Finance MCQs
Finance MCQs
Try to answer these 800+ Finance MCQs and check your understanding of the Finance subject. Scroll down and let's begin!
1: ________ is shown on a multiple-step but not on a single-step income statement.
A. Credited to Inventory
B. A customer utilizes a prompt payment incentive.
C. Debited to the Inventory account
D. Gross profit
2: A lorenz curve graphs the _________________ received by everyone up to a certain quintile.
A. Unequal distribution over time
B. Normative shares of income
C. Cumulative shares of income
D. Total share of income
3: Abc systems ________.
A. Highlight the different levels of activities
B. Limit cost drivers to units of output
C. Allocate costs based on the overall level of activity
D. Generally undercost complex products
4: Actual costing is a costing system that traces direct costs to a cost object by ________.
A. A cost-allocation base can be either financial or nonfinancial
B. Using the actual direct cost rates times the actual quantities of the direct-cost inputs
C. Budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base
5: As a rule of thumb, your piti costs shouldn't exceed ________ of your pretax monthly income.
A. 8 percent
B. 18 percent
C. 28 percent
D. 48 percent
6: Budgeted costs are ________.
A. The costs incurred this year
B. The costs incurred last year
C. Planned or forecasted costs
D. Competitor's costs
7: Changing the method of valuing inventory ignores the principle of ________.
A. Lower of cost or market
B. Specific identification
C. Consistency
D. Ending inventory comes from the most recent purchases
8: Financial statements are prepared from the balances in a(n) ________.
A. Unadjusted trial balance
B. Adjusted trial balance
C. Chart of accounts
D. General journal
9: Holders of equity capital ________.
A. Own the firm
B. Receive interest payments
C. Receive guaranteed income
D. Have loaned money to the firm
10: If you oppose ______, you will likely argue that ______.
A. Industrial policy; governments, not the free market, should determine which sectors succeed and fail
B. Anti-cabotage laws; the government doesn't need to support basic research
C. Industrial policy; the free market, not governments, should determine which sectors succeed and fail
D. Anti-cabotage laws; the private sector doesn't always support basic research
11: Machine setminusup would most likely be classified as a ________ cost.
A. Unit-level
B. Decrease
C. Batch-level
D. None of these
12: Managerial accounting information for a company is primarily used by ________.
A. Work-in-Process Inventory account
B. It provides information to investors needed for their investment decisions.
C. The cost of those goods that were completed during the period
D. Its employees to​ plan, direct and control operations
13: Prior period adjustments ________.
A. Always increase the beginning balance of retained earning
B. Are shown on the statement of retained earnings as corrections to the beginning balance
C. Affect balance sheet accounts only and must be included on single-step income statement
D. Must be included as a separate line item on a multi-step income statement
14: The revenue recognition principle guides accountants in ________.
A. Determining when to record revenues
B. Depreciation Expense
C. Financial statements can be prepared for specific periods
D. None of these
15: ____ is considered a social networking site for professionals.
A. Pinterest
B. MySpace
C. Google+
D. LinkedIn
E. Facebook
16: _____ and _____ are measures that are used to measure stock market performance.
A. Unsecured; bonds
B. Dividend; yield
C. Indexes; averages
D. Retained; earnings
17: _______ accounting serves internal users, whereas _______ accounting serves external users.
A. ​Managerial; financial
B. ​Managerial; advisory
C. ​Financial; managerial
D. ​Investigative; forensic
18: ________have separate cost allocation rates for each activity identified by the company.
A. Lean thinking
B. Activity-based costing (ABC) systems
C. TQM programs emphasize nonfinancial measures
D. Activity based-costing (ABC) causes more cost distortion, which results from the allocation of indirect costs, based on the types of product activities and product usage
19: By finding the total cost and dividing by the number of units produced ______________ are found.
A. Average or per unit costs
B. Good Choices
C. Law of Diminishing Returns
D. Marginal Product
20: Changes in activity have a(n) _________ effect on fixed costs per unit.
A. Inverse
B. Neutral
C. Positive
D. Negative
21: Common stockholders are sometimes referred to as ________.
A. Rights offering
B. The stock market
C. Residual owners
D. Present value of a constant growing dividend stream
22: Each cost in the activity cost pools are ________ costs.
A. Manufacturing overhead (MOH)
B. Activity-based costing (ABC)
C. Reduction of delivery speed
D. Overutilizing employees
23: Expenses that fall outside the regular operations of a business are ________.
A. Included under the other income and expenses section of the income statement
B. Not considered for the calculation of net income
C. Generally a substantial part of net income
D. Recorded in the Retained Earnings account
24: In the cost allocation process, an allocation base ________.
A. Must be some characteristic that is common to all of the cost objectives.
B. Ideally should result in cost being allocated based on a cause-and-effect relationship.
C. Selection is not an easy matter.
D. All of these answer choices are correct
25: It is important to use the__________ as the standard against which actual cost is compared.
A. Cumulative budget
B. Total budget
C. Budget at completion
D. Phased budget
26: Managerial finance ________.
A. Involves tasks such as budgeting, financial forecasting, cash management, and funds procurement
B. Involves the design and delivery of advice and financial products
C. Recognizes funds on an accrual basis
D. Devotes the majority of its attention to the collection and presentation of financial data
27: Market risk is also called __________ and _________.
A. Systematic risk, diversifiable risk.
B. Systematic risk, nondiversifiable risk.
C. Unique risk, non diverse risk.
D. Unique risk, diversifiable risk.
E. Firm-specific risk
28: Net operating losses may be _______.
A. Carried back 2 years or carried forward up to 20 years
B. Upward sloping
C. Interest paid on debt
D. Maximizing the value of the firm's equity
29: One of the main outputs of the _____ process is a cost baseline.
A. Cost budgeting
B. Cost control
C. Estimating costs
D. Cost forecasts
30: Revenue is earned when ________.
A. (or as) the business satisfies each performance obligation
B. The journal entry to record revenue has been prepared
C. There is a binding agreement to provide goods or services
D. The business has received cash from the customer
31: Standard deviation measures _____ risk.
A. Portfolio expected return
B. Total, systematic
C. Market risk premium
D. Portfolio systematic risk
32: The value of internet companies is based primarily on _____.
A. Growth opportunities
B. Replacement cost
C. Current profits
D. Tobin's q
33: The _______ decision should take precedence over the _____ decision.
A. Asset allocation; stock selection
B. Bond selection; mutual fund selection
C. Stock selection; asset allocation
D. Stock selection; mutual fund selection
34: The fundamental starting point of all the accounting statements is the ________.
A. Accounting identity
B. Computing identity
C. Investing identity
D. Financing identity
35: The ____ is not an organized security exchange.
A. New York Stock Exchange
B. American Stock Exchange
C. Midwest Stock Exchange
D. Pacific Stock Exchange
E. OTC Exchange
36: The ________ is utilized to value preferred stock.
A. Capital asset pricing model
B. Arbitrage pricing model
C. Zero-growth model
D. Black-Scholes model
37: Your _____ is an example of a liquid asset.
A. Home
B. Car
C. Checking account
D. Charge account
E. Life insurance cash value
38: The value chain is the sequence of business functions in which ________.
A. Products and services are evaluated with respect to their value to the supply chain
B. Value is deducted from the products or services of an organisation
C. Value is added to the products or services from the customers perspective
D. Usefulness is added to the products or services of an organization.
39: Work performance information and cost forecasts are main outputs of the _____ process.
A. Cost budgeting
B. Cost estimating
C. Cost control
D. Cost pricing
40: When the total fixed costs increase, the breakeven point ________.
A. Decreases
B. Increases
C. Both of these
D. None of these
41: In comparing the internal rate of return and net present value methods of evaluation, ________.
A. Internal rate of return is theoretically superior, but financial managers prefer net present value.
B. Net present value is theoretically superior, but financial managers prefer to use internal rate of return.
C. Financial managers prefer net present value, because it is presented as a rate of return.
D. Financial managers prefer net present value, because it measures benefits relative to the amount invested
42: One year from now bond c should sell for ________ (to the nearest dollar).
A. $857
B. $894
C. $835
D. $821
43: Proponents of the emh think technical analysts __________.
A. Should focus on resistance levels.
B. Should focus on support levels.
C. Should focus on financial statements.
D. Are wasting their time
44: Risk aversion is the behavior exhibited by managers who require ________.
A. An increase in return, for a given increase in risk
B. Decrease in return, for a given increase in risk
C. An increase in return, for a given decrease in risk
D. No changes in return, for a given increase in risk
45: The ______ measure of returns ignores compounding.
A. Geometric average
B. Arithmetic average
C. IRR
D. Dollar-weighted
46: The bid-ask spread exists because of _______________.
A. Market inefficiencies
B. Discontinuities in the markets
C. The need for dealers to cover expenses and make a profit
D. Lack of trading in thin markets
47: The change brought about by online competition from amazon and walmart are examples of _____
A. Same customer preferences.
B. Changing customer preferences.
C. Decreasing customer preferences.
D. None of these
48: The decision to approve a capital budget is an example of a(n) ________ decision.
A. Structured
B. Analytic
C. Semi-structured
D. Undocumented
E. Unstructured
49: The primary goal of consistently delivering superior value is to ________.
