MGT401 Quiz 1

Q1. The investors are considered as the ____________ users of the general-purpose financial statements.

1. Outside
2. Stakeholder
3. Primary
4. Secondary

Correct answer: Primary

Q2. Which of the following statements are INCORRECT?

1. Permanent differences between accounting profit and taxable profit affect the effective income tax rate of future periods
2. Permanent differences between accounting profit and taxable profit affect the effective income tax rate of future periods
3. The adjustment in a deferred income tax account due to a tax rate changes affects accounting profit in the year in which the tax rate changes.
4. The amount of the premium on a bond issue is subtracted from the nominal value of the bonds to determine the net liability reported in the balance sheet.

Correct answer: Permanent differences between accounting profit and taxable profit affect the effective income tax rate of future periods

Q3. In cash flow statement, capital investments are presented in the:

1. Financing activity
2. Operating activity
3. Cash and cash equivalents
4. Investing activity

Correct answer: Investing activity

Q4. The short-term lenders of the organizations are more concerned with:

1. Financial Performance and Financial Position
2. Financial Performance and Liquidity
3. Cash Flows and Liquidity
4. Financial Performance and Goodwill

Correct answer: Cash Flows and Liquidity

Q5. Issuance of share for cash for expansion of business operations is considered as:

1. Operating activity
2. Financing activity
3. All of the given options
4. Financing activity

Correct answer: Financing activity

Q6. Which of the following is/are primarily desirable for a financial health?

1. Positive net cash from financing activities
2. Positive net cash from operating activities
3. Positive net cash from investing activities
4. All of the given options

Correct answer: Positive net cash from operating activities

Q7. The company has sold the machinery for worth Rs. 12 million which also includes Rs. 2 million gain from the sale of machinery. This transaction would affect the:

1. Operating activity and financing activity
2. Financing activity and investing activity
3. Investing activity
4. Financing activity

Correct answer: Investing activity

Q8. Which of the following is considered as outflow of cash?

1. Payment of dividend
2. Issuance of shares
3. Issuance of debentures
4. Loan taken from bank

Correct answer: Payment of dividend

Q9. All of the followings are the financial statements, EXCEPT:

1. Cash flows statement
2. Balance sheet
3. Cash and bank reconciliation statement
4. Statement of financial position

Correct answer: Cash and bank reconciliation statement

Q10. The ______________ of financial information is capable of making difference in the decisions made by the stakeholders and users.

1. Confirmatory value
2. Biasedness
3. Completeness
4. Timeliness

Correct answer: Confirmatory value