Financial Management
Chapter Exam Questions
Course Introduction
Financial Management is a comprehensive course that introduces students to the principles and practices essential to the effective management of a firms financial resources. The course covers fundamental concepts such as financial analysis, planning and control, time value of money, capital budgeting, risk assessment, cost of capital, and methods of financing, including debt and equity. By integrating case studies and real-world examples, students develop the analytical skills necessary to evaluate financial decisions, maximize shareholder value, and understand the impact of financial strategies on organizational growth and sustainability.
Recommended Textbook Managerial Accounting v. 2.1 by Kurt Heisinger and Joe Hoyle
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Page 2
Chapter 1: What Is Managerial Accounting
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Sample Questions
Q1) An internal auditor typically reports to the CFO and is responsible for confirming that the company has controls to ensure accurate financial data.
A)True
B)False
Answer: True
Q2) According to the IMA Statement of Ethical Professional Practice,competence means that each member has a responsibility for all the following except:
A)refrain from using confidential information for unethical or illegal advantage.
B)maintaining an appropriate level of professional expertise.
C)recognizing and communicating professional limitations.
D)performing professional duties in accordance with relevant laws,regulations and technical standards.
E)None of the above.
Answer: A
Q3) Period costs are also called manufacturing costs.
A)True
B)False
Answer: False
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3
Chapter 2: How Is Job Costing Used to Track Production Costs
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Sample Questions
Q1) Service organizations often use a predetermined overhead rate similar to manufacturing companies.
A)True
B)False
Answer: True
Q2) The overhead costs applied to jobs using a predetermined overhead rate are recorded by debiting Work in Process Inventory and crediting Manufacturing Overhead.
A)True
B)False
Answer: True
Q3) Which of the following accounts would probably not be found in the Job Costing accounts of a service organization?
A)Finished Goods.
B)Overhead.
C)Cost of Services.
D)Supplies Inventory.
E)None of the answer choices is correct.
Answer: A
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Chapter 3: How Does an Organization Use Activity-Based
Costing to Allocate Overhead Costs
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Sample Questions
Q1) Which of the following items is a unit-level activity?
A)Purchase requisitions issued for raw materials needed to produce groups of products.
B)Direct labor assembling products.
C)Maintenance performed on the factory building.
D)Quality inspections of groups of products.
E)None of the answer choices is correct.
Answer: B
Q2) Activity-based costing and activity-based management are two terms used to describe the same concept.
A)True
B)False
Answer: False
Q3) U.S.Generally Accepted Accounting Principles require all manufacturing costs be allocated to products for inventory costing purposes.
A)True
B)False
Answer: True
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Page 5
Chapter 4: How Is Process Costing Used to Track
Production Costs
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Sample Questions
Q1) The Packaging Department at Vail Incorporated had 51,000 units in beginning inventory.These units contained $105,000 in direct materials,$120,000 in direct labor,and $90,000 in overhead.During the period,the department incurred costs of $480,000 in direct materials,$600,000 in direct labor and $300,000 in overhead and started 240,000 units.Ending inventory consisted of 18,000 units which were 100% complete with respect to direct materials and 70% complete with respect to direct labor and overhead.How many units were transferred out?
A)309,000
B)291,000
C)282,000
D)273,000
E)None of the answer choices is correct.
Q2) The production cost report is often prepared using computerized software to minimize math errors and to speed up the process.
A)True B)False
Q3) A job costing system would be appropriate for an oil refinery. A)True B)False
Page 6
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Chapter 5: How Do Organizations Identify Cost Behavior
Patterns
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Sample Questions
Q1) Refer to Exhibit 5-4.What is the estimated cost per machine hour?
A)$34
B)$55
C)$20
D)$40
E)None of the answer choices is correct.
Q2) An example of a mixed cost would include salespersons who are paid salaries plus commissions based on sales dollars.
A)True
B)False
Q3) All costs behave in a linear manner.
A)True
B)False
Q4) Refer to Exhibit 5-6.Using the information above,what is the cost equation in the form Y = f + vX?
A)880 = f + v (1,016.75)
B)Y = 1,016.75 + 880X
C)1,016.75 = 880 + vX
D)Y = 880 + 1,016.75X
E)None of the answer choices is correct.
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Chapter 6: How Is Cost-Volume-Profit Analysis Used for Decision Making
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Sample Questions
Q1) Which of the following companies would be most likely to use the break-even point expressed in units?
A)An accounting firm
B)A law firm
C)An electrician
D)An automobile dealer
E)None of the answer choices is correct.
Q2) Target profit before taxes is calculated as target profit after tax divided by one minus the tax rate.
A)True
B)False
Q3) The contribution margin per unit is the amount each unit sold contributes to covering fixed costs and increasing profit.
A)True
B)False
Q4) It is important for all profit and non-profit companies to determine their profit desired after accounting for income taxes.
A)True
B)False
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Chapter 7: How Are Relevant Revenues and Costs Used to
Make Decisions
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Q1) Refer to Exhibit 7-4.If allocated fixed costs are based on sales revenue for each product line as a proportion of total sales revenue,what is the profit or (loss)for Color?
A)$8,500
B)$16,000
C)$31,000
D)$13,000
E)None of the answer choices is correct.
Q2) Joint products are two or more products produced from a single input.