A. Expand into global markets
B. Maximize profits
C. Build profitable customer relationships
D. Avoid the need to advertise
50: Total itemized deductions must be ____ to reduce your tax liability.
A. Greater than your standard deduction
B. Greater than 5 percent of your adjusted gross income
C. Greater than 7.5 percent of your adjusted gross income
D. Less than your taxable income
51: As the risk of a stock investment increases, investors' ________.
A. Required rate of return will increase
B. Required rate of return will decrease
C. Return will increase
D. Return will decrease
52: A foreign subsidiary's ________ currency is the currency used in the firm's day-to-day operations.
A. Local
B. Integrated
C. Notational dollar
D. Functional
53: __________ damage for the sake of doing damage, and they often choose targets of opportunity.
A. Vandals
B. Saboteurs
C. Disgruntled employees
D. Hackers
54: Companies invest in trading investments with the intent of ________.
A. Increasing the amount of long-term assets
B. Gaining the controlling rights of the investee
C. Holding the investment till maturity
D. Generating a profit on a quick sale
55: If a company retires preferred stock, ________.
A. Total stockholders' equity will decrease
B. Total stockholders' equity will increase
C. The company can record a gain or loss on retirement of stock
D. The number of outstanding shares will increase
56: The purchase of equipment financed by a long-term notes payable is an example of ________.
A. Investing activity
B. Financing activity
C. Operating activity
D. Non-cash investing and financing activity
57: The entry to recognize the bad debt expense ________ when the allowance method is used.
A. Increase net income
B. Decrease total current liabilities
C. Decreases current assets
D. Increase working capital
58: The present value of an expected future payment ________ as the interest rate increases.
A. Falls
B. Rises
C. Is constant
D. Is unaffected
59: Debt is generally the least expensive source of capital. this is primarily due to ________.
A. The priority of claims on assets and earnings in the event of liquidation
B. The secured nature of a debt obligation
C. The fixed interest payments
D. The tax deductibility of interest payments
60: Real gdp per person is not an accurate measure of the standard of living because it ______.
A. Omits the goods and services that people produce for themselves.
B. Omits the goods and services imported from other countries.
C. Includes the goods and services that governments buy.
D. Includes goods and services bought by firms
61: In accounting for stock investments between 20% and 50%, the _______ method is used.
A. Equity
B. Consolidated statements
C. Controlling interest
D. Cost
62: In general, banks make profits by selling ________ liabilities and buying ________ assets.
A. Long-term; shorter-term
B. Short-term; longer-term
C. Illiquid; liquid
D. Risky; risk-free
63: In general, banks would prefer to acquire funds quickly by ________ rather than ________.
A. Educing loans; selling securities
B. Reducing loans; borrowing from the Fed
C. Borrowing from the Fed; reducing loans
D. "calling in" loans; selling securities
64: A ________ is a grouping of individual indirect cost items.
A. Cost allocation base
B. Cost assignment
C. Cost pool
D. Job-costing system
65: A business's cash receipts and cash payments for a specific period are reported on a(n) ________.
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Cash reconciliation statement
66: A cost system determines the cost of a cost object by ________.
A. Accumulating and then assigning costs
B. Accumulating costs
C. Assigning and then accumulating costs
D. Assigning costs
67: A favorable flexible budget variance in sales revenue suggests a(n) ________.
A. Decrease in number of actual units sold when compared to the expected number of units sold.
B. Increase in variable cost per unit.
C. Increase in number of actual units sold when compared to the expected number of units sold.
D. Increase in sales price
68: A normal cost system applies overhead to jobs ________.
A. By multiplying a predetermined overhead rate by the estimated amount of the allocation base incurred by the job
B. By multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job
C. Using the actual amount of overhead caused by each job
D. Using the normal amount of overhead caused by each job
69: A profit center responsibility report ________.
A. Should not include costs for which the profit center manager is not accountable
B. Does not include revenues since that information only appears on the revenue center responsibility report
C. Is the same as a performance report
D. Includes traceable fixed expenses
70: All of the following are profitability ratios except ________.
A. Profit margin
B. Earnings per share
C. Inventory turnover
D. Return on assets
E. Return on equity
71: As a key participant in financial transactions, individuals are ________.
A. That homeowners may not be able to, or choose not to, repay their loans
B. Net suppliers of funds because they save more money than they borrow
C. Both of these
D. None of these
72: Companies with a great deal of long-term debt would rate fairly high in ____ risk.
A. Business
B. Event
C. Financial
D. Liquidity
E. Market
73: Cost objects may include all of the following except ________.
