In correct order, 'financial planning processes' involve:

address present position, determine needs, budgeting.

Liquidity is concerned with:

meeting financial commitments in the short term.

indicates amount of sales that are allocated to expenses.

short & long term borrowing from external sources.

Profit or loss is best displayed:

in a statement of financial performance.

issued for a fixed rate of interest & time period.

Profitability is best described as:

the earning performance of a business.

Objectives of financial management include:

profitability, liquidity, efficiency, solvency & growth.

Cash flow statements:

show if a business has funds for unforeseen circumstances.

Operating budgets are best described as:

relating to the main activities of a business.

Ordinary shares and private equity are:

considered as external sources of equity funds.

include new issues and rights issues.

displays 'accounts payable' as a current liability.

acts as both a primary and secondary market.

equal assets minus owners' equity.

include control of cash & credit procedures.

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Finance Fanatics

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Business Studies - Finance Topic.

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Questions 20

Answers

1
In correct order, 'financial planning processes' involve:
determine financial needs, establish control, tactical plans
address present position, determine needs, budgeting.
ratio analysis, budgets, addressing present position.
financial controls, revising budgets & risk identification.
2
Liquidity is concerned with:
meeting financial commitments in the short term.
all of the above.
ability to pay debts in the long term.
the debt to equity ratio.
3
The expense ratio:
should ideally be increasing consistently.
is measured by sales divided by total expenses.
indicates amount of sales that are allocated to expenses.
indicates day-to-day inefficiency of a business.
4
Debt finance is:
an asset to a business.
short & long term borrowing from external sources.
money owed to internal sources such as business owners.
the internal sources of finance in the business.
5
Profit or loss is best displayed:
when assets equal liabilities plus owners' equity.
when COGS is large.
in a statement of financial performance.
when cash inflows equal cash outflows.
6
A 'debenture' is:
issued for a fixed rate of interest & time period.
a loan secured by a property.
a loan not backed by collateral or assets.
short-term borrowing for a business.
7
Profitability is best described as:
saving resources & reducing inflows.
sales divided by gross profit.
the earning performance of a business.
maximising profits and expenses.
8
Objectives of financial management include:
tactical plans that underpin goals of the business.
delaying accounts payable.
postponing financial resources to achieve adequate cash flow
profitability, liquidity, efficiency, solvency & growth.
9
Cash flow statements:
add cash receipts together with cash payments.
are the reverse of income statements & balance sheets.
show if a business has funds for unforeseen circumstances.
are prepared from a credit card statement.
10
Gearing ratios determine:
the relationship between debt and the cost of debt.
the mix of debt & accounts receivable held by the business.
the ability to meet financial commitments in the short term.
a firm's solvency.
11
Operating budgets are best described as:
relating to the main activities of a business.
relating to capital expenditure and R&D.
relating to financial data of a business.
relating to the income statement and the balance sheet.
12
A document ordering the payment of money at a fixed future date is called:
a mortgage.
none of the above.
a bank overdraft.
a bill of exchange.
13
Ordinary shares and private equity are:
considered as internal sources of equity.
internal equity sources for a business.
considered as external sources of equity funds.
external debt instruments.
14
'Ordinary shares':
are debt instruments.
include new issues and rights issues.
are considered long-term borrowing.
are a source of private equity funds.
15
Equity finance:
is considered low gearing.
is more risky for the business owner.
attracts interest repayments.
disallows equity holders from having voting rights.
16
A balance sheet:
displays 'accounts payable' as a current liability.
shows gross profit.
shows 'retained profits' as current assets.
displays 'cash at bank' as non-current.
17
The ASX:
uses super funds for long-term investment in growth & profit
acts as both a primary and secondary market.
provides loans to businesses and individuals.
is regulated by APRA.
18
Liabilities:
are current in nature only.
equal assets minus owners' equity.
equal assets plus owners' equity.
are non-current in nature only.
19
Financial controls:
include control of cash & credit procedures.
impede a business.
include theft, fraud and errors in record systems.
are a risk to the business.
20
Factoring is:
a source of private equity.
a long-term borrowing instrument.
selling accounts payable for a discounted price.
short-term borrowing.

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