Question 1
Question
What is a source of new capital for a public company?
Answer
-
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
Question 2
Question
What is a characteristic of external equity finance?
Question 3
Question
What is the net profit ratio (net profit ÷ sales) for 2014?
Question 4
Question
Which of the following describes the change in gross profit ratio and expense ratio from 2014 to 2015?
Question 5
Question
A business is planning to increase its market share by merging with a competitor.
What financial objective does this best illustrate?
Answer
-
Growth
-
Liquidity
-
Profitability
-
Solvency
Question 6
Question
Which of the following would be found on an income statement?
Answer
-
Accounts payable
-
Gross profit
-
Intangibles
-
Net assets
Question 7
Question
Why would a business choose debentures as a source of funding?
Answer
-
To reduce financial risk
-
To provide security over assets
-
To retain ownership and control
-
To obtain cheap, short-term finance
Question 8
Question
Which of the following statements is true about liquidity for Kerry's Warehouse in 2014?
Answer
-
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.
Question 9
Question
Which of the following statements is true about gearing for Kerry's Warehouse in 2014?
Answer
-
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.
Question 10
Question
What does the expense ratio measure?
Answer
-
Efficiency
-
Growth
-
Profitability
-
Solvency
Question 11
Question
Which of the following would immediately improve the working capital of a business?
Answer
-
Increasing credit sales
-
Using sale and lease back
-
Preparing a cash flow statement
-
Repaying debt to creditors more quickly
Question 12
Question
Which of the following would improve the financial position of a business?
Answer
-
Lower current ratio and lower accounts receivable turnover ratio
-
Higher current ratio and lower accounts receivable turnover ratio
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Lower current ratio and higher accounts receivable turnover ratio
-
Higher current ratio and higher accounts receivable turnover ratio
Question 13
Question
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?
Answer
-
Capitalised expenses
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Debt repayments
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Normalised earnings
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Timing issues
Question 14
Question
What would be the best strategy for a business to increase its gross profit?
Answer
-
Use cost centres
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Reduce fixed costs
-
Minimise expenses
-
Use sale and leaseback
Question 15
Question
Which of the following groups would suffer the worst financial impact as a result of an increase in the value of the Australian dollar?
Answer
-
Japanese shareholders of an Australian bank
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Australian producers selling wine to New Zealand
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Australian car makers purchasing inputs from Italy
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American travel agents organising tours for Australians
Question 16
Question
Compared to the industry averages, this business has
Answer
-
better solvency and better liquidity.
-
better solvency and poorer liquidity.
-
poorer solvency and better liquidity.
-
poorer solvency and poorer liquidity.
Question 17
Question
How is the role of the Reserve Bank of Australia best described?
Answer
-
It provides loans to small businesses.
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It provides insurance services for farmers.
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It facilitates the buying and selling of shares.
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It oversees the stability of the financial system.
Question 18
Question
What does a cash flow statement show?
Answer
-
Assets
-
Liquidity
-
Profitability
-
Receivables
Question 19
Question
What is a derivative?
Answer
-
An agreement to buy a foreign currency at an agreed price on some day in the
future
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An assessment of the reliability of a customer’s capacity to make timely payments
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A method of protecting the business against seizure of its assets by a foreign
government
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A method of payment that allows a buyer to gain access to goods immediately and
promise to pay later
Question 20
Question
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?
Answer
-
The company’s credit risk will increase.
-
The cost of insuring the product will increase.
-
The purchase price of the product will be greater
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The company will have more funds available for other uses.
Question 21
Question
Which of the following are BOTH external sources of funds for a business?
Answer
-
Bank loan, mortgage
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Retained profits, leasing
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Owner’s Equity, mortgage
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Retained profits, factoring
Question 22
Question
What might happen as a result of a company having highly undervalued plant and
equipment on its balance sheet?
Answer
-
Asset stripping
-
Growth in equity
-
Capital expansion
-
Factoring of liabilities
Question 23
Question
A business uses factoring to pay creditors.
Which financial objective is the business trying to achieve?
Answer
-
Efficiency
-
Liquidity
-
Profitability
-
Solvency
Question 24
Question
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?
Answer
-
Open account
-
Letter of credit
-
Bill of exchange
-
Payment in advance
Question 25
Question
How has the financial position of the business changed from 2008 to 2009?
Answer
-
Reduced solvency and increased risk
-
Reduced solvency and decreased risk
-
Improved solvency and increased risk
-
Improved solvency and decreased risk
Question 26
Question
What is the net profit ratio (net profit /sales) in 2008?
Question 27
Question
Which statement describes how the financial position of Danok Ltd changed between 2008 and 2009?
Answer
-
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.
Question 28
Question
What is ONE use of a cash flow statement for management?
Question 29
Question
A business aims to increase its sales from $160 000 to $300 000 over the next 12 months. How might the business achieve this?
Answer
-
By increasing advertising
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By decreasing owners’ equity
-
By increasing mortgage repayments
-
By decreasing the size of the research team
Question 30
Question
One example of managing the sales mix for revenue control is to
Answer
-
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.
Question 31
Question
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?
Answer
-
Hedging
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Insurance
-
Bill of exchange
-
Overseas borrowing
Question 32
Question
Which of the following best matches source of finance to business purpose?
Answer
-
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
Question 33
Question
Which of the following are external sources of funds for businesses?
Answer
-
Grants, debentures, leasing, mortgage
-
Venture capital, loans, drawings, factoring
-
Accounts payable, owners’ equity, leasing, discounts
-
Bank overdraft, retained profits, factoring, bank bills
Question 34
Question
A business sells its accounts receivable to improve cash flow.