A. Direct materials
B. A unit
C. A product line
D. A plant / factory
74: For each petty cash payment, the custodian of the account prepares a(n) ________.
A. Invoice
B. Purchase order
C. Receipt
D. Petty cash ticket
75: Gross margin is to absorption costing as ____ is to variable costing.
A. Gross profit
B. Territory margin
C. Income
D. Contribution margin
76: A modern perpetual inventory system ________.
A. Achieves better control over inventory
B. Records the​ quantity, but not the​ cost, of merchandise inventory on hand
C. Eliminates the need for a physical count of inventory
D. Is required by U.S. GAAP
77: A(n) ________ cost is a cost whose total amount changes in direct proportion to a change in volume.
A. Variable
B. Fixed
C. Mixed
D. Irrelevant
78: Abc and traditional systems are quite similar in ________.
A. The treatment of direct costs
B. The allocation of overheads
C. Evaluating performance
D. The identification of cost pools
79: According to the capital asset pricing model, a fairly priced security will plot _________.
A. Above the security market line
B. Along the security market line
C. Below the security market line
D. At no relation to the security market line
80: According to the capital asset pricing model, fairly priced securities have _________.
A. Negative betas
B. Positive alphas
C. Positive betas
D. Zero alphas
81: An adjusting entry that credits salaries payable is an example of a(n) ________.
A. Accrued expense
B. Deferred expense
C. Deferred revenue
D. Accrued revenue
E. None of the above
82: An ethics program is expected to have ________ impact on a firm's share price.
A. A positive
B. A negative
C. No impact
D. An unpredictable
83: Assets normally carry a _______ balance and are shown in the ______________.
A. Debit; Income statement
B. Debit; Statement of stockholders' equity
C. Credit; Balance sheet
D. Debit; Balance sheet
84: Expenses normally carry a _______ balance and are shown in the ______________.
A. Debit; income statement
B. Income statement ;debit
C. Both of these
D. None of these
85: If goods are sold on terms fob shipping point, the ________.
A. Seller normally pays the transportation costs
B. Buyer normally pays the transportation costs
C. Buyer and the seller split the transportation costs
D. Shipping company bears the transportation cost
86: In a(n) ________ center, managers are accountable to both revenues and costs.
A. Cost center
B. Revenue center
C. Profit center
D. Investment center
E. None of these
87: Both ________ and ________ are federal reserve assets.
A. Currency in circulation; reserves
B. Currency in circulation; government securities
C. Government securities; discount loans
D. Government securities; reserves
88: Both ________ and ________ are monetary liabilities of the fed.
A. Government securities; discount loans
B. Currency in circulation; reserves
C. Government securities; reserves
D. Currency in circulation; discount loans
89: A corporation uses __________ as its federal tax id number.
A. The owner's social security number
B. An EIN number
C. Business operating license number
D. None of these
90: A classified balance sheet ______.
A. Shows only current assets and current liabilities
B. Shows changes in assets, liabilities, revenues
C. And expenses
D. Contains confidential information
E. Shows subtotals for current assets and current Liabilities
91: __________ is the return on a stock beyond what would be predicted from market movements alone.
A. A normal return
B. A subliminal return
C. An abnormal return
D. None of these option
92: __________ portfolio construction starts with selecting attractively priced securities.
A. Top-down
B. Upside-down
C. Side-to-side
D. Bottom-up
93: Stock market analysts have tended to be ___________ in their recommendations to investors.
A. Slightly overly optimistic.
B. Overwhelmingly optimistic
C. Both of these
D. None of these
94: Ups devices typically run up to ____ va.
A. 1,000
B. 100
C. 500
D. 250
95: A(n) ________ gives purchasers inflation protection.
A. Junk bond
B. Floating rate bond
C. Income bond
D. Zero-coupon bond
96: A(n) ________ yield curve reflects higher expected future rates of interest.
A. Flat
B. Downwarddash-sloping
C. Upwarddash-sloping
D. Linear
97: All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to maturity.
A. A premium; equal to
B. Par; less than
C. A discount; less than
D. A discount; higher than
E. A premium; less than
98: All else constant, a bond will sell at _____ when the yield to maturity is _____ the coupon rate
A. A premium; equal to
B. Par; less than
C. A discount; less than
D. A discount; higher than
E. A premium; less than
99: The tax liability of a corporation with ordinary income of $105,000 is ________.
A. $35, 700
B. $24, 200
C. $23, 950
D. $42,000
100: The term complete portfolio refers to a portfolio consisting of _________________.
A. The risk-free asset combined with at least one risky asset
B. The market portfolio combined with the minimum-variance portfolio
C. Securities from domestic markets combined with securities from foreign markets
D. Common stocks combined with bonds
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