Financial Management Test Questions
Course Introduction
Financial Management is a foundational course that introduces students to the principles and practices of managing an organizations financial resources. The course covers key topics such as financial analysis, planning and forecasting, capital budgeting, cost of capital, working capital management, and risk assessment. Students will learn how to make informed financial decisions that maximize value, interpret financial statements, evaluate investment opportunities, and understand the financial environment in which businesses operate. Through case studies, real-world applications, and analytical tools, this course equips students with the skills necessary to strategically manage finances in both corporate and personal contexts.
Recommended Textbook
Introduction to Managerial Accounting 4th Canadian Edition by Peter C. Brewer
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Chapter 1: An Introduction to Managerial Accounting and Cost Concepts
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Sample Questions
Q1) List four major potential benefits of successfully implementing a just-in-time (JIT)system in a manufacturing company.
Answer: 1.substantial reduction in inventory ordering and warehousing costs.
2.reduction in waste due to inventory obsolescence and pilferage.
3.a commitment to zero defects.
4.a reduction in time to complete a product.
Q2) Financial accounting is primarily concerned with:
A) reporting to external investors and creditors.
B) long term decision making.
C) feasibility analysis.
D) reporting exclusively to internal users.
Answer: A
Q3) Managerial Accounting reports are prepared for external users while Financial Accounting reports are prepared for internal users.
A)True
B)False
Answer: False
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Chapter 2: Systems Design: Job-Order Costing
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Sample Questions
Q1) Gabel Inc.is a merchandising company.Last month the company's merchandise purchases totalled $63,000.The company's beginning merchandise inventory was $13,000 and its ending merchandise inventory was $15,000.What was the company's cost of goods sold for the month?
A) $61,000.
B) $63,000.
C) $65,000.
D) $91,000.
Answer: A
Q2) If raw materials costing $35,000 were purchased during January,the total manufacturing costs for the month was?
A) $144,000.
B) $145,000.
C) $146,000.
D) $151,000.
Answer: C
Q3) A cost that differs from one month to another is known as a differential cost.
A)True
B)False
Answer: False
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Chapter 3: Systems Design: Activity-Based Costing
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Sample Questions
Q1) What is the company's contribution margin for the quarter?
A) $1,653,750.
B) $771,750.
C) $1,910,965.
D) $1,028,965.
Answer: A
Q2) In order for a cost to be variable it must vary with either units produced or units sold.
A)True
B)False
Answer: False
Q3) The scattergraph method yields cost estimates that are the most precise possible. A)True
B)False
Answer: False
Q4) Indirect costs,such as manufacturing overhead,are always fixed costs. A)True
B)False
Answer: False
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Chapter 4: Systems Design: Process Costing
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Sample Questions
Q1) Stan Wilson,a newly hired worker at Superior Molding,was puzzled by the job cost sheets attached to the jobs he worked on.He understood the materials and labour cost entries - these represent the actual costs of materials he requisitioned for the job and the cost of the labour hours he recorded for the job.However,he did not understand the entry for manufacturing overhead.This entry was made at the end of the day by the accountants and he had no idea where this number came from.He asked the company's controller,Mary Donner,but the only part of the explanation he understood was that the overhead entries do not represent actual overhead costs.
Required:
Explain to Stan what the manufacturing overhead entries on the job cost sheet mean.
Q2) When completed goods are sold the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process.
A)True
B)False
Q3) Scanlon Company has a job-order costing system and applies manufacturing overhead cost to products on the basis of machine hours.The following estimates were used in preparing the predetermined overhead rate for the most recent year:
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Chapter 5: Cost Behavior: Analysis and Use
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Sample Questions
Q1) Assuming that Jimbob Co.uses the FIFO method,the equivalent units of production for materials would be?
A) 45,000 units.
B) 46,000 units.
C) 48,000 units.
D) 54,000 units.
Q2) Using the weighted-average method,the cost per equivalent unit of conversion cost for May is ? (Round your answers to the nearest whole cent)
A) $5.14.
B) $5.68.
C) $6.00.
D) $6.41.
Q3) Using the FIFO method,the equivalent units for materials are closest to?
A) 104,000 units.
B) 113,600 units.
C) 120,000 units.
D) 154,800 units.
Q4) Production and cost data for the month of February for Process A of the Packer Manufacturing Company follow:
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Chapter 6: Cost-Volume-Profit Relationships
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Sample Questions
Q1) The credits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:
A) $2,202,600.
B) $2,218,050.
C) $2,233,500.
D) $2,249,700.
Q2) The total credits to the Manufacturing Overhead account during the year were closest to:
A) $124,254.
B) $124,494.
C) $125,055.
D) $125,667.
Q3) The total amount of overhead cost allocated to Product X during the year would be closest to:
A) $224,000.
B) $796,400.
C) $972,450.
D) $1,145,000.
Q4) What are the four categories of quality costs and which costs are included within each?
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Chapter 7: Profit Planning
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Sample Questions
Q1) There are various budgets within the master budget.One of these budgets is the production budget.Which of the following BEST describes the production budget?
