchange
Primary market of the Australian Securities and Investment Commission
Secondary market of the Australian Securities and Investment Commission

Explanation

Question 2 of 78

What is a characteristic of external equity finance?

Select one of the following:

Specific maturity date
Low interest payments
Fixed returns to owners
Diluted business ownership

Explanation

Question 3 of 78

What is the net profit ratio (net profit ÷ sales) for 2014?

Select one of the following:

Explanation

Question 4 of 78

Which of the following describes the change in gross profit ratio and expense ratio from 2014 to 2015?

Select one of the following:

Explanation

Question 5 of 78

A business is planning to increase its market share by merging with a competitor.
What financial objective does this best illustrate?

Select one of the following:

Growth
Liquidity
Profitability
Solvency

Explanation

Question 6 of 78

Which of the following would be found on an income statement?

Select one of the following:

Accounts payable
Gross profit
Intangibles
Net assets

Explanation

Question 7 of 78

Why would a business choose debentures as a source of funding?

Select one of the following:

To reduce financial risk
To provide security over assets
To retain ownership and control
To obtain cheap, short-term finance

Explanation

Question 8 of 78

Which of the following statements is true about liquidity for Kerry's Warehouse in 2014?

Select one of the following:

It is better than industry average and has improved since 2013.
It is better than industry average and has worsened since 2013.
It is worse than industry average and has improved since 2013.
It is worse than industry average and has worsened since 2013.

Explanation

Question 9 of 78

Which of the following statements is true about gearing for Kerry's Warehouse in 2014?

Select one of the following:

It is better than industry average and has improved since 2013.
It is better than industry average and has worsened since 2013.
It is worse than industry average and has improved since 2013.
It is worse than industry average and has worsened since 2013.

Explanation

Question 10 of 78

What does the expense ratio measure?

Select one of the following:

Efficiency
Growth
Profitability
Solvency

Explanation

Question 11 of 78

Which of the following would immediately improve the working capital of a business?

Select one of the following:

Increasing credit sales
Using sale and lease back
Preparing a cash flow statement
Repaying debt to creditors more quickly

Explanation

Question 12 of 78

Which of the following would improve the financial position of a business?

Select one of the following:

Lower current ratio and lower accounts receivable turnover ratio
Higher current ratio and lower accounts receivable turnover ratio
Lower current ratio and higher accounts receivable turnover ratio
Higher current ratio and higher accounts receivable turnover ratio

Explanation

Question 13 of 78

Auditors have discovered that the value of legal fees paid has been included in the asset value of a new warehouse purchased by a business.
What limitation of financial reports does this show?

Select one of the following:

Capitalised expenses
Debt repayments
Normalised earnings
Timing issues

Explanation

Question 14 of 78

What would be the best strategy for a business to increase its gross profit?

Select one of the following:

Use cost centres
Reduce fixed costs
Minimise expenses
Use sale and leaseback

Explanation

Question 15 of 78

Which of the following groups would suffer the worst financial impact as a result of an increase in the value of the Australian dollar?

Select one of the following:

Japanese shareholders of an Australian bank
Australian producers selling wine to New Zealand
Australian car makers purchasing inputs from Italy
American travel agents organising tours for Australians

Explanation

Question 16 of 78

Compared to the industry averages, this business has

Select one of the following:

better solvency and better liquidity.
better solvency and poorer liquidity.
poorer solvency and better liquidity.
poorer solvency and poorer liquidity.

Explanation

Question 17 of 78

How is the role of the Reserve Bank of Australia best described?

Select one of the following:

It provides loans to small businesses.
It provides insurance services for farmers.
It facilitates the buying and selling of shares.
It oversees the stability of the financial system.

Explanation

Question 18 of 78

What does a cash flow statement show?

Select one of the following:

Assets
Liquidity
Profitability
Receivables

Explanation

Question 19 of 78

What is a derivative?

Select one of the following:

An agreement to buy a foreign currency at an agreed price on some day in the
future
An assessment of the reliability of a customer’s capacity to make timely payments
A method of protecting the business against seizure of its assets by a foreign
government
A method of payment that allows a buyer to gain access to goods immediately and
promise to pay later

Explanation

Question 20 of 78

In 2010 an Australian company bought products from the USA.
If the Australian dollar rises in value against the US dollar before the payment is made, which of the following would be true?

Select one of the following:

The company’s credit risk will increase.
The cost of insuring the product will increase.
The purchase price of the product will be greater
The company will have more funds available for other uses.

Explanation

Question 21 of 78

Which of the following are BOTH external sources of funds for a business?

