Solved MCQs Questions and Answers: May 2016

AIMA Management Control System Assignment

AIMA Online Assignments

Management Control System (FM02)

Note :- The answers are boldly marked

Question 1:- The primary purpose of the balance sheet is to

a) measure the net income of a business up to a particular point in time.

b) report the difference between cash inflows and cash outflows for the period.

c) report the current value of the business.

d) report the financial position of the reporting entity at a particular point in time.

Question 2:- Financial accounting

a) provides information primarily for external decision makers.

b) is required for corporations but probably would not be done by other business entities.

c) provides information primarily for the use of managers of the company.

d) has been practiced in this country for approximately the last 15 years.

Question 3:- The margin of safety can be expressed as:

a) The excess of stocks held over the expected demand

b) The difference between actual and budgeted output

c) The difference between actual output and the break even point

d) The excess of selling price over cost of sales

Question 4:- An example of a semi-variable cost would be:

a) Electricity costs

b) Supervisor Salary

c) Direct Material

d) Insurance cost

Question 5:- The master budget does NOT contain which of the following?

a) operating budget

b) financial budget

c) sales budget

d) All of the above

Question 6:- Costing can be used in the field of:

a) Manufacturing Industries

b) Service Industries

c) Trading firms

d) All of the above

Question 7:- For a business, an example of an internal decision maker is

a) a loan officer at a bank.

b) one of the business's managers.

c) one of the business's long-term customers.

d) a supplier who sells goods to the company on an account.

Question 8:- For a business, a supplier

a) is a company or individual that owns shares of the business.

b) provides goods and services used by the business.

c) makes loans to the company to help finance its activities.

d) is a company or individual to whom the business sells goods or services.

Question 9:- A responsibility center where the manager is accountable for only the revenues and costs is a(n)

a) cost center.

b) revenue center.

c) investment center.

d) profit center.

Question 10:- Sunk cost are generally –

a) Variable cost

b) Fixed cost

c) Production cost

d) Relevant cost

Question 11:- For EOQ which of the following is true:

a) Total cost is minimum

b) Ordering cost is equal to carrying cost

c) Both A & B

d) None of the above

Question 12:- Which of the following step is the 3rd step towards budgeting process?

a) Forecasting

b) Determination of Principle budget factor

c) Decision about the removal of constraints

d) Construction of budget on agreed basis

Question 13:- In the long run a business must:

a) Charge a price that covers both fixed and variable costs

b) Charge a price that covers its variable costs only

c) Charge a price that covers its fixed costs only

d) Charge a price that leads to a positive contribution

Question 14:- Which of the following is not considered to be a liability?

a) accounts payable

b) notes payable

c) wages payable

d) cost of goods sold

Question 15:- Accounting information developed primarily for internal decision makers is called

a) financial accounting.

b) management accounting.

c) risk accounting.

d) auditing

Question 16:- Which of the following would NOT lead to an increase in net cash flow?

a) Larger sales volume

b) Higher selling price

c) Charging of lower depreciation

d) Reduced material cost

Question 17:- When a budget is administered wisely, it will

a) provide a framework for performance evaluation.

b) discourage managers and employees.

c) eliminate coordination and communication between subunits.

d) discourage strategic planning.

Question 18:- Which of the following is one of the ways variances can help management implement and evaluate strategies?

a) early warning

b) performance evaluation

c) evaluating strategy

d) All of the above

Question 19:- Which of the following reports the cash inflows, cash outflows, and change in cash for a period?

a) Income statement.

b) Balance sheet.

c) Statement of cash flows.

d) Statement of retained earnings

Question 20:- Which of the following is true for the manufacturing overhead budget?

a) Provides a schedule of all costs of production other than direct materials and direct labor

b) Includes both variable and fixed costs associated with overhead

c) Depreciation has to be deducted as a non-cash expense in order to determine the level of cash required for overhead

d) All of the given options

Question 21:- Most businesses earn revenues

a) when they collect accounts receivable.

b) through sales of goods or services to customers.

c) by borrowing money from a bank.

d) by selling shares of stock to stockholders.

