1. Net Interest income isa. Interest earned on advancesb. Interest earned on investments c. Total interest earned on advances and investment

d. Difference between interest earned and interest paid2. Interest rate risk is a type of

a. Credit riskb. Market riskc. Operational riskd. All the above

3. European opinion can be exercised on any day at the option of the buyer on or before the expiry of the option.

a. Trueb. Falsec. Noned. Can’t Say

4. What is the beta factor for corporate finance under Standardized approach ?a. 15%b. 18%c. 12%d. None of the above

5. A bank suffers loss due to adverse market movement of a security. The security was however held beyond the defeasance period. What is the type of the risk that the bank has suffered?

a. Market Riskb. Operational Riskc. Market Liquidation Riskd. Credit Risk

6. Which of the following is not a type of credit risk?a. Default riskb. Credit spread riskc. Intrinsic riskd. Basis risk

7. 8% Government of India security is quoted at RS 120/- The current yield on the security, will be----

a. 12%b. 9.6%c. 6.7%d. 8%

8. Risk of a portfolio with over exposure in steel sector will bea. More than systematic riskb. Equal to intrinsic riskc. Less than intrinsic riskd. None of these

9. A company declares RS 2/- dividend on the equity share of face value of RS 5/-. The share is quoted in the market at RS 80/- the dividend yield will be----

a. 20%b. 4%c. 40%d. 2.5%

10. The risk that arises due to worsening of credit quality isa. Intrinsic Riskb. Credit spread Riskc. Portfolio riskd. Counterparty risk

11. A debenture of face value of As. 100 carries a coupon of 15%. If the current yield is 12.5%. What is the current market price?

a. Rs.100b. Rs.120c. Rs.150d. Rs.125

12. An increase in cash reserve ratio will cause yield curve toa. Shift downwardb. Remain unchangedc. Become steeperd. Become flatter

13. The model that combines five financial ratios using reported accounting information and equity values to produce on objective measure of borrower’s financial health is

a. Altman’s 2 scoreb. ‘Credit Metrics’c. Credit Risk +d. None of the above

14. A bank holds a security that is rated A+. The rating of the security migrates to A. What is the risk that the bank has faced ?

a. Market riskb. Operational riskc. Market liquidation riskd. Credit risk

15. When interest rates go up, prices of fixed interest bonds –a. Go upb. Go down c. Remain unchangedd. Can’t Say

16. VaR is not enough to assess market risk of a portfolio. Stress testing is desirable because

a. It helps in calibrating VaR moduleb. It helps as an additional risk measurec. It helps in assessing risk due to abnormal movement of market parametersd. It is used as VaR measure is not accurate enough

17. A transaction where financial securities are issued against the cash flow generated from a pool of assets is called

a. Securitizationb. Credit Default Swapsc. Credit Linked Notesd. Total Return Swaps

18. Growth Fund is a mutual fund thata. assures growth in incomeb. invests in fixed income securitiesc. gives fixed returnd. invests primarily in equities

19. Operational Risk arises from

a. Inadequate or failed internal processesb. People and systemsc. External Eventsd. Defaults

20. Which of the following is true?a. All of themb. None of themc. (a) , (b) and (c)d. (a) , (b) and (e)

21. A decline in cash reserve ratio will cause the yield curve toa. shift upwardb. shift downwardc. become flatterd. remain unchanged

22. 12% Government of India security is quoted at Rs.120. If interest rates go down by 1%, the market price of the security will be.....

a. Rs. 120b. Rs.133.3c. Rs. 109d. Rs. 140

23. A bank expects fall in price of a security if it sells it in the market. What is the risk that the bank is facing?

a. Market riskb. Operational riskc. Asset Liquidation riskd. Market liquidity risk

24. 11% Government of India security is quoted at Rs. 110, the yield will be –a. 11%b. 10%c. 9%d. None of these

25. 1 day VaR of a portfolio is Rs.500, 000 with 95% confidence level. In a period of six months (125 working days) how many times the loss on the portfolio may exceed Rs.500, 000?

a. 4 daysb. 5 daysc. 6 daysd. 7 days

26. A fall in interest rates will make prices of Government Securities - a. Go downb. Go upc. Remain unchangedd. None of these

27. Systemic risk the risk ofa. Failure of a bank, which is not adhering to regulationsb. Failure of two banks simultaneously due to bankruptcy of one bankc. Where a group of banks fail due to contagion effectd. Failure of entire banking system

28. 11% Govt. of India security is quoted at Rs.110. If the interest rates go down by 1% the market price of the security will be

a. Rs.110b. Rs.109c. Rs.122.2d. Rs.130

29. Balanced fund is a mutual fund thata. Assures incomeb. Invests in debt and equityc. Assure growthd. Gives fixed returns

30. Back testing is done toa. Test a model b. Compare model results and actual performancec. Record performanced. None of the above

31. Under Basel II, Capital requirement under the accord isa. The maximum Capital that is required to be maintainedb. The minimum Capital that is required to be maintainedc. The capital as specified by the regulatory authority is required to be

maintainedd. None of the above

32. Capital charge for credit risk requires input for PD, LGD, EAD and M. Under advanced IRB approach, who provide the input for LGD.

a. Bankb. Supervisorc. Function provided by BCBSd. None of the above

33. A debenture of Rs.100 carrying 15% coupon rate is quoted in the market at Rs.135/-. The current yield on this debenture will be

a. 13.5%b. 15%c. 11.11%d. 10%

34. Investment in Post Office time deposit isa. Zero risk investmentb. Low risk investmentc. Medium risk investmentd. High risk investment

35. If the short term interest rates are temporarily higher than the long term interest rates, the yield curve will be

a. Sloping upwardb. Invertedc. Zigzagd. Horizontal

36. Premature payment of a term loan will result in interest rate risk of type a. Basis riskb. Yield curve riskc. Embedded option riskd. Mismatch risk

37. A company with equity capital of Rs.50 crores (Face Value of Rs.10/- per share) makes gross profit of Rs.70 crores and net profit after tax of Rs.25 crores. If the market price of its equity share is Rs.50, the PE ratio will be

a. 50b. 5c. 10d. 20

38. Daily volatility of a stock is 1%. What is its 10 days volatility approximately?a. 3%b. 10%c. 1%d. 4%

39. If call money rates are temporarily higher than the long term interest rates, the yield curve will be

a. Slopping upwardsb. Zigzagc. Invertedd. Horizontal

40. Equity oriented mutual fundsa. Assure incomeb. Assure growthc. Invest in debenturesd. Invest in shares

41. A bank funds its assets from a pool of composite liabilities. Apart from credit and operational risks, it faces

a. Basis riskb. Mismatch riskc. Market riskd. Liquidity risk

42. A rise in Government securities prices will make yield curve –a. Slope upwardb. Shift downwardc. Remain stabled. Shift upward