Select one of the following:

Bank loan, mortgage
Retained profits, leasing
Owner’s Equity, mortgage
Retained profits, factoring

Explanation

Question 22 of 78

What might happen as a result of a company having highly undervalued plant and
equipment on its balance sheet?

Select one of the following:

Asset stripping
Growth in equity
Capital expansion
Factoring of liabilities

Explanation

Question 23 of 78

A business uses factoring to pay creditors.
Which financial objective is the business trying to achieve?

Select one of the following:

Efficiency
Liquidity
Profitability
Solvency

Explanation

Question 24 of 78

An Australian business is negotiating an order with a new overseas customer. Which method of payment would involve the greatest risk for the Australian business?

Select one of the following:

Open account
Letter of credit
Bill of exchange
Payment in advance

Explanation

Question 25 of 78

How has the financial position of the business changed from 2008 to 2009?

Select one of the following:

Reduced solvency and increased risk
Reduced solvency and decreased risk
Improved solvency and increased risk
Improved solvency and decreased risk

Explanation

Question 26 of 78

What is the net profit ratio (net profit /sales) in 2008?

Select one of the following:

Explanation

Question 27 of 78

Which statement describes how the financial position of Danok Ltd changed between 2008 and 2009?

Select one of the following:

Gross profit ratio is unchanged and the expense ratio has improved.
Gross profit ratio has increased and the expense ratio has decreased.
Gross profit ratio has decreased and the expense ratio is unchanged.
Gross profit ratio has improved and the expense ratio has increased.

Explanation

Question 28 of 78

What is ONE use of a cash flow statement for management?

Select one of the following:

To negotiate finance
To identify new markets
To determine the value of intangibles
To calculate depreciation of non-current assets

Explanation

Question 29 of 78

A business aims to increase its sales from $160 000 to $300 000 over the next 12 months. How might the business achieve this?

Select one of the following:

By increasing advertising
By decreasing owners’ equity
By increasing mortgage repayments
By decreasing the size of the research team

Explanation

Question 30 of 78

One example of managing the sales mix for revenue control is to

Select one of the following:

set sales objectives to achieve target profits.
judge a manager’s performance against sales.
determine a pricing policy for each product sold.
decide which range of products to offer customers.

Explanation

Question 31 of 78

Oz Juice signed a contract with an overseas supplier for future purchases of pineapples at a set exchange rate for $US. Which term best describes this financial strategy?

Select one of the following:

Hedging
Insurance
Bill of exchange
Overseas borrowing

Explanation

Question 32 of 78

Which of the following best matches source of finance to business purpose?

Select one of the following:

Increasing bank overdraft to buy a delivery van
Applying for a government grant to pay creditors
Using retained earnings to expand into new markets
Selling accounts receivable to replace furniture and fittings

Explanation

Question 33 of 78

Which of the following are external sources of funds for businesses?

Select one of the following:

Grants, debentures, leasing, mortgage
Venture capital, loans, drawings, factoring
Accounts payable, owners’ equity, leasing, discounts
Bank overdraft, retained profits, factoring, bank bills

Explanation

Question 34 of 78

A business sells its accounts receivable to improve cash flow.
Which of the following best describes this strategy?

Select one of the following:

Factoring
Equity financing
Sale and lease back
Accounts receivable turnover

Explanation

Question 35 of 78

Which statement best describes the changed financial position?

Select one of the following:

Solvency has declined and profitability has increased from 2006 to 2007.
Profitability has decreased and solvency has improved from 2006 to 2007.
The expense ratio has improved and is closer to the industry average in 2007 than in 2006.
Solvency in 2007 is better than industry average and the expense ratio has improved from 2006.

Explanation

Question 36 of 78

What may have contributed to the change in the expense ratio?

Select one of the following:

Increase in cash
Increase in purchases
Decrease in drawings
Decrease in interest rates

Explanation

Question 37 of 78

The financial manager of a furniture company has determined that improving turnover of accounts receivable will be the goal for the next financial year. Which objective is the financial manager aiming to improve?

Select one of the following:

Efficiency
Liquidity
Profitability
Solvency

Explanation

Question 38 of 78

What is the main role of the Australian Stock Exchange?

Select one of the following:

Conducting a public market in shares and debentures
Buying and selling securities in Australian businesses
Providing prudential supervision of financial institutions
Ensuring investors create economic growth and employment prospects

Explanation

Question 39 of 78

What is the current ratio (current assets/current liabilities)?