Question 22:- A budget that requires management to justify all expenditures, rather than just changes from the previous year is referred to as:

a) Master budget

b) Zero-based budget

c) Perpetual budget

d) Participative budget

Question 23:- The objective of costing is to –

a) Control cost

b) Ascertain cost

c) Classification of cost

d) None of the above

Question 24:- The objective of Value chain analysis is –

a) To ascertain the cost of each activity

b) To control the cost of each activity

c) To make each activity cost effective.

d) To recognize the cost incurred for each activity.

Question 25:- A business's assets are

a) the economic resources of the business.

b) Reported at current cost.

c) Reported on the income statement.

d) equal to liabilities minus stockholders' equity.

Question 26:- A Fixed budget is based on which of the following factor?

a) Theoretical capacity

b) Actual capacity

c) Normal capacity

d) None of the given options

Question 27:- When closing stock is over valuate, what would its effect on profit?

a) Can not be determined with given statement

b) It will decrease the profit

c) No effect on profit

d) It will Increase the profit

Question 28:- A Company reported the following amounts at the end of the first year of operations: capital Rs.100,000; sales revenue Rs.400,000; total assets Rs.300,000; Rs.20,000 dividends; and total liabilities Rs.160,000. Retained earnings and total expenses would be

a) retained earnings Rs.60,000 and expenses Rs. 320,000.

b) retained earnings Rs.140,000 and expenses Rs.240,000.

c) retained earnings Rs.160,000 and expenses Rs.220,000.

d) retained earnings Rs.40,000 and expenses Rs.340,000.

Question 29:- The financial statement that reports the financial position of a business is the

a) income statement.

b) cash flows statement

c) balance sheet.

d) footnotes to the financial statements.

Question 30:- The break even point in units is represented by the equation:

a) Fixed costs / Variable costs

b) Fixed costs / Contribution per unit

c) Fixed costs / selling price per unit

d) (Sales revenue - Fixed costs) / Contribution per unit

AIMA Online Assignment Financial Management FM12

AIMA Online Assignments

Financial Management FM12

NOTE: The answers are boldly marked.

Question 1:- A financial ratio does the following:

a) Relationship between different financial statements of an organization.

b) Compares different items

c) A yardstick used by management to take decisions

d) All of the above

Question 2:- ____________ standard of comparison indicates the direction of change for a company over the past few years.

a) Time series analysis

b) Proforma analysis

c) Both of them

d) None of the above

Question 3:- The ratios most useful for short-term creditors are

a) Leverage ratio

b) Activity ratio

c) Liquidity ratio

d) None of the above

Question 4:- When we are comparing the financial ratio's of three it companies, we are said to be carrying out a ______________________________ analysis:

a) Time series analysis

b) Industry analysis

c) Proforma analysis

d) None of the above

Question 5:- Fixed assets turnover ratio is a part of analyzing the

a) Efficiency in utilizing assets

b) Leverage of the company

c) Liquidity of the company

d) Studying the profitability of the company

Question 6:- ________________ ratio indicates the no. of days a company can finance its business without receiving cash from outside

a) Inventory ratio

b) Interval measure

c) Net working capital

d) Cash ratio

Question 7:- The following condition needs to be fulfilled for a company to be considered having a strong financial position:

a) A high debt-equity ratio

b) Low proportion of shareholder equity

c) both the conditions are fulfilled

d) none of them is true

Question 8:- The following companies would be able to face adverse situations like recession favorably:

a) A company with low operating expense ratio

b) A company with low profit margin

c) Both the conditions are favorable

d) None of the conditions are favorable

Question 9:- The following measures the market value of a firms assets to its asset replacement cost:

a) DuPont analysis

b) Tobin’s Q

c) Book value to market value ratio

d) Market value to book value ratio

Question 10:- The following it true of gross working capital

a) It may be positive or negative

b) Suggests the extent to which working capital needs to be financed by the permanent sources of funds

c) Both are correct

d) None are correct

Question 11:- Low levels of marketable securities are maintained for financing working capital according to the ___________________ .

a) Restrictive approach

b) Flexible approach

c) Conservative approach

d) Hedging approach

Question 12:- The asset side of a balance sheet flows in the following order:

a) Cash, Accounts receivables, inventory, marketable securities, fixed assets.

b) Cash, Accounts receivables, marketable securities, inventory, fixed assets.

c) Cash, marketable securities, Accounts receivables, inventory, fixed assets.

d) Can be arranged in any order.