43. 9% Government of India security is quoted at Rs.120. The current yield on the security will be –

a. 12%b. 9%c. 7.5%d. 13.3%

44. Financial Risk is defined asa. Uncertainties resu1ting in adverse variation of profitability or outright lossesb. Uncertainties that result in outright lossesc. Uncertainties in cash flowd. Variations in net cash flows

45. Strategic Risk is a type ofa. Interest Rate Riskb. Operation Riskc. Liquidity Riskd. None of the above

46. Objective of liquidity management is to:a. Ensure profitabilityb. Ensure liquidityc. Either of twod. Both

47. A mutual fund charges 1% entry load and no exit load. Its NAV is Rs.16; its sale and repurchase price will -----

a. Rs.16 and Rs.15.80b. Rs.16.16 and Rs.15.84c. Rs.15.84 and Rs.16d. Rs.16.16 and Rs.16

48. Banks need liquidity to:a. Meet deposit withdrawalb. Fund loan demandsc. Both of themd. None of them

49. A fall in interest rate of long dated government securities with the short term interest rates remaining unchanged will make the yield curve.

a. Steeperb. Slop downwardc. Shift downwardd. Flatter

50. Adequacy of bank’s liquidity position depends upon:a. Sources of fundsb. Anticipated future funding needsc. Present and future earnings capacityd. All of the above

51. Current yield on a government security is 5%. If the market price of the bond is Rs.160, the coupon rate on the bond will ----

a. 6%b. 5%c. 8%d. 10%

52. A rise in the short term interest rates with the long term interest rates remaining unchanged will make the yield curve -----.

a. Steeperb. Shift upwardc. Flatterd. Slope upward

53. A scheme of mutual fund has units with face value of Rs.10 and NAV of Rs.37. The Fund declares a dividend of 35% in the scheme. The ex-dividend NAV will be ------- per unit.

a. Rs.37b. Rs.2c. Rs.33.50d. Rs.35.5

54. 7.5% coupon interest Government Security is quoted at Rs.120. Its current yield will be -a. 8.55%b. 6.25%c. 7.75%d. 7%

55. A company with equity capital of Rs.15 crores makes PBIDT of Rs.15 crores and PAT of Rs.10 crores. The face value of its share is Rs.5 and PE is 10, the market price will be ----

a. Rs.50b. Rs.66c. Rs.33d. Rs.100

56. Which term defines the process of project compliance with policies and procedures?a. Quality controlb. Quality assurancesc. Quality auditsd. Quality control management

57. Which process does QA provide and umbrella for?a. Continuous process improvementb. Quality assurance c. Project management pland. Quality baseline

58. Which of the processes includes all activities of the performing organization that determines policies and responsibilities of a project?

a. Performance quality control b. Project quality managementc. Performance plan managementd. Quality control management

59. Which of the following are negative possibilities if quality requirements are not met?a. Overworking team members and poor product qualityb. Customer complaints and late productc. Poor qualityd. Termination

60. Which of these terms apply to identifying quality standards and how to satisfy them?a. Quality projectionsb. Quality managementc. Quality planningd. Quality overview

61. Which of the following definitions apply to the cost of quality?a. Left over productb. Total cost of all project effortsc. Customer satisfactiond. Redoing entire project

62. Strategic stretch involves:a. The fit between the organization and its environment.

b. Creating new opportunities by stretching and exploiting capabilities in new ways.c. The skills of the senior management.d. Utilizing all the resources of an organization to their full capacity.

63. Portfolio working is working which is:a. Not attached to a single employer and contract of employmentb. An individual who works at home for a single employerc. A person who demonstrates his/her work in a portfoliod. A person who chooses more than one career

64. Why has the power of managers to act unilaterally in work organizations in the UK been reduced? Is it due to:

a. More powerful trade unionsb. Management trainingc. Benevolent managers

d. UK and European legislation65. What changes have evolved from inward foreign investment in the UK?

a. The harmonization of terms and conditions of employmentb. Life time employmentc. Multiple union recognitiond. Comprehensive provision of welfare benefits

66. What did the Hawthorne experiments discover?a. That people need to belong to a 'social group'b. That people need heat and good lighting to work wellc. Money is a motivatord. It makes no difference how you treat people at work in relation to their behavior

67. Post modernist ideas have impacted on our understanding of the role of rationality in workplaces by recognizing:

a. One type of rationality prevailsb. More than one type of rationality prevails in work organizationsc. That managements type of rationality is the only true one to exist at workd. Employees must learn to respect managements version of rationality at work

68. According to Cloke and Goldsmith the biggest change to the history of management is:a. Decline in hierarchy and bureaucracyb. The continuation of autocratic managementc. Workers directivesd. Team working

69. A philosophy of management…a. Doesn't existb. Is the assumptions managers make about peoplec. Is more than a single ingredientd. Is a style of management

70. Treating employees as people or as an economic resources is:a. A choice all managers have to makeb. Mutually exclusivec. A question of balance which will be affected by the context of each organizationd. A matter of luck

71. The creation of personnel as a specialist function dealing with people issues from the latter part of the twentieth century has been responsible in part for:

a. Disenfranchising line managers in dealing with key aspects of people managementb. Reducing the stress and work load of line managersc. Creating greater workplace efficiencyd. Bureaucratizing the people function in workplaces

72. The origins of Personnel Management was an outcome of:a. Welfare workersb. Legislation relating to factory reformc. The work of nineteenth century social reformers and Quaker employers

d. The government73. Scientific management contributed to the development of a more rational approach to

management by developing which characteristics?a. The planning and organization of work based on scientific principlesb. Time and motion studiesc. Standardized payd. The encouragement of trade unions

74. One final development influencing the practice of Personnel Management in the 1960s was:a. The effect of recessionb. Powerful trade unionsc. Globalizationd. Growing importance of training

75. A distinction can be made between 'hard' and 'soft' types of HRM. Soft HRM can be characterized by:

a. Seeing people as organizational assetsb. A quantitative approach to HRMc. A mutual commitment of employees and employers to the goals of the organizationd. Being driven by costs

76. The resource based view of the firm is one that believes the key human resources are:a. Those employees not members of trade unionsb. Knowledge workersc. Used to create new capabilities that help achieve organizational successd. Those willing to work overtime

77. SHRM is also about strategic choice, which refers to:a. The processes and decisions that shape the organization’s philosophy towards its

employeesb. Managerial prerogative in decision makingc. Negotiating with trade unions or employee associations over the direction of the

organizationd. Giving employees their 'say' in organizational concerns

78. Do HR activities have an effect on employee and managerial behavior?a. Yes, but these effects can be negative as well as positiveb. HR impacts on employee behavior but not on managerialc. HR impacts on employee behavior but not on manageriald. No, it is managerial behavior which impacts on HR