Select one of the following:

0.33:1
1.25:1
1.5:1
3:1

Explanation

Question 40 of 78

What is the gearing ratio (total liabilities/owner's equity)?

Select one of the following:

1.25:1
1.33:1
1.5:1
2:1

Explanation

Question 41 of 78

Which of the following is an advantage of using owner’s equity as a source of funds?

Select one of the following:

The owner’s unproductive assets are liquidated.
There is no change of ownership as funding is internal.
The business can make tax savings in periods of high inflation.
The business is able to sustain prolonged periods of operating losses.

Explanation

Question 42 of 78

A clothing retailer places an order for goods from an overseas supplier for delivery within one month. The retailer negotiates to pay the account at the exchange rate existing at the time the order is placed.
Which of the following is the retailer doing?

Select one of the following:

Hedging
Factoring
Cushioning the economic cycle
Engaging in foreign direct investment

Explanation

Question 43 of 78

What is the value of the gross profit ratio (gross profit/sales)?

Select one of the following:

1:12
1:6
1:4
1:1.33

Explanation

Question 44 of 78

What is the return on owner’s equity (net profit/total equity)?

Select one of the following:

8.3%
12.5%
37.5%
150%

Explanation

Question 45 of 78

In which two months might Nic’s Cafe experience a liquidity problem?

Select one of the following:

October and November
November and December
November and January
December and January

Explanation

Question 46 of 78

Which of the following strategies would be most appropriate to solve this liquidity problem at Nic’s Cafe?

Select one of the following:

Issue debentures
Obtain a mortgage
Seek venture capital
Apply for an overdraft

Explanation

Question 47 of 78

Domestic interest rates in Australia are below those of its trading partners. The Aussie Hat Company has borrowed funds to service the debt of an overseas subsidiary.
Which of the following will be the impact of this financial strategy?

Select one of the following:

Increased gearing & Improved solvency
Increased gearing & Reduced solvency
Reduced accounts payable & Improved owner's equity
Reduced accounts payable & Reduced owner's equity

Explanation

Question 48 of 78

JJ’s Wool Company is considering purchasing 48% of shares in Hunter Cotton Ltd. Audited accounts show that the plant and equipment of Hunter Cotton Ltd are under-valued. JJ’s Wool Company hopes to profit if Hunter Cotton Ltd buys back the shares to maintain control of its company. Which of the following lists two ethical aspects that JJ’s Wool Company should consider?

Select one of the following:

Asset stripping and lease back
Asset stripping and corporate raiding
Inappropriate cut-off periods and misuse of funds
Inappropriate cut-off periods and corporate raiding

Explanation

Question 49 of 78

Which of the following statements is correct?

Select one of the following:

Net profit ratios compare favourably with the industry average.
There has been an improvement in the expense ratio from 2003 to 2004.
The expense ratio in 2004 compares favourably with the industry average.
Each of the profitability ratios indicates performance below industry averages.

Explanation

Question 50 of 78

Which of the following global changes could explain the increase in the 2004 expense ratio for Zahra’s Coffee Imports Pty Ltd?

Select one of the following:

A depreciation of the Australian dollar
An appreciation of the Australian dollar
Widespread dumping of coffee due to excess supply
A new free trade agreement with one of the countries supplying this company

Explanation

Question 51 of 78

Which of the following ratios would Mitchell use to determine if his firm was using its resources to ensure it can meet its financial commitments in the longer term?

Select one of the following:

Gross profit
Debt to equity
Return on owners’ equity
Accounts receivable turnover

Explanation

Question 52 of 78

An online supermarket business has decided to lease delivery vehicles rather than purchase them. What is the purpose of this strategy?

Select one of the following:

To limit the capital costs of the business
To ensure that only new vehicles are used
To minimise the long-term costs of vehicles to the business
To avoid the registration and insurance costs of vehicle ownership

Explanation

Question 53 of 78

Calculate the value of Retained Profits.

Select one of the following:

0
15 000
25 000
50 000

Explanation

Question 54 of 78

Correct Printing has decided to use an overdraft facility to purchase an additional printing machine.
How would this affect the Balance Sheet?

Select one of the following:

Increase Owners’ Equity and decrease Cash at Bank
Increase Current Liabilities and increase Non-current Assets
Decrease Cash at Bank and increase Non-current Assets
Decrease Retained Profits and increase Non-current Assets

Explanation

Question 55 of 78

In 1989, an Australian company purchased a building in the USA for $US200 000 to store the products it distributes in the USA. The purchase was financed by a Federal Government export grant.
Which ratio from the 2004 financial reports is affected by the historical cost method of accounting for this purchase?