Question 13:- Accounts receivables are the same as:

a) Sundry debtors

b) Bill receivables

c) Trade creditor

d) All mean the same

Question 14:- Accounts receivables management is based on the following principal:

a) As liquidity increases the return decreases

b) Cash is king

c) Too much liquidity prevents bankruptcy

d) All are true

Question 15:- Costs incurred in writing off accounts receivables due to non-payment is called

a) Bad debt

b) Bankruptcy cost

c) Opportunity cost

d) Collection cost

Question 16:- The credit term 5/10 net 60 signifies:

a) Credit period 10 days, cash discount 5% cash discount period 60 days

b) Credit period 60 days, cash discount 10% cash discount period 5 days

c) Credit period 60 days, cash discount 5% cash discount period 10 days

d) Credit period 5 days, cash discount 10% cash discount period 60 days

Question 17:- Average collection period is:

a) Credit sales/Account receivables

b) Account receivables/ Sales

c) Receivables period/365

d) 365/Receivables period

Question 18:- The following statements are true as regards inventory management:

a) Maintaining huge amount of inventories requires huge investments

b) Efficient inventory management is necessary to avoid unnecessary and inadequate investment

c) Inventory management includes acquisition, storage, disposal of materials

d) All are correct

Question 19:- Inventory term includes:

a) Raw maw material + work-in-progress + finished goods

b) Raw maw material + work-in-progress + machine spare parts

c) Raw maw material + work-in-progress + Finished goods +machine spare parts

d) Raw maw material + work-in-progress + Finished goods +machine spare parts + tables + chairs

Question 20:- Holding inventory to take advantage of changes in prices and getting quality discounts is regarded as the following motive:

a) Transaction motive

b) Speculative motive

c) Precautionary motive

d) Financial motive

Question 21:- The insurance paid against fire and theft of inventories is regarded as the following cost:

a) Carrying cost

b) Ordering cost

c) Capital cost

d) Storage cost

Question 22:- The level of inventory at which the inventory cost is minimum is regarded as:

a) Order point quantity

b) Economic order quantity

c) Re-order quantity

d) None of the above

Question 23:- One of the oldest technique of inventory control which is generally used to control "C" category inventories is :

a) ABC Analysis

b) VED classification

c) Two-bin technique

d) HML classification

Question 24:- Classifying inventory on the basis of their availability is called:

a) FSN classification

b) HML classification

c) VED classification

d) SDE classification

Question 25:- A fixed quantity of material is ordered whenever the stock level reaches the re-order level in the:

a) Fixed order periodic system

b) Just in time system

c) Fixed order quantity system

d) Order cycling system

Question 26:- A disbursement float is:

a) The amount not debited

b) The amount not credited

c) Firms available balance

d) Firms book balance

Question 27:- The net float of cash management is positive when:

a) The firms disbursement float is more than the collection float

b) The firms collection float is more than the disbursement float

c) Both the situations are correct

d) None of the statements are correct

Question 28:- The bank already holds Rs. 5000. They write a cheque of Rs. 1000 and deposit a cheque of Rs. 2000. What would be your net float.

a) 6000

b) -6000

c) 1000

d) -1000

Question 29:- The total delay in case of collection float includes:

a) Mailing time + Processing time

b) Mailing time + Processing time+ availability time

c) Mailing time + Availability time

d) Availability time + processing time

Question 30:- ___________________ approach is use of more short-term funds warranted by the matching plan.

a) Matching

b) Conservative

c) Aggressive

d) None of the above