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- 1. Multiple Choice
Which ONE of the following relates to the ability of a business to pay its debts as they fall due?
growth
liquidity
efficiency
profitability
- 2. Multiple Choice
The managers of a business pursue an objective of having adequate cash flow.
What possible conflict of objectives can result from this action?
a conflict between the objectives of efficiency and growth
a conflict between the objectives of profitability and growth
a conflict between managers and shareholders of the business
a conflict between managers and short-term creditors of the business
- 3. Multiple Choice
Which term refers to the extent to which the current assets of a business exceed the current liabilities of that business?
growth
liquidity
solvency
profitability
- 4. Multiple Choice
A company issues shares directly to investors,usually an institution, rather than making a public offering.
What type of equity finance is this?
placement
new issue
rights issue
share purchase plan
- 5. Multiple Choice
Which of the following is a characteristic of equity finance?
The finance must be repaid at a future date
The returns to the suppliers of finance are called dividends
Suppliers of finance have no rights of ownership over the business
Suppliers of finance have prior claim on assets in the event of liquidation
- 6. Multiple Choice
Which of the following is a type of short-term external source of funds?
leasing
overdraft
mortgages
debentures
- 7. Multiple Choice
Which financial institution is most likely to issue debentures as a method of raising finance?
unit trust
investment bank
public company
superannuation fund
- 8. Multiple Choice
What is the role of the Australian Securities Exchange (ASX)?
to supervise the banking system
to regulate the operation of companies
to investigate breaches of the Corporations Act
to make markets for the sale and purchase of shares
- 9. Multiple Choice
Which ONE of the following items would be found in the income statement of a business?
equipment
investments
gross profit
accounts payable
- 10. Multiple Choice
A business has current liabilities of $200 000 million and current assets of $250 000 million.
Which of the following statements correctly describes the position of the business?
The business has a current ratio of 0.8:1 and has a liquidity problem
The business has a current ratio of 1.25:1 and has a liquidity problem
The business has a current ratio of 0.8:1 and does not have a liquidity problem
The business has a current ratio of 1.25:1 and does not have a liquidity problem
- 11. Multiple Choice
Bill's Building Supplies has sold goods totaling $50 000 to a number of builders on 90 days' credit. The business now finds that it has a short-term cash flow problem.
What is the appropriate solution to this problem?
extend trade credit to the builders
sell the debts and lease them back
negotiate a term loan with a finance company
sell the accounts receivable to a finance company
- 12. Multiple Choice
What is ONE method of controlling current liabilities?
selling accounts receivable at a discount
having a tight policy on allowing trade credit
making interest and loan repayments on time
offering discounts for cash and early payment
- 13. Multiple Choice
Which ONE of the following is a cost control?
sales mix
pricing policy
sales objectives
expense minimisation
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