Financial Management

591. The volume of sales is influenced by ______________ of a firm.

  1. finance policy
  2. credit policy
  3. profit policy
  4. fund policy
Correct answer: (D)
fund policy

592. Inventory management is essential because investments in stock are ______________.

  1. high
  2. low
  3. medium
  4. fixed
Correct answer: (A)
high

593. The difference between selling price and present book value of machinery is called

  1. Capital income
  2. Revenue income
  3. Revenue Receipt
  4. Capital Receipt
Correct answer: (A)
Capital income

594. The primary purpose of the statement of cash flows is to

  1. provide information about the investing and financing activities during a period
  2. prove that revenues exceed expenses if there is a net income
  3. provide information about the cash receipts and cash payments during a period
  4. facilitate banking relationships
Correct answer: (C)
provide information about the cash receipts and cash payments during a period

595. The category that is generally considered to be the best measure of a company's ability tocontinue as a going concern is

  1. cash flows from operating activities
  2. cash flows from investing activities
  3. cash flows from financing activities
  4. usually different from year to year
Correct answer: (A)
cash flows from operating activities

596. Which of the following would be subtracted from net income using the indirect'method?

  1. Depreciation expense
  2. An increase in accounts receivable
  3. An increase in accounts payable
  4. A decrease in prepaid expenses
Correct answer: (B)
An increase in accounts receivable

597. An asset is a

  1. Source of fund
  2. Use of fund
  3. Inflow of funds
  4. none of the above
Correct answer: (B)
Use of fund

598. Properietory ratio is calculated by

  1. Total assets/Total outside liability
  2. Total outside liability/Total tangible assets
  3. Fixed assets/Long term source of fund
  4. Properietor'sFunds/TotalTangible Assets
Correct answer: (D)
Properietor'sFunds/TotalTangible Assets

599. Financial leverage means

  1. Use of more debt capital to increase profit
  2. High degree of solvency
  3. Low bank finance
  4. None of the above
Correct answer: (A)
Use of more debt capital to increase profit

600. What relationship exists between the average collection period and accounts receivable turnover?

  1. Both ratios are expressed in number of days
  2. Both ratios are expressed in number of times receivables are collected per year
  3. As average collection period increases (decreases) the accounts receivable turnover decreases (increases)
  4. There is a direct and proportional relationship
Correct answer: (C)
As average collection period increases (decreases) the accounts receivable turnover decreases (increases)
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