A)True
B)False
Q3) Refer to Exhibit 7-1.Talmont is considering the option of throwing away the remaining smart phone units that are in work-in-process inventory.What effect would this decision have on net income?
A)Net income would decrease by $1,060 for each unit discarded.
B)Net income would decrease by $600 for each unit discarded.
C)Net income will increase by $200 for each unit discarded.
D)This decision would have no effect on net income.
E)None of the answer choices is correct.
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Chapter 8: How Is Capital Budgeting Used to Make Decisions
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Sample Questions
Q1) Refer to Exhibit 8-3.What is the net present value of Investment B (rounded to the nearest dollar)?
A)($9,700)
B)$250,300
C)$100,000
D)($10,000)
E)None of the answer choices is correct.
Q2) If a project's net present value is zero,the internal rate of return is:
A)less than the discount rate.
B)equal to the discount rate.
C)greater than the discount rate.
D)cannot be determined without more information.
E)None of the answer choices is correct.
Q3) The internal rate of return (IRR)represents the cash flows required to get a net present value of zero.
A)True
B)False
Q4) The hurdle rate used to evaluate an investment is also called the discount rate.
A)True
B)False
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Chapter 9: How Are Operating Budgets Created
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Q1) An operating budget is similar to a capital budget in that both are long-term budgets.
A)True
B)False
Q2) Refer to Exhibit 9-1.What will accounts payable be at the end of April?
A)$552,000
B)$1,272,000
C)$1,128,000
D)$1,848,000
E)None of the answer choices is correct.
Q3) All of the following appear on the budgeted income statement except:
A)selling and administrative expenses.
B)cost of goods sold.
C)accounts payable.
D)sales.
E)None of the answer choices is correct.
Q4) Organizations use budgets to control operations,because budgets provide a means to evaluate employee and company performance.
A)True
B)False
Page 11
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Chapter 10: How Do Managers Evaluate Performance Using Cost Variance Analysis
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Sample Questions
Q1) Most managers prefer attainable standards rather than ideal standards for the following reasons except:
A)attainable standards reflect what really happens in the factory.
B)attainable standards allow for occasional downtime for equipment.
C)attainable standards motivate employees to achieve perfection.
D)attainable standards recognize that some materials might have to be scrapped.
E)None of the answer choices is correct.
Q2) Which of the following is a possible cause for an unfavorable labor rate variance?
A)An unexpected increase in hiring new unskilled personnel.
B)Producing fewer units than expected.
C)An unexpected increase in demand caused the direct labor workforce to work overtime.
D)Using attainable standards rather than ideal standards.
E)None of the answer choices is correct.
Q3) The variable overhead efficiency variance is the difference between the actual hours worked at the standard rate and the standard hours worked at the standard rate.
A)True
B)False
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Chapter 11: How Do Managers Evaluate Performance in
Decentralized Organizations
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Sample Questions
Q1) Refer to Exhibit 11-1.Using the segmented income statements,what is the profit margin ratio for the Bikes Division (to the nearest tenth of a percent)?
A)13.5
B)41.7%
C)22.5%
D)58.3%
E)None of the answer choices is correct.
Q2) Refer to Exhibit 11-3.If Dillon's cost of capital is 25%,what is the division's residual income?
A)$ 200,000
B)$800,000
C)$440,000
D)$1,200,000
E)None of the answer choices is correct.
Q3) Asset turnover is calculated as sales divided by average operating assets.
A)True
B)False
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Chapter 12: How Is the Statement of Cash Flows Prepared and Used
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Sample Questions
Q1) Factory equipment sold for cash would appear in the financing activities section of the statement of cash flows.
A)True
B)False
Q2) The operating cash flow ratio is calculated as cash provided by operating activities divided by current liabilities.
A)True
B)False
Q3) Refer to Exhibit 12-3.Which of these would be deducted from net income as part of the operating activities section,when using the indirect method of preparing the statement of cash flows?
A)2,3,5,7,8,& 10
B)1,4,& 6
C)2,3,5,& 7
D)3,4,5,6,& 7
E)None of the answer choices is correct.
Q4) Operating cash flow ratios are always greater than 1.0.
A)True
B)False
14
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Chapter 13: How Do Managers Use Financial and
Nonfinancial Performance Measures
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Sample Questions
Q1) The following condensed income statement is for Boston Inc. \(\begin{array}{c}
\text { Boston Inc.}\\
\text { Income Statement}\\
\text { Years ended December 31, 2017 and 2016}\\
\text { (in thousands)}\\\\ \begin{array}{lcc} &2017&2016\\
\text { Net sales } & \$ 20,000 & \$ 13,000 \\
\text { Cost of goods sold } & 13,000 & 9,000 \\
\text { Gross margin } & 7,000 & 4,000 \\
\text { Selling and administrative expenses } & 3,000 & 2,000 \\
\text { Operating income } & 4,000 & 2,000 \\
\text { Other expense, net } & 300 & 200 \\
\text { Income before taxes } & 3,700 & 1,800 \\
\text { Income tax expense } & 800 & 400 \\
\text { Net income } & \$ 2.900 & \$ 1.400 \\
\end{array}\end{array}\)
Prepare a trend analysis of the income statements from 2016 to 2017.(Round percent computations to one decimal place. )
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