A) It details the required direct labour hours.
B) It details the required raw materials purchases.
C) It is calculated based on the sales budget,the desired beginning inventory and the desired ending inventory.
D) It summarizes the costs of producing required units for the budget period.
Q2) In a budgeted balance sheet,the merchandise inventory on February 28 would be:
A) $3,200.
B) $4,800.
C) $7,500.
D) $9,600.
Q3) If the company has budgeted to sell 25,000 units of Product SW in July,then the total budgeted selling and administrative expenses for July will be:
A) $56,250.
B) $78,000.
C) $123,250.
D) $134,250.
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Chapter 8: Standard Costs
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Sample Questions
Q1) If two companies produce the same product and have the same total sales and same total expenses,operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost structure.
A)True
B)False
Q2) Based on the information above,What are the break-even sales in units?
Q3) Once the break-even point has been reached,increases in contribution margin will be reflected dollar for dollar in increased net income.
A)True
B)False
Q4) Belli-Pitt,Inc.produces a single product.The results of the company's operations for a typical month are summarized in contribution format as follows:
Q5) The inclusion of fixed manufacturing costs in an absorption costing statement can lead to difficulties is making some decisions based upon product costs.
A)True
B)False
Q6) Given the above data,how many families can receive a box of food?
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Chapter 9: Flexible Budgets and Overhead Analysis
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Sample Questions
Q1) A sunk cost is a cost that has already been incurred and that cannot be avoided regardless of what action is chosen.
A)True
B)False
Q2) Existing fixed manufacturing overhead costs are not relevant in deciding whether to accept a special order.
A)True
B)False
Q3) Future costs that do not differ among the alternatives are not relevant in a decision.
A)True
B)False
Q4) If by dropping a product a firm can avoid more in fixed costs than it loses in contribution margin,then the firm is better off economically if the product is dropped. A)True
B)False
Q5) Variable costs are always relevant costs.
A)True
B)False
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Chapter 10: Decentralization
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Sample Questions
Q1) The net present value is closest to:
A) $20,400.
B) $28,400.
C) $80,000.
D) $50,000.
Q2) The nominal cost of capital does not include a factor for expected inflation.
A)True
B)False
Q3) Jimbob Co.has purchased new equipment at a cost of $200,000.The business wishes to consider in its capital budgeting analysis the impact of the tax shield resulting from this purchase.The capital cost allowance rate for this type of asset is 30% subject to the half year rule in the year of purchase.The applicable annual corporate tax rate is 40% and Jimbob Co.'s cost of capital is 10%.
Required:
What are the annual tax shield amounts to be used in net present value calculations for the first five years of the life of the equipment? (Round to even dollars)
Q4) Monson Company is considering three investment opportunities with cash flows as described below:
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Chapter 11: Relevant Costs for Decision Making
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Sample Questions
Q1) To record the use of direct materials in production,the general ledger would include what entry to the materials quantity variance account?
A) $900 debit.
B) $900 credit.
C) $3,600 debit.
D) $3,600 credit.
Q2) Lido Company's standard and actual costs per unit for the most recent period,during which 400 units were actually produced,are given below:
Q3) The fixed overhead budget variance is not controllable by managers since fixed costs are not controllable.
A)True
B)False
Q4) The variable overhead spending variance is:
A) $220 F.
B) $220 U.
C) $240 F.
D) $240 U.
Q5) Determine the materials price variance:
Q6) Determine the total labour cost variance:
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Chapter 12: Capital Budgeting Decisions
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Sample Questions
Q1) The return on investment last year for the Northern Division was?
A) 18.00%.
B) 28.13%.
C) 40.00%.
D) 62.50%.
Q2) Which of the following are benefits of decentralization? I Giving a manager of a division greater decision making control over his/her division provides vital training for a manager who is on the rise in the company.
II Managers at corporate headquarters have greater control in seeing that the goals of the company are realized.
III Added decision-making authority and responsibility often leads to increased job satisfaction and often persuades a manager to put forth his/her best efforts.
A) Only I and II.
B) Only II and III.
C) Only I and III.
D) Only I.
Q3) The following data have been extracted from the year-end reports of two companies-Company X and Company Y:
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Chapter 13: How Well Am I Doing Statement of Cash Flows
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Sample Questions
Q1) Calculate the average collection period for 20 × 4
Q2) Orantes Company's accounts receivable turnover for 20 × 6 was closest to:
A) 10.3 times.
B) 13.5 times.
C) 14.8 times.
D) 19.3 times.
Q3) Laroche Company's book value per share at the end of 20 × 6 was closest to:
A) $10.00.
B) $17.50.
C) $48.33.
D) $52.50.
Q4) Comparative financial statements for Springville Company for the last two years appear below.The market price of each share of Springville's common stock was $25 on December 31,Year 2.During Year 2,dividends of $2,000,000 were paid to preferred shareholders and $10,000,000 to common shareholders.
Q5) Lisa Inc.'s current ratