Basic Accounting 14

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Objective Questions and Answers of MBA: Basic Accounting 14

Subject: Objective Questions and Answers of MBA: Basic Accounting 14

Part 14: Objective questions and answers of Basic Accounting


Q1. ______________ means expanding the number of investments which cover different kinds of stocks.

a) Diversification

b) Standard deviation

c) Variance

d) Covariance


Q2. One of the problems with attempting to forecast stock market values is that

a) There are no variables that seem to predict market return

b) The earnings multiplier approach can only be used at the firm level

c) The level of uncertainty surrounding the forecast will always be quite high

d) Dividend payout ratios are highly variable


Q3. When the market's Required Rate of Return for a particular Bond is much less than its

Coupon Rate, the Bond is selling at

a) Premium

b) Discount

c) Par

d) Face


Q4. Which group of ratios measures a firm's ability to meet short-term obligations?

a) Liquidity ratios

b) Debt ratios

c) Coverage ratios

d) Profitability ratios


Q5. ABC’s and XYZ’s debt-to-total assets ratio is 0.4. What is its debt-to-equity ratio?

a) 0 .2

b) 0 .77

c) 0.667

d) 0.333


Q6. Which of the following is an advantage of a corporation that is NOT an advantage as in a partnership?

a) Limited liability

b) Capital shortage

c) Single taxation

d) All of the above


Q7. Financial leverage means

a) Use of more debt capital to increase profit

b) High degree of solvency

c) Low bank finance

d) None of the above


Q8. The coupon is the

a) Amount of discount received when a Bond is purchased

b) Amount paid to a Bond dealer when a Bond is purchased

c) Difference between the Bid and Ask Price

d) Stated Interest Payment on a Bond


Q9. Which of following is (are) Direct Claim Security?

a) Bonds

b) Option

c) Shares

d) a and c


Q10. Break even analysis is also called

a) Contribution Margin

b) Unit sales

c) Cost-Volume-Profit analysis

d) None of the above


Q11. Those liabilities which arise only on the happening of some event are called

a) Current liabilities

b) Outstanding liabilities

c) Deferred liabilities

d) Contingent liabilities


Q12. ______________ tells us after how much time period the amount of money will become double.

a) Real interest rate

b) Nominal interest rate

c) Rule of 72

d) Time value of money


Q13. Interest paid (earned) on only the original principal borrowed (lent) is often referred to as ______________.

a) Compound interest

b) Simple interest

c) Present value

d) Future value


Q14. What are the earnings per share (EPS) for a company that earned Rs.100, 000 last year in after-tax profits, has 200,000 common shares outstanding and Rs.1.2 million in retained earning at the year end?

a) Rs.1.00

b) Rs. 6.00

c) Rs. 0.50

d) Rs. 6.50


Q15. Which of the following statements is most correct?

a) One of the ways in which firms can mitigate or reduce agency problems between bondholders and stockholders is by increasing the amount of debt in the capital structure.

b) Managerial compensation can be structured to reduce agency problems between stockholders and managers.

c) All of above statements are incorrect

d) All of the statements above are correct


Q16. Carrying cost always calculate on

a) Inventory cost

b) Ordering cost

c) Purchase cost

d) EOQ


Q17. The higher the Future Value (FV) of the payment, the higher will be the:

a) Discount rate

b) Present value

c) Liquidity

d) Cost of borrowing


Q18. In the Balance Sheet of a firm, the Total Debt-to-Equity Ratio is 2:1.The amount of Long

Term and Short Term Sources are Rs.12 billion. What is the amount of owner’s Net Worth of the firm?

a) Rs.18 billion

b) Rs.6 billion

c) Rs.4 billion

d) Rs.2 billion


Q19. Income statement comes under the category of

a) Point in time statement

b) Period statement

c) Flow statement

d) Both b & c


Q20. In the Balance Sheet amount of total Assets is Rs.10 million, Current Liabilities Rs.5 million and Owner Equity are Rs.2 million. What is the Long term Debt-to-Equity Ratio?

a) 1 : 1

b) 1.5 : 1

c) 2 : 1

d) None of the above


Part 14: Objective questions and answers of Basic Accounting


Q1. Answer a


Q2. Answer c


Q3. Answer a


Q4. Answer a


Q5. Answer c


Q6. Answer a


Q7. Answer a


Q8. Answer d


Q9. Answer d


Q10. Answer c


Q11. Answer d


Q12. Answer c


Q13. Answer b


Q14. Answer c


Q15. Answer b


Q16. Answer c


Q17. Answer b


Q18. Answer b


Q19. Answer d


Q20. Answer b

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