How does purchasing inventory on credit affect the financial equation?

Increase in liabilities and an increase in assets

A gearing ratio of less than 1:1 indicates:

A business not using its capacity to borrow funds to expand

The two main ways to calculate efficiency are:

Expense ratio and accounts receivable turnover ratio

What are the objectives of financial management?

provide the business with people who have acquired skills

Which one of the following is a disadvantage of using personal savings as a source of finance?

The amount available might not be sufficient

Depreciation is best described as:

The fall invalue of a fixed asset

the selling of accounts receivable for a discounted price

In what way is the concept of short-term different from long-term?

Short Term is within 12 months, Long Term is over a year

Which three ratios determine profitability?

Gross profit ratio, net profit ratio and return on equity

Two important aspects of fi nancial planning includ

profitability management and cash-flow management

A financial audit is the:

independent check of the accuracy of $ records & procedure

Which of the following indicates the effectiveness of a firm’s credit policy?

Accounts Receivable Turnover Ratio

A worker and a manager are using mediationto resolve a dispute. Which best describes mediation?

A neutral third party assisting both parties to resolve

Current assets/current liabilities

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HSC Finance

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Questions 28

Answers

1
How does purchasing inventory on credit affect the financial equation?
Increase in liabilities and a decrease in assets
Increase in liabilities and an increase in owner’s equity
Increase in liabilities and an increase in assets
Increasing liabilities and a decrease in owner’s equity
2
A gearing ratio of less than 1:1 indicates:
A business with liquidity issues.
A business not using its capacity to borrow funds to expand
A business with a cash flow problem
A business in trouble
3
The two main ways to calculate efficiency are:
Expense ratio and accounts receivable turnover ratio
Net profit ratio and gross profit ratio
Return on owner’s equity and debt to equity ratio
Current ratio and debt to equity ratio
4
Which one of the following is an example of a short-term source of finance?
Loan from bank
Venture capital
Overdraft
Share capital
5
What are the objectives of financial management?
provide the business with people who have acquired skills
provide the business with people to solve conflict
provide the business with people who look good
provide the business with people to work for them
6
In acash flow statement the Net In/Out flow is calculated using the formula:Revenue – Payments
True
False
7
The price of one currency in terms of another is known as:
Income Tax
Capital
Exchange Rate
Cash Flow Forecast
8
Which one of the following is a disadvantage of using personal savings as a source of finance?
The amount available might not be sufficient
The money is instantly available
The money will not have to be repaid
No interest will have to be paid
9
Depreciation is best described as:
The fall in share value
The rise in value of a fixedasset
The fall invalue of a fixed asset
The same as appreciation
10
What is a budget?
Cheap Car Insurance
Financial plans for the future
Certain amounts of money available to spend
Amount of money a business has
11
The break even point is where a firm ismaking zero profit
True
False
12
A business employsexternal contractors to provide payroll services. Which term describes this?
Strategic Alliance
Diversification
Vertical Integration
Outsourcing
13
Two strategies for managing working capital include
factoring and selling
inventory control and selling
leasing and marketing
leasing and factoring
14
Liquidity is determined by
Accounts Receivable Turnover Ratio
Working Capital Ratio
Debt to Equity Ratio
Gross Profit Ratio
15
Which of the following indicates the effectiveness of a firm’s credit policy?
Current ratio
Accounts Receivable ratio
Net profit ratio
Expense ratio
16
What is factoring?
a loan secured by the property of the borrower
a loan for a set period of time
document ordering the payment of a certain amount of money
the selling of accounts receivable for a discounted price
17
In what way is the concept of short-term different from long-term?
Short Term wants to make the business better quicker
Short Term isn't the same as Long term
Short Term aims to make the business shorter
Short Term is within 12 months, Long Term is over a year
18
Which of the following fi nancial ratios helps determine a business’s level of gearing?
Expense ratio
Net profit ratio
Return on owners’ equity ratio
Debt to equity ratio
19
Which three ratios determine profitability?
Return on equity, expense ratio, working capital ratio
Net profit ratio, acc rec turnover & workingcapital ratio
Gross profit ratio, net profit ratio and return on equity
Net profit ratio, return on equity and debt to equity ratio
20
Two important aspects of fi nancial planning includ
profitability management and cash-flow management
account management and staff management
profitability management and staff management
cash-flow management and accounts management
21
A financial audit is the:
independent check of the accuracy of $ records & procedure
a review of the business’s fi nances by the govt
a stocktake of inventory
a review of all financial statements since it started
22
OzJuice has a contract with an overseassupplier for purchases at a set exchange rate for $US.
Bill of exchange
Overseas borrowing
Hedging
Insurance
23
Which of the following indicates the effectiveness of a firm’s credit policy?
Expense ratio
Net Profit Ratio
Accounts Receivable Turnover Ratio
Current Ratio
24
What is not part of the income statement?
COGS
Expenses
Assets
Gross Profit
25
A worker and a manager are using mediationto resolve a dispute. Which best describes mediation?
A neutral third party assisting both parties to resolve
A judge hearing the dispute incourt and making a decision
The worker and manager meetingalone to resolve the dispute
Both parties attending a conference to reach an agreement
26
Which source of finance is most suitable forbuying property?
Share Issue
Bank Loan
Mortgage
Overdraft
27
Which of the following financial ratios helps determine a business’s level of gearing?
Debt to equity
Net Profit
Return on owners equity
Expense
28
The current ratio is
Current assets/current liabilities
Debt/equity
Total assets/total liabilities
Accounts receivable/sales

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