Select one of the following:

Expense
Working capital
Return on owners’ equity
Accounts receivable turnover

Explanation

Question 56 of 78

Which of the following would best describe the role of a merchant bank?

Select one of the following:

To monitor the activities of publicly-listed companies
To act as banker and financial agent to the federal government
To provide borrowing and lending services, primarily to the business sector
To provide loans to the corporate sector through receipts of insurance premiums

Explanation

Question 57 of 78

Which of the following statements describes the performance of Acrid Waste Services?

Select one of the following:

Debt to Equity Ratio is below the industry average
Debt to Equity Ratio exceeds the industry average
Working Capital Ratio exceeds the industry average
Working Capital Ratio is equal to the industry average

Explanation

Question 58 of 78

Which statement best describes the situation represented in the graph?

Select one of the following:

Year 1 was a period of decreasing expenses and Year 2 was a period of increasing expenses
Year 1 was a period of increasing expenses and Year 2 was a period of decreasing expenses
Year 1 was a period of improved sales performance and Year 2 was a period of increasing expenses.
Year 1 was a period of improved sales performance and Year 2 was a period of decreasing expenses.

Explanation

Question 59 of 78

A cash-flow statement for a retail business would include which of the following?

Select one of the following:

Cash sales
Credit purchases
Credit sales
Receivables

Explanation

Question 60 of 78

The General Manager of Yeo Enterprises meets with directors once a month to compare actual and planned financial performance.
Which of the following best describes this management process?

Select one of the following:

Controlling
Organising
Planning
Staffing

Explanation

Question 61 of 78

Staple Stationery Supplies decides to use factoring to improve cash flow.
This strategy would involve which of the following?

Select one of the following:

Selling accounts receivable to a collection agency
Selling goods on credit but with a specified date for payment
Selling the factors of production for cost, plus a small mark-up
Selling unused factory equipment to make up for the short-fall in cash flow

Explanation

Question 62 of 78

A balance sheet includes which of the following?

Select one of the following:

Expenses
Intangibles
Return on owners’ equity
Sales

Explanation

Question 63 of 78

How would the Australian tourism industry be affected by a fall in the value of the Australian dollar compared to other currencies?

Select one of the following:

Increased numbers of Australians travelling overseas and decreased numbers of overseas visitors to Australia
Increased numbers of Australians travelling overseas and increased numbers of overseas visitors to Australia
Decreased numbers of Australians travelling overseas and increased numbers of overseas visitors to Australia
Decreased numbers of Australians travelling overseas and decreased numbers of overseas visitors to Australia

Explanation

Question 64 of 78

What is the function of management that involves comparing sales figures for a financial period to the forecast of sales for the same period?

Select one of the following:

Collecting market research data
Comparing cash and credit sales
Implementing financial plans
Monitoring the achievement of marketing plans

Explanation

Question 65 of 78

What is the variable cost of producing 3000 units?

Select one of the following:

$0
$500
$1000
$3000

Explanation

Question 66 of 78

What is the net profit from selling 6000 units?

Select one of the following:

$500
$1000
$1500
$2000

Explanation

Question 67 of 78

Which of the following statements about the efficiency of Abix International Ltd is correct?

Select one of the following:

The expense ratio has improved while the accounts receivable turnover ratio has deteriorated.
The expense ratio has improved and the accounts receivable turnover ratio has also improved
The expense ratio has deteriorated while the accounts receivable turnover ratio has improved.
The expense ratio has deteriorated and the accounts receivable turnover ratio has also deteriorated.

Explanation

Question 68 of 78

What is the value of the Cost of Goods Sold for Jack’s Computer Services Pty Ltd?

Select one of the following:

$250
$500
$2500
$3000

Explanation

Question 69 of 78

The Gross Profit Ratio has increased from 40% in 2001 to 60% in 2002, while revenue and expenses remained the same. What was the net profit or loss in 2001?

Select one of the following:

$750 net loss
$500 net loss
$750 net profit
$2000 net profit

Explanation

Question 70 of 78

Which of the following is an example of long-term borrowing?

Select one of the following:

Bank bills
Grants
Mortgage
Overdraft

Explanation

Question 71 of 78

Which of the following best indicates the solvency of a business?

Select one of the following:

Current ratio
Expense ratio
Net profit ratio
Debt to equity ratio

Explanation

Question 72 of 78

Which strategy could a business use to effectively manage receivables?

Select one of the following:

Offering discounts for early payment
Increasing the price of the product
Taking out a short-term loan
Increasing its overdraft

Explanation

Question 73 of 78

Which of the following best describes hedging?