79. The view that employees are critical to organizational success is now generally accepted. Does this mean that:

a. All employees have the same value or potential for the organizationb. It reflects the unprecedented success of HR practitioners to deliverc. Good management of people will prevaild. Managing the human resource has become even more important because it is the one

resource most difficult to replicate

80. The most common activities performed by HR, which are often outsourced, are:a. Recruitment an selectionb. Occupational health, payroll, pensions and trainingc. Human resource planningd. Assessment centers

81. Recruitment and selection must be effective to ensure it:a. Offsets high labor turnoverb. Delivers the highest caliber of individuals at optimum mostc. To have a surplus in case of sickness and absenced. Encourages new blood into the organization

82. Can the assessment and selection of applicants be carried out in such a way that the 'best' or 'right' person will always be identified?

a. Yesb. Noc. If enough money is invested in the processd. If managers use their intuition or 'gut reaction' in making recruitment decisions

83. The solution to many so-called 'people problems' is often associated with improving the effectiveness of the recruitment process by:

a. Having a robust HR department to carry out the processb. Outsourcing the HR departmentc. Careful selection of the right people for the jobd. Devolving to line managers

84. The science and engineering sectors reflect significant under representation of which group of employees?

a. Highly skilled operatorsb. Young peoplec. Over 50sd. Women

85. The target figure of the Sussex Police Race Equality Scheme to increase ethic representation in its work force is:

a. 10.5%b. 20%c. 3.5%d. 5%

86. Are the best and most productive employees likely to be:a. The least costly in terms of recruitment and employment costsb. A matter of 'pot luck' in terms of recruitment decisionsc. The most costly to employd. Have no bearing on recruitment and selection costs

87. Too great a reliance on internal recruitment can result in:a. Reduced job performanceb. High labor turnoverc. Internal conflictd. Poor group dynamics

88. What strategies deployed by HR for attracting potential candidates to apply for vacancies might be seen to result in indirect discrimination?

a. Advert in local pressb. Word of mouthc. Now recruiting banners/noticesd. Agency or job centre

89. According to O'Leary et al (2002) the most important property of the assessment instruments used to measure or assess applicants against set criteria is their ability to predict what?

a. Whether a person will be a good team playerb. Length of servicec. Future job performanced. Time it will take to train the person

90. The employment contract provides a set of rights, responsibilities and obligations that structure the behavior of whom?

a. Both partiesb. The employeec. The employerd. Trade unions

91. What did the Whitely Councils establish? Was it:a. Tripartite employee relationsb. Collective bargaining frameworkc. Trade unionsd. Employer associations

92. Substantive rules are those which determine:a. Rules governing redundancyb. Rules governing discipline and grievancec. Trade union recognitiond. Rates of pay and how levels are determined

93. Are those employers that reflect a unitary perspective to employee relations generally:a. Welcoming of themb. Hostile to trade unionsc. Seeking agreement with single unionsd. None committal either way

94. What % of membership does a trade union have to demonstrate amongst the group it is wishing to represent before it can apply to the Central Arbitration Committee (CAC)?

a. 10%b. 40%c. 20%d. 5%

95. If a local collective agreement on pay and conditions is in place, who benefits?a. Only those employees who are members of the trade unionb. All employees regardless of union membershipc. All employees in that industry nationwided. All employees regardless of union membership who are in the grade of work covered

by the agreement96. Apart from pay what is the second most common reason for employees to join a trade union?

a. Group solidarityb. Friendship groupsc. Political reasonsd. Wide range of personal benefits

97. In organizing industrial action a Union is encouraging its members to break their contractual obligation to attend work. Is this action:

a. Protected by union immunityb. Unlawfulc. Referred to as a 'wild cat striked. Such that employers can sue the union for loss of earnings

98. What are the types of industrial action a union is most likely to engage in?a. Unofficial actionb. Strike actionc. Action short of a striked. Absence

99. The psychological contract refers to the obligations that an employer and an employee perceive to exist between each other as part of the employment relationship. As such it will include:

a. The loyalty and trust of employeesb. Pay and working conditionsc. Managers pay only 'lip service' to consultationd. Managers reneges on commitments to employees

100. Which recent case brought against a corporation's top management lead to new rules on 'corporate governance'?

a. The Enron affairb. BPc. Texacod. Northern Rock

101. The purpose and function of discipline in contemporary organizations seems at odds with developments in contemporary management thinking with its emphasis on:

a. Tight controlb. A disciplined workforcec. Commitmentd. Sanctions and punishments

102. Why is 'procedural justice' important in the context of the management of misconduct?a. It reflects on the integrity of HR professionalsb. To ensure that individuals have a sense that they have been treated fairlyc. It reflects on the values and attitudes of top managementd. To protect line managers

103. What does discipline mean in the context of the workplace?a. Enforcing compliance and orderb. A system of rules designed to improve and correct behavior through teaching or

trainingc. Punishmentd. Exercising control

104. Why can altruism as an approach to discipline be regarded as an essential element?a. It is an essential requirement for survivalb. To maintain good employee relationsc. To demonstrate who's bossd. To re-establish a welfare approach to HR

105. What might be the reason for why HR is not often informed of incidents that could result in a disciplinary action being taken?

a. Those involved often agree to contain the incidentb. Those involved would be concerned about reprisalsc. Due to lenient managersd. It would impact on the relationships between subordinates and superiors

106. Which organization provides established guidelines for disciplinary procedures?a. TUCb. ACASc. CIPDd. Employers

107. What is the meaning of the term 'gross misconduct' in the context of a company's disciplinary procedures?

a. Breaches of standards and rules that are serious and unacceptable in any circumstances

b. Stealing company propertyc. Being repeatedly late for workd. Absence without leave

108. Should confidentiality be guaranteed to people who report breaches of rules which could lead to disciplinary action taken on a fellow employee?

a. Depends on the circumstancesb. It should not be guaranteedc. Management should attempt to guarantee confidentialityd. It should be guaranteed

109. Is it important to have two managers responsible for leading a disciplinary investigation because:

a. Provides support for each other when dealing with stressful situationsb. It ensures a degree of impartialityc. It a requirement by tribunalsd. Provides cover in the event of absence through ill health

110. Which aspect of employment is fairness in the management of HR linked to?a. Just recruitment and selectionb. Grievance and disciplinec. Reward managementd. All aspects of HR

111. What expresses the commitment management has made to embrace the concepts of equality and diversity?

a. Investors in peopleb. Strategic HRMc. An 'equal opportunity employer'd. Diversity management

112. An equal opportunities approach to fairness at work is essentially about:a. Taking a business perspectiveb. Taking a more strategic approachc. Having a diverse workforced. Compliance and maintaining minimum standards

113. A stereotype is a fixed idea or misconception about an individual or group of people. The basis of stereotyping is:

a. Based on objective and rational considerationsb. Seeing people as a group with similar characteristics rather than recognizing

differences between peoplec. Gut reactiond. Formed from personal experience of different groups of people