Which of the following best describes this strategy?
Question 35
Question
Which statement best describes the changed financial position?
Answer
-
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.
Question 36
Question
What may have contributed to the change in the expense ratio?
Question 37
Question
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?
Answer
-
Efficiency
-
Liquidity
-
Profitability
-
Solvency
Question 38
Question
What is the main role of the Australian Stock Exchange?
Answer
-
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
Question 39
Question
What is the current ratio (current assets/current liabilities)?
Question 40
Question
What is the gearing ratio (total liabilities/owner's equity)?
Question 41
Question
Which of the following is an advantage of using owner’s equity as a source of funds?
Answer
-
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.
Question 42
Question
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?
Question 43
Question
What is the value of the gross profit ratio (gross profit/sales)?
Question 44
Question
What is the return on owner’s equity (net profit/total equity)?
Question 45
Question
In which two months might Nic’s Cafe experience a liquidity problem?
Answer
-
October and November
-
November and December
-
November and January
-
December and January
Question 46
Question
Which of the following strategies would be most appropriate to solve this liquidity problem at Nic’s Cafe?
Answer
-
Issue debentures
-
Obtain a mortgage
-
Seek venture capital
-
Apply for an overdraft
Question 47
Question
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?
Answer
-
Increased gearing & Improved solvency
-
Increased gearing & Reduced solvency
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Reduced accounts payable & Improved owner's equity
-
Reduced accounts payable & Reduced owner's equity
Question 48
Question
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?
Answer
-
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
Question 49
Question
Which of the following statements is correct?
Answer
-
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.
Question 50
Question
Which of the following global changes could explain the increase in the 2004 expense ratio for Zahra’s Coffee Imports Pty Ltd?
Answer
-
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
Question 51
Question
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?
Question 52
Question
An online supermarket business has decided to lease delivery vehicles rather than purchase them. What is the purpose of this strategy?
Answer
-
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
Question 53
Question
Calculate the value of Retained Profits.
Question 54
Question
Correct Printing has decided to use an overdraft facility to purchase an additional printing machine.
How would this affect the Balance Sheet?
Answer
-
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
Question 55
Question
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?
Question 56
Question
Which of the following would best describe the role of a merchant bank?
Answer
-
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
Question 57
Question
Which of the following statements describes the performance of Acrid Waste Services?
Answer
-
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
Question 58
Question
Which statement best describes the situation represented in the graph?
Answer
-
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.
Question 59
Question
A cash-flow statement for a retail business would include which of the following?
Answer
-
Cash sales
-
Credit purchases
-
Credit sales
-
Receivables
Question 60
Question
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?
Answer
-
Controlling
-
Organising
-
Planning
-
Staffing
Question 61
Question
Staple Stationery Supplies decides to use factoring to improve cash flow.
This strategy would involve which of the following?
Answer
-
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
Question 62
Question
A balance sheet includes which of the following?
Answer
-
Expenses
-
Intangibles
-
Return on owners’ equity
-
Sales
Question 63
Question
How would the Australian tourism industry be affected by a fall in the value of the Australian dollar compared to other currencies?
Answer
-
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
Question 64
Question
What is the function of management that involves comparing sales figures for a financial period to the forecast of sales for the same period?
Answer
-
Collecting market research data
-
Comparing cash and credit sales
-
Implementing financial plans
-
Monitoring the achievement of marketing plans
Question 65
Question
What is the variable cost of producing 3000 units?
Question 66
Question
What is the net profit from selling 6000 units?
Question 67
Question
Which of the following statements about the efficiency of Abix International Ltd is correct?
Answer
-
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.
Question 68
Question
What is the value of the Cost of Goods Sold for Jack’s Computer Services Pty Ltd?
Question 69
Question
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?
Answer
-
$750 net loss
-
$500 net loss
-
$750 net profit
-
$2000 net profit
Question 70
Question
Which of the following is an example of long-term borrowing?
Answer
-
Bank bills
-
Grants
-
Mortgage
-
Overdraft
Question 71
Question
Which of the following best indicates the solvency of a business?
Answer
-
Current ratio
-
Expense ratio
-
Net profit ratio
-
Debt to equity ratio
Question 72
Question
Which strategy could a business use to effectively manage receivables?
Answer
-
Offering discounts for early payment
-
Increasing the price of the product
-
Taking out a short-term loan
-
Increasing its overdraft
Question 73
Question
Which of the following best describes hedging?
Answer
-
Using transfer pricing between subsidiaries
-
Minimising the effects of the global business cycle
-
Protecting against fluctuating exchange rates
-
Reducing credit risks on international transactions
Question 74
Question
Which of the following would be an effective management strategy to improve the long-term profitability of a business?
Answer
-
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
Question 75
Question
Which of the following methods of payment represents the least level of risk for exporters?
Answer
-
Bill of exchange
-
Letter of credit
-
Open account
-
Pre-payment
Question 76
Question
Which of the following has been a consequence of deregulation of financial markets?
Answer
-
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
Question 77
Question
Which of the following is a good measure of return on owners’ equity?
Answer
-
Gearing
-
Liquidity
-
Profitability
-
Solvency
Question 78
Question
Which of the following would describe the financial position of this business in 2001 compared with 2000?
Answer
-
Increased liquidity and increased solvency
-
Increased liquidity and reduced solvency
-
Reduced liquidity and increased solvency
-
Reduced liquidity and reduced solvency