Select one of the following:

Using transfer pricing between subsidiaries
Minimising the effects of the global business cycle
Protecting against fluctuating exchange rates
Reducing credit risks on international transactions

Explanation

Question 74 of 78

Which of the following would be an effective management strategy to improve the long-term profitability of a business?

Select one of the following:

Altering the credit terms to ensure early payment of receivables
Improving the efficiency of cost centres
Selling of non-productive assets
Factoring of accounts receivable

Explanation

Question 75 of 78

Which of the following methods of payment represents the least level of risk for exporters?

Select one of the following:

Bill of exchange
Letter of credit
Open account
Pre-payment

Explanation

Question 76 of 78

Which of the following has been a consequence of deregulation of financial markets?

Select one of the following:

An increase in the use of fixed exchange rates
An increase in foreign direct investment
Greater influence of trading blocs
Increased mobility within international labour markets

Explanation

Question 77 of 78

Which of the following is a good measure of return on owners’ equity?

Select one of the following:

Gearing
Liquidity
Profitability
Solvency

Explanation

Question 78 of 78

Which of the following would describe the financial position of this business in 2001 compared with 2000?

Select one of the following:

Increased liquidity and increased solvency
Increased liquidity and reduced solvency
Reduced liquidity and increased solvency
Reduced liquidity and reduced solvency

Explanation

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	Created by Daniel Miller about 8 years ago

Quiz on HSC Business Studies 2000-2015 - Finance Questions , created by Daniel Miller on 17/05/2016.

HSC Business Studies 2000-2015 - Finance Questions

Question 1 of 78

What is a source of new capital for a public company?

Select one of the following:

Explanation

Question 2 of 78

What is a characteristic of external equity finance?

Select one of the following:

Explanation

Question 3 of 78

What is the net profit ratio (net profit ÷ sales) for 2014?

Select one of the following:

Explanation

Question 4 of 78

Which of the following describes the change in gross profit ratio and expense ratio from 2014 to 2015?

Select one of the following:

Explanation

Question 5 of 78

A business is planning to increase its market share by merging with a competitor. What financial objective does this best illustrate?

Select one of the following:

Explanation

Question 6 of 78

Which of the following would be found on an income statement?

Select one of the following:

Explanation

Question 7 of 78

Why would a business choose debentures as a source of funding?

Select one of the following:

Explanation

Question 8 of 78

Which of the following statements is true about liquidity for Kerry's Warehouse in 2014?

Select one of the following:

Explanation

Question 9 of 78

Which of the following statements is true about gearing for Kerry's Warehouse in 2014?

Select one of the following:

Explanation

Question 10 of 78

What does the expense ratio measure?

Select one of the following:

Explanation

Question 11 of 78

Which of the following would immediately improve the working capital of a business?

Select one of the following:

Explanation

Question 12 of 78

Which of the following would improve the financial position of a business?

Select one of the following:

Explanation

Question 13 of 78

Auditors have discovered that the value of legal fees paid has been included in the asset value of a new warehouse purchased by a business. What limitation of financial reports does this show?

Select one of the following:

Explanation

Question 14 of 78

What would be the best strategy for a business to increase its gross profit?

Select one of the following:

Explanation

Question 15 of 78

Which of the following groups would suffer the worst financial impact as a result of an increase in the value of the Australian dollar?

Select one of the following:

Explanation

Question 16 of 78

Compared to the industry averages, this business has

Select one of the following:

Explanation

Question 17 of 78

How is the role of the Reserve Bank of Australia best described?

Select one of the following:

Explanation

Question 18 of 78

What does a cash flow statement show?

Select one of the following:

Explanation

Question 19 of 78

What is a derivative?

Select one of the following:

Explanation

Question 20 of 78

In 2010 an Australian company bought products from the USA. If the Australian dollar rises in value against the US dollar before the payment is made, which of the following would be true?

A business is planning to increase its market share by merging with a competitor.
What financial objective does this best illustrate?

Auditors have discovered that the value of legal fees paid has been included in the asset value of a new warehouse purchased by a business.
What limitation of financial reports does this show?

In 2010 an Australian company bought products from the USA.
If the Australian dollar rises in value against the US dollar before the payment is made, which of the following would be true?

What might happen as a result of a company having highly undervalued plant and
equipment on its balance sheet?

A business uses factoring to pay creditors.
Which financial objective is the business trying to achieve?

A business sells its accounts receivable to improve cash flow.
Which of the following best describes this strategy?