114. The first elements in the legal framework for equal opportunities legislation were introduced in:

a. The 1940sb. The 1970sc. The 1920sd. 2000

115. Circumstances in which discrimination can be justified include:a. Where the employer prefers to employ someone of a specific sexb. Where the employer believes the tasks are more suitable for someone of a specific sexc. Where a person is employed to provide authenticity such as employing a black person

to play a black role in a playd. Where there has been a tradition of employing a person of one sex as opposed to the

other sex116. Unreasonable adjustments in light of a person's disability might include:

a. Alterations to a person’s working conditionsb. Acquiring or modifying equipment c. Building access ramps to buildingsd. Altering hours of work or duties

117. Approximately what % of the UK working population is classified as disabled?a. One in 5 people of working ageb. 1 in 10 people of working agec. 1 in 20 people of working aged. 1 in 30 people of working age

118. The CIPD survey of 2005 found that the impact of poor work-life balance affecting performance was perceived by what % of employees?

a. 60%b. 40%c. 20%d. 5%

119. Which of the following is the main reason for why harassment and bullying need to be taken seriously at work?

a. It is costly for the employerb. It can lead to impairment of an employee's physical and/or mental healthc. It impacts on social relations at workd. It could lead to dismissal of the perpetrator

120. A Sole Trader is a firm whicha. sells fishb. is operated by a single personc. is unincorporatedd. can be taken to court instead of its owner

121. The main aim of any private business is toa. increase market shareb. survivec. make a profitd. employ people

122. The secondary sector of the economy is concerned witha. bankingb. manufacturingc. farmingd. education

123. The fourth element in a SWOT analysis isa. internal threatsb. external threatsc. internal trialsd. external trials

124. All of the following are examples of the advantages of being a plc excepta. being able to sell shares on the Stock Exchangeb. being liable to hostile take-overc. being able to raise capital from many sourcesd. being a legal entity separate from the owners and directors

125. Limited liability when applied to an incorporated firm means thata. it only has to pay 50% of its billsb. the shareholders and the directors share the responsibility to pay any debts the firm

may havec. the firm is liability limited to the fully paid-up share capital of the firmd. the firm is only partially responsible for the safety and reliability of its product

126. What do we mean by the term 'unfair competitiona. A market in which there exists output that exceeds current market demandb. A market in which participants have an opportunity to earn very high profitsc. The market demand for a products exceeds its current levels of productiond. The management tool used to look at internal and external factors affecting the

business127. Which type of market competition is characterized by many firms differentiating a similar

producta. Perfect competition?b. Oligopolistic competition?c. Monopolistic competition?d. A monopolist?

128. Skimming pricing is best described asa. Keeping prices very low in an attempt to destroy or drive out competitorsb. Setting a high price to yield a high profit marginc. The price set by the largest company in the market which influences the price other,

smaller rivals must followd. Setting the price low so as to break into a market

129. All of the following are features of a sole trader, except that

a. they are very flexible to changes in circumstances or competitionb. they have limited liability for their debtsc. they are very privated. they are easy to start up

130. All of the following are suitable methods of market research for a new, small firm, excepta. use of Yellow Pages or local directoriesb. market mappingc. published data in libraries, government publications, or on the Internetd. regional field surveys and market trials

131. All of the following statements are true of a patent, excepta. A patent gives its holder exclusive rights to make and sell a product for 16 to 20 yearsb. A patent is valid in all countries of the Worldc. The patent holder has to take firms who seem to copy the patent to court himself, not

the policed. The patent is published, so everybody can find out how it works, and can try to develop

a 'legal' copy132. A budget is

a. a statement showing how much must be spent in a period of timeb. a plan, in financial terms, of a company’s expenditure for a period of time in the futurec. A plan, in financial terms, of a company’s revenues and expenditures for a period of

time aheadd. a statement, in financial terms, showing how much was received and spent last year

133. All of the following are fixed assets excepta. buildingsb. stockc. production plantd. vehicles

134. The following are examples of variable costs excepta. raw materialsb. directors salariesc. packing materialsd. commission payments

135. One difference between an ordinary share and a preference share is thata. dividends on ordinary shares have to be paidb. ordinary shares are a loan and have to be repaid on demandc. The ordinary share gives the owner the right to one vote at an AGMd. In the event of a firm going into liquidation, ordinary shares are paid back first

136. The following are all examples of possible causes of cash flow problems, except

a. over-investmentb. overtradingc. selling on creditd. buying on credit

137. In the context of break-even analysis, the Margin of Safety for a firm isa. The difference between the sales revenue achieved and the break-even revenueb. The difference between planned (or actual) output and the break-even quantity in a

particular time periodc. The percentage difference between planned (or actual) output and the break-even

quantityd. The difference between planned (or actual) output and the break-even quantity

138. In the business sense, and for a particular business, a debtor isa. Someone, firm or individual, that the business owes money tob. A current asset of a businessc. A current liability of a businessd. the Inland Revenue

139. Variances in costs can be caused by changes in all of the following, excepta. storage and waste of materialsb. efficiencyc. wages of staffd. price of the product

140. The liquidity of a firm is a measure ofa. its ability to pay bills as they come dueb. its ability to respond to changes in demandc. how flexible it is in its production planningd. how quickly and easily a firm could relocate to another site

141. Profit can be defined asa. A firm's revenue less its costs for an accounting periodb. An accounting concept, the difference between the revenue obtained from the sale of

something less all the costs incurred in its manufacture and salec. An accounting concept, the difference between the revenue obtained from the sale of

something less all the costs incurred in its manufacture and sale, irrespective of any credits given or taken

d. The difference between the money in the bank at the start and end of a trading period142. In the context of accounting, the margin is

a. the value of materials wasted during productionb. the percentage added to costs to determine the pricec. the difference between the price of something and all the costs involved in its

production and saled. the edge of the balance sheet

143. All of the following are examples of current assets excepta. stocks of raw materialsb. unpaid billsc. customers who have not paid their bills yetd. money in a current account

144. The main disadvantage of an overdraft is that ita. can only be repaid at the end of the agreed periodb. the bank can demand repayment at a moment’s noticec. is very inflexibled. must be supported by some security

145. In the context of accounting, liabilities area. things that you have to put up withb. items of money owed to a businessc. a firms debtsd. people who do not work efficiently

146. All of the following are examples of fixed assets excepta. a firms buildingsb. a firms stock of fuel oil and lubricantsc. a firms motor vehiclesd. a firms computer equipment

147. A firm may raise money internally or externally. All of the following are internal sources, excepta. retaining profits within a business rather than paying them out as dividendsb. selling assets that are not needed any morec. reducing the working capital requirementsd. organizing and using an overdraft

148. All of the following are aims of budgeting, excepta. to establish prioritiesb. to assign responsibilitiesc. to be able to assign blamed. to encourage forward planning

149. What is meant by the term cost-plus pricing?a. Charging a higher price to those customers who will pay itb. Setting the price at the average cost plus the agreed sum of profit needed to make the

investment viable for the companyc. Setting a price that covers variable costs and makes a contribution to fixed costsd. Looking at ones rivals and copying their prices

150. All of the following are examples of short-term liabilities excepta. debentures with a repayment date in 2 years time

b. unpaid VATc. declared but unpaid dividendsd. overdrafts

151. In following the procedure known as 'zero budgeting'a. managers are not allowed to spend any money on capital items for the period of the

budgetb. managers have to justify any expenditure in order to ensure that allocations to

departments are not excessivec. managers may apply for their budgets to be changed within the budgeting periodd. managers are not allowed to use money saved against one periods to budget in the next

period152. All the following are fixed costs, except

a. a salaryb. a wagec. a commission paymentd. a weekly retainer

153. All the following are examples of fixed costs, excepta. insurance feesb. rent paymentsc. directors feesd. license fee on a product sold

154. The value of break-even analysis to a firm is limited by all of the following factors excepta. the assumption that all items made are soldb. the assumption that all fixed costs do not change with outputc. all costs vary with timed. that all costs and price can change independently of each other

155. All of the following are examples of profit centers within an airline, excepta. in-flight magazineb. merchandisingc. aircraft maintenanced. ticketing

156. A Cash Cow isa. a product which generates a significant amount of profit for a companyb. a product with a high market share, and a high rate of growthc. a product with a low market share and a low rate of growthd. a product which generates a significant amount of money for a company

157. A product life cycle

a. shows how a products sales or profits, depending on the units used, may rise and fall over its life

b. tells you how long a product will sell for and make a profitc. is divided into three stagesd. shows how profitable a product will be

158. When performing primary researcha. you spend a lot of time sitting at a desk, using a computer, and researching through old

datab. you are obtaining first hand data, specifically targeted at a particular marketing

problemc. you are spending little moneyd. you are researching into the farming, fishing and mining industries

159. All of the following are examples of extension strategies, excepta. selling overseasb. developing a new market for the productc. finding new uses for the productd. stretching the quantity available over a wider geographical region

160. The demand for a product varies with all of the following excepta. the income of prospective customersb. its pricec. the costs of productiond. The amount of successful advertising expenditure

161. What is meant by the term psychological pricing?a. The process of raising the customer awareness of the supposed values/qualities of your

product, so building its brand imageb. The cutting out of wholesalers from the distribution chainc. Setting prices that reinforce the concept of value. e.g. £99 and not £100d. The forces of supply and demand and how they determine price

162. All of the following are roles of wholesalers , excepta. breaking bulkb. sharing the risk of new products with the manufacturerc. servicing the needs of small customersd. selling directly to consumers

163. The price elasticity of demand for a product tells youa. how sensitive price is to changes in demandb. how sensitive the demand for a product is to changes in the products pricec. How demand changes with changes in the prices of competitors goodsd. how sensitive demand is to changes in the costs of production

164. Market share tells you

a. how well a firm is doingb. how much power a firm has in a marketc. how many firms there are in a particular marketd. how big a market is

165. Market segmentation is done by firms for all of the following reasons, excepta. to increase market shareb. to assist new product developmentc. so that they can develop multi-purpose advertising campaignsd. to extend products into new markets

166. The income elasticity of demand for a product is negative. Such products are known asa. normal goodsb. inferior goodsc. luxury goodsd. necessities

167. In the marketing mix what is meant by the term 'place'?a. The process of getting products to the places where customers can buy themb. Recognizing that consumers change their tastes over a period of timec. The building-in of reliability to a productd. Launching a new product that extends the product range

168. The Boston Matrix is a visual presentation, or model, whicha. shows if a product is likely to be a success or notb. allows firms to classify their products according to their market share and the growth

of thec. The building-in of reliability to a productd. Launching a new product that extends the product range

169. A 'Star' isa. A product with a high market share and a high rate of growthb. A product with a low market share and a low rate of growthc. A product with a high market share but a low rate of growthd. A product with a low market share but a high rate of growth

170. The price elasticity of a product is influenced by all of the following factors, excepta. necessityb. habitc. brand loyaltyd. the level of VAT in operation at the time

171. Market share can be measured by

a. counting the number of customers there are in a market, and for a particular firm within it

b. comparing the sales value for a company with the total unit sales for the whole marketc. comparing the sales value for a company with the total sales value for the whole

marketd. comparing the number of outlets a firm has with the total number of outlets within the

market172. All of the following are extension strategies for a product, except

a. finding new uses for the productb. encouraging more frequent use and purchase of the productc. developing new markets for the productd. repackaging the product

173. Explain what is meant by the term advertising elasticitya. The responsiveness of demand to price changesb. How much advertising influences salesc. It measures the responsiveness of the demand for a product to changes in the amount

of advertising spent on itd. The change in demand caused by a change in income

174. When looking at firms marketing strategy you notice the term 'asset-led' marketing. What does this mean?

a. The selling of those fixed assets which are no longer needed to maintain current capacity needs

b. The use of names to sell productsc. The use by a company of its assets as a major part of its marketing strategyd. The process of buying a company and then selling some of its most valued assets

175. Our 'below the line operations' continue to be disappointing. What does the Chief Executive mean by this?

a. That the profit after tax deduction is less than forecastb. A range of promotional activities over which the company has little direct controlc. The feedback that comes from a surveyd. Research conducted by using publications that are available on a subject

176. 'We should have referred to the Boston matrix exercise we carried out.' Who or what is the Boston Matrix?

a. A mathematical exercise that puts data into a series of boxesb. A management tool that allows firms to classify their products according to their

market share and the growth of thec. The feedback that comes from a surveyd. Research conducted by using publications that are available on a subject

177. Explain, using examples what is meant by the term 'above the line' marketing

a. The use of point of sale materials such as cut outs of artists in record storesb. A marketing term referring to promotional expenditure using independent media

channels, such as television and radioc. The accounting profit before profit and tax are deductedd. Using various ways to promote fast moving consumer goods by changing their

appearance or contents178. Which of the following is an example of a loss leader?

a. The use of advertising via newspapers and televisionb. Engaging a public relations firm to promote your companyc. Using very low prices to encourage customers to buyd. An advertising campaign that aims to increase public awareness of your product

179. What does a business mean by the term 'advertising'?a. various ways of communicating the qualities of products to potential consumersb. The placing of advertisements in newspapers and magazinesc. Through the use of various media channels the firm tries to inform potential

customers of its productsd. Selling products to people

180. One advantage of Just-In-Time (JIT) management of stocks isa. it reduces the need to plan and organizeb. it removes the need for delivery Quality Controlc. it reduces the costs of holding stock within the factoryd. it works very well with competitive tendering

181. A firm is capital intensive ifa. it is based in the capital cities of the countries it operates inb. it has borrowed a lot of capital from the bankc. it has a high proportion of fixed costs in its cost structure, rather than variable costsd. has a very steep total cost line on its break-even chart

