ACC501 Quiz 1

Q1. Which of the following cost is reported on the income statement as the cost of goods sold?

1. Period cost
2. Managerial cost
3. Product cost
4. Selling cost

Correct answer: Product cost

Q2. The income statement of a company shows earnings before interest & tax (EBIT) of Rs. 5,000 and interest 4,000. What would be the cash coverage ratio if depreciation is Rs. 3,000?

1. 1/2 times
2. 1.25 times
3. 3 times
4. 2 times

Correct answer: 2 times

Q3. Which one of the following financial statement shows the sources from which cash has been generated and how it has been spent during a period of time?

1. Balance Sheet
2. Owner’s Equity Statement
3. Income Statement
4. Cash Flow Statement

Correct answer: Cash Flow Statement

Q4. Balance Sheet is based upon which of the following formula?

1. Assets + Stockholder’s equity = Liabilities
2. Assets = Liabilities + Stockholder’s equity
3. Assets = Liabilities – Stockholder’s equity
4. Assets + Liabilities = Stockholder’s equity

Correct answer: Assets = Liabilities + Stockholder’s equity

Q5. The accounting definition of income is:

1. Income = Current Assets – Current Liabilities
2. Income = Revenues – Current Liabilities
3. Income = Fixed Assets – Current Assets
4. Income = Revenues – Expenses

Correct answer: Income = Revenues – Expenses

Q6. Which of the following equation best represents Net Working Capital?

1. None of the given options
2. Current assets – current liabilities
3. Current liabilities – current assets
4. Current assets = current liabilities

Correct answer: Current assets – current liabilities

Q7. Which of the following is the primary issue while investing in financial assets?

1. Long-term cash flow a company needs to pay its bills
2. Short-term cash flow a company needs to pay its bills
3. Associated Risks & rewards
4. International Aspect of corporate finance

Correct answer: Associated Risks & rewards

Q8. The use of debt in the firm’s capital structure is called:

1. Financial accounting
2. Financial modeling
3. Financial leverage
4. Accounting Liquidity

Correct answer: Financial leverage

Q9. In which form of business organizations, owners have limited liability?

1. Joint stock company
2. Partnership
3. Sole proprietorship
4. None of the above

Correct answer: Joint stock company

Q10. Mr. A has just recently started a business by investing a capital of Rs. 500,000. He will be the only owner of the business and also enjoy all the profits of the business. Which type of business is being employed by Mr. A?

1. Sole-proprietorship
2. Partnership
3. None of the given options
4. Corporation

Correct answer: Sole-proprietorship