182. A firm is productively efficient whena. it is producing its product or service at the lowest unit cost that it canb. it is selling at the lowest price possiblec. it has the highest labor productivity that it cand. it is making what its customers want

183. 'Kaisen' isa. a word meaning 'continuous improvement'b. a method of stock controlc. a modern way of operating a production lined. another word for Quality Circles

184. All of the following are examples of economies of scale, excepta. being able to employ specialist staff efficientlyb. the effective division of laborc. having better communicationsd. bulk buying

185. Which of the following is NOT a sign that labor shortages are hitting a companya. The need to outsource part of its productionb. A lack of accurate records as to staff trainingc. The introduction of university place sponsorshipd. An increase in basic rates of pay for current employees

186. External economies of scale area. savings that are made possible by outside agenciesb. savings that can be made in distribution and sellingc. savings that are available to a firm as a result of the concentration of an industry in a

regiond. savings that can be made in export markets only

187. All of the following are justifications for holding large stocks of raw materials, excepta. the seasonal supply of materials such as coffee beans or even garden peasb. in anticipation of a future shortage and rapid rise in pricec. large quantities are available on the marketd. to take advantage of significant bulk buying reductions

188. Which of the following are NOT a benefit thought to accompany the introduction of technologya. Improved efficiency and reductions in wasteb. Increased strains in industrial relationsc. The introduction of new and better productsd. Advances in communication

189. The opportunity cost to a business of an investment isa. the amount of capital that has to be borrowed to be able to make the investmentb. the cost of all the fixed assets that are to be purchasedc. the next best investment now foregoned. the amount by which the project will have risen due to inflation, on a monthly basis

190. When a firm in the secondary sector of the economy takes over a related business in the tertiary sector, this is an example of

a. horizontal integrationb. backward integrationc. Forward vertical integrationd. Forward horizontal integration

191. A bank takes over a fishing company, a steel works, a vegetable processing firm and an airline. This is an example of

a. forward integrationb. a firm becoming a conglomeratec. horizontal integrationd. company mergers

192. Cell production is the modern production method wherea. buildings are made from prefabricated units, or cellsb. production is done in small roomsc. the output from the Prison Service factoriesd. production on assembly lines is managed and run by groups of workers who are

responsible for the quality of their work193. The long-run for a company is when

a. the scale of production itself, and thus capacity can be increasedb. 5 yearsc. the time it takes to buy and install new plantd. the time interval between the payment of a firms fixed costs

194. In the interests of efficiency and obtaining more economies of scale, two firms agree to join together and become one. This is an example of a

a. hostile take-overb. hostile mergerc. friendly mergerd. friendly take-over

195. A firm can be considered to be efficient when ita. is producing its product or service at the lowest possible average costb. is fully utilizing its capacityc. has minimized the amount of waste that it producesd. employs the maximum number of workers

196. The short-run for a company isa. one month, being the payment base for salariesb. the period where output can only be changed by altering the utilization of existing

plant and equipmentc. the time it takes to terminate staffd. when it is working on a short-time basis

197. What is meant by the term 'management by objectives'?a. A system of giving the authority to carry out certain jobs by those lower down the

management hierarchyb. The system of management that is based on bringing together experts into a teamc. The setting of objectives to bring about the achievement of the corporate goalsd. The control of the organization by those in the 'head office'

198. A manager may delegate any of the following excepta. authorityb. workloadc. responsibilityd. attendance at meetings to represent the department

199. Workforce planning involves all of the following excepta. organizing the training of staffb. forecasting future personnel requirementsc. examining production plans in a factoryd. preparing and maintaining personnel records

200. Maslow, in his triangle of human needs, showed thata. having challenging new tasks is a basic human needb. money always motivates workersc. safety and security is a low order human needd. workers will not give of their best unless they have good social events provided by the

firm201. Piecework is a payment system where the worker is

a. paid overtime for any hours worked beyond 25 per weekb. rewarded for good conductc. is paid a minimum of £4.20 per hourd. is paid for what he or she achieves

202. Which of the following will NOT result following the introduction of a more decentralized system of management?

a. Increased motivation amongst those empowered to make decisionsb. Greater consistency in the decisions madec. The development of skills amongst the junior members of the management teamd. An increase in the speed at which essential decisions are made

203. An advantage of recruitment from outside the company isa. that it is cheaper than internal recruitmentb. that there is no need to advertise the vacancyc. that it brings in new experience and skills to the firmd. that it avoids jealousy within the firm

204. When designing his hierarchy of needs triangle Maslow did NOT include one of these. Was it?a. Good wages and salaries and working conditionsb. The need to feel secure at work with adequate financial rewards such as pensions to

assist one later in lifec. The need to build a career pathd. Opportunities for team working and social events that allow a sense of belonging to

emerge205. When deciding on objectives for management it is advised that companies should aim to

achieve 'SMART' within these. Which of the following is NOT part of the SMART scheme?a. The need to be Specific in the choice of objectivesb. The need to make objectives Tangiblec. All objectives must be Measurabled. For personnel to feel capable of reaching objectives they must be Achievable

206. Which of the following is a reason for introducing a matrix management system?a. Because it allows for an easily understood functional responsibility chart to designedb. The management can increase the use of delegation within the organizationc. The senior management wants to develop a clearly defined set of responsibilitiesd. A more centralized system of control is required

207. What is meant by the term functional management?a. A system of business organization that is based on an individual having a wide range of

skills needed to administer a businessb. A type of management that is based more on personalityc. A system that groups together various jobs and is organized by departments, sections

or functionsd. A system that supports a flat form of command chain

208. What is meant by the term delegation?a. A system of management that relies on consulting employees before making decisionsb. The process of using goals as the best way of motivating managers to achieve corporate

targets/objectivesc. The giving of tasks by a manager to a subordinated. A style of management supported by FW Taylor

209. Which of the following is a reason for supporting a wider span of control within an organization?

a. The management wants to reduce the opportunities for delegationb. There is a need for tighter control within the businessc. The business accepts that within its management there will be increased contact

between managers and employeesd. Management wishes to introduce a process of de-layering

210. Which of the following is NOT a characteristic of a narrow span of control?a. There is less opportunity to delegateb. This form of span of control creates a smaller hierarchy within the businessc. Supervision and control are tighterd. The distance between the top and bottom of the organization is greater

211. The effectiveness of wide spans of control will depend ona. The ability of the chosen manager to control effectively those under their controlb. Designing a complex set of tasks for less senior personnel to performc. Employees being treated in a more Theory X way (McGregor) and not left to supervise

their own working environmentd. The senior management wishing to encourage promotion from within its current staff

212. Which of the following is the best definition of a centralized management system?a. A system that encourages empowerment of workersb. A management structure that concentrates on developing the skills of junior personnelc. A system that involves authority and responsibility for decision-making being in the

hands of senior managersd. A system that encourages faster decision-making

213. Most management teams use 'appraisal' but what is meant by this term?a. A system used to improve the performance of personnelb. The main way in which an employee’s wages are determinedc. A system of reward points offered by retailers to attract customer loyaltyd. The evaluation of an individual employee's performance over a given period of time

214. In recent years autonomous working groups have come to play an important part in many businesses. What are their essential features?

a. The group reports directly to the senior management above them in the hierarchy of the firm

b. The creation of teams which have a high level of autonomy and control over their immediate working environment

c. The bringing together of various individuals who have a common interest in solving certain problems

d. A group of experts brought into research new ways of producing a product215. Authoritarian leadership is a term often seen in textbooks. What does it mean

a. A style of leadership where the leader keeps a very tight control on all information and decision-making processes

b. A system of leadership that allows maximum participation by all employeesc. A chain of command that is flat and allows considerable personal freedom to make

decisionsd. The selling of debts to an agency, who take responsibility for their collection

216. Ineffective planning of workforce would be highlighted bya. Recruitment and selection problemsb. The need to outsource some of the productionc. A need to offer retraining to current employeesd. An opportunity to increase the use of mechanization

217. Which of the following is one of the factors that might influence the style of leadership used by a firm?

a. Accepting that employees who agree are favoredb. Workers should be left to be more in control of their own working environmentc. Offering profit sharing as part of employees remuneration packaged. The skills expected from each employee

218. Which of the following will influence the style of management used by a company?a. The desire by the owner to have the workforce treat him in a fatherly wayb. The need to focus discussions on policy as a joint process between employees and

employer / managerc. The culture of the company, the nature of its work and the preferences of the

individual managersd. The use of distinct penalties for poor performance

219. What is meant by the term empowerment?a. A process of giving employees greater autonomy and decision-making powersb. A system that encourages workers to move more freely within the workforcec. The opportunity to share in the company's profitsd. A formal system of leadership that relies greatly on control

220. Which of the following will influence the method of recruitment and selection used by a company?

a. The state of the economyb. The size of the organizationc. The type of training programs used by the companyd. The possible expansion of UK business in Europe

221. Which of the following is an accurate definition of recruitment?a. The process of attempting to fill gaps that exist in the skills of the current labor forceb. The system of following someone around and noting how they perform their dutiesc. The process by which companies fill the need to find new employeesd. A statement that enshrines the fundamental objectives of the company

222. Which of the following is NOT normally a sign of poor morale amongst a workforce?a. High levels of absenteeismb. High levels of turnoverc. Increased levels of personal productivityd. A poor external image and difficulties attracting good recruits

223. Which of the following IS one of Herzberg's 'motivational factors'?a. Opportunities to achieve some personal advancement within the organizationb. The application of respected supervision of employees by those responsible for this role

within the organizationc. Within organizations it is the workings of groups that influence codes of behaviord. People are primarily motivated by money and little else

224. Which of the following is one of Herzberg's 'hygiene factors'?a. Recognition in the workplaceb. A reasonable salaryc. An opportunity to take some responsibility in ones place of workd. Developing a sense of achievement in the working environment

225. An increase in the rate of interest may reduce the profits of a company becausea. the customers will have more money to spendb. exports will become easier and cheaperc. costs will increase since overdrafts and loans will be more expensived. it will become more rewarding to invest in new products and projects

226. All of the following are examples of external stakeholders of a company excepta. shareholdersb. suppliersc. customersd. local government

227. Structural unemployment can be caused by all of the following, excepta. a collapse in the demand for coal, leading to pit closures in South Walesb. a slowing of the economyc. growth of the textile industry in India, leading to the failure of the industry in Lancashired. collapse of the market for valves after the invention of transistors

228. A market is said to be oligopolistic whena. it is dominated by a single supplier of a productb. a few significant suppliers dominate the market for a productc. there are many small firms supplying the same productd. there are many branded varieties of the product on the market

229. All of the following are examples of unfair competition, excepta. two firms agreeing to fix their pricesb. three companies agreeing to share a market between themc. a monopolist charging excess prices for its productd. exploiting a patent that the firm has on a product it has developed itself

230. A firm will have monopoly power ifa. it is the sole producer of its productb. it has a market share of at least 25%c. it can set its priced. it is making high profits

231. All of the following are examples of unfair competition, excepta. restricting supply to retailers who agree to take a complete range of itemsb. a monopoly charging excessive prices because of lack of competitionc. market sharing; where a group of firms agree to share a market and fix prices in their

favord. a firm taking out a patent for a drug it has invented

232. The dominant firm in a market is operating at near full capacity, and the other firms can do little to significantly increase their supply to the market. This will lead to all of the following, except

a. rising prices as demand begins to outstrip supplyb. high and rising profit marginsc. increased levels of marketing, especially advertisingd. new firms considering entering the market

233. A rise in interest rates, followed by a rise in the exchange rate, will result in all of the following effects, except

a. The price of imported raw materials will riseb. The price of imported raw materials will fallc. The price of exported goods will rised. Domestic producers will find it harder to compete against imported goods

234. The business cycle is the regular pattern of upturns and relative downturns in output and demand within an economy. All of the following can cause this, except

a. Government policies which effectively achieve steady, sustainable growthb. changes in business confidence, leading to more of less capital investmentc. stock building, followed by destockingd. Irregular buying of consumer durables such as cars and household appliances

235. Which of the following might cause a downturn in the economy?a. The demand for a product is exceeding its supplyb. A total fall in output and expenditurec. Distinct signs of growing business confidenced. Stocks are starting to exceed demand

236. If the pound increased in value against the dollar what would happen to the price of exports?a. Imports will become more expensive and exports will be less expensiveb. An increase in the exchange rate means dearer exports but cheaper importsc. The exchange is influenced by government action in order to prevent it changing to an

undesirable leveld. The government will buy the currency in order to support its value

237. Rising interest rates can have all but one of the following implications for an economy. Which one is it?

a. Credit sales will fallb. Investment may start to fall as business loses confidencec. Potential exporters will see the UK market as one worth selling tod. As the cost of maintaining working capital rises so stocks will need to be reduced

238. Which of the following is an accurate definition of interest rates?a. The cost of borrowing moneyb. The price of one currency expressed in terms of anotherc. The level of unemployment that is normally apparent in an economy as some people are

in between jobs or searching for a new oned. The setting of the exchange rate by the forces of the market for currency

239. Which of the following would probably NOT be the result of a period of relatively high inflation?

a. Lower sales within the economyb. A loss in international competitivenessc. An increase in the trade surplus of the countryd. Workers demand higher wages

240. Which of the following is NOT a primary cause of inflation in an economy?a. Large increases in consumer demand that cannot be adequately meet by current supplyb. Increases in costs, wages, imported goods / components/ raw materials and other

expensesc. A belief amongst many in the population that prices will be rising in the futured. Falls in the amount of money in circulation beneath the growth rates being recorded

by the economy

241. Which of the following is an accurate definition of price inflationa. An increase in pricesb. A persistent increase in the general level of pricesc. Decreases in the general level of pricesd. The index that measures monthly movements in prices

242. Which of the following is a clear sign that an economy is heading for recession?a. A rise in the demand for consumer goodsb. Companies start to post growing amounts of bad debtsc. The capacity within the economy is being fully usedd. Potential bottlenecks start to appear within the economy

243. Which of the following might cause cyclical unemployment?a. A downturn in world export tradeb. The replacement of coal by gas in many of the UK power stationsc. A fall in the competitiveness of UK clothing productsd. Some workers in the hotel trade being laid off in late October

244. Financial statements are prepareda. Only for publicly owned business organizationsb. For corporations, but not for sole proprietorships or partnershipsc. Primarily for the benefit of persons outside of the business organization

d. In either monetary or nonmonetary terms, depending upon the need of the decision maker

245. The basic purpose of an accounting system is toa. Develop financial statements in conformity with generally accepted accounting

principlesb. Provide as much useful information to decision makers as possible, regardless of costc. Record changes in the financial position of an organization by applying the concepts of

double-entry accountingd. Meet an organization's need for accounting information as efficiently as possible

246. Information is cost effective whena. The information aids management in controlling costsb. The information is based upon historical costs, rather than upon estimated market

valuesc. The value of the information exceeds the cost of producing itd. The information is generated by a computer-based accounting system

247. Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed toward the information needs of

a. Investors and creditorsb. Government agencies such as the Internal Revenue Servicec. Customersd. Trade associations and labor unions

248. A complete set of financial statements for Hartman Company, at December 31, 1999, would include each of the following, except

a. Balance sheet as of December 31, 1999b. Income statement for the year ended December 31, 1999c. Statement of projected cash flows for 2000d. Notes containing additional information that is useful in interpreting the financial

statements249. All of the following are characteristics of managerial accounting, except

a. Reports are used primarily by insiders rather than by persons outside of the business entity

b. Its purpose is to assist managers in planning and controlling business operationsc. Information must be developed in conformity with generally accepted accounting

principles or with income tax regulationsd. Information may be tailored to assist in specific managerial decisions

250. In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a managerial accounting report is more likely to

a. Be used by decision makers outside of the business organizationb. Focus upon the operation results of the most recently completed accounting periodc. View the entire organization as the reporting entityd. Be tailored to the specific needs of an individual decision maker

251. The nature of an asset is best described asa. Something with physical form that is valued at cost in the accounting recordsb. An economic resource owned by a business and expected to benefit future operationsc. An economic resource representing cash or the right to receive cash in the near futured. Something owned by a business that has a ready market value

252. The balance sheet item that represents the resources invested by the owner isa. Accounts receivableb. Cashc. Note payabled. Owner's equity

253. Arguments that the cost principle is not a satisfactory basis for the valuation of assets in financial statements are usually based on

a. The lack of objective evidence to permit verification of cost datab. Increased availability and capacity of computersc. Stronger internal control structuresd. Continued inflation

254. The amount of owner's equity in a business is not affected bya. The percentage of total assets held in cashb. Investments made in the business by the ownerc. The profitability of the businessd. The amount of dividends paid to stockholders

255. An income statement communicates information regarding revenues and expensesa. For a period of timeb. At a given point in timec. For some point of time in the futured. At the beginning of the fiscal year

256. The realization principle indicates that revenue usually should be recognized and recorded in the accounting records

a. When goods are sold or services are rendered to customersb. When cash is collected from customersc. At the end of the accounting periodd. Only when the revenue can be matched by an equal dollar amount of expenses

257. The matching principle is best demonstrated bya. Using debits to record decreases in owner's equity and credits to record increasesb. The equation A = L + OEc. Allocating the cost of an asset to expense over the periods during which benefits are

derived from ownership of the assetd. Offsetting the cash receipts of the period with the cash payments made during the

period258. The matching principle

a. Applies only to situations in which a cash payment occurs before an expense is recognized

b. Applies only to situations in which a cash receipt occurs before revenue is recognizedc. Is used in accrual accounting to determine the proper period in which to recognize

revenued. Is used in accrual accounting to determine the proper period for recognition of

expenses259. The reason that both expenses and dividends are recorded by debit entries is that

a. All dividend and expense transactions involve offsetting credit entries to the Cash account

b. Both expenses and dividends are offset against revenue in the income statementc. Both expenses and dividends reduce owner's equityd. The statement is untrue-expenses are recorded by debits, but withdrawals are recorded

by credits to the owner's drawing account

260. The concept of adequate disclosurea. Does not apply to information which is immaterialb. Grants users of the financial statements access to a company's accounting recordsc. Does not apply to events occurring after the balance sheet dated. Specifies which accounting methods must be used in a company's financial statements

261. The concept of adequate disclosure requires a company to inform financial statement users of each of the following, except

a. The accounting methods in useb. The due dates of major liabilitiesc. Destruction of a large portion of the company's inventory on January 20, three weeks

after the balance sheet date, but prior to issuance of the financial statementsd. Income projections for the next five years based upon anticipated market share of a

new product; the new product was introduced a few days before the balance sheet date

262. When a business closes its accounts only at year-enda. Financial statements are prepared only at year-endb. Adjusting entries are made only at year-endc. Revenue and expense accounts reflect year-to-date amounts throughout the yeard. Monthly and quarterly financial statements cannot be prepared

263. When a business adjusts its records monthly, but closes its accounts only at year-enda. Interim financial statements are prepared using the amounts shown in an adjusted trial

balance at the end of the interim period desiredb. Only annual financial statements can be preparedc. Interim financial statements are prepared by subtracting prior balances from current

balances for all accountsd. The revenue and expense accounts in an adjusted trial balance reflect year-to-date

amounts264. Which of the following amounts appears in both the Income Statement debit column and the

Balance Sheet credit column of a worksheet?a. Net incomeb. Net lossc. Dividendsd. Retained earnings

265. Which of the following is not included in an end-of-period worksheet?a. Information for adjusting entriesb. Financial statement informationc. Trial balanced. Closing entries

266. Preparation of interim financial statementsa. Makes the preparation of year-end financial statements unnecessaryb. Requires the journalizing and posting of adjusting entriesc. Requires the journalizing and posting of closing entriesd. Is done monthly or quarterly-in between the year-end financial statements

267. If monthly financial statements are desired by managementa. Journalizing and posting adjusting entries must be done each monthb. Journalizing and posting closing entries must be done each monthc. Monthly financial statements can be prepared from worksheets; adjustments and

closing entries need not be entered in the accounting recordsd. Adjusting and closing entries must be entered in the accounting records before

preparation of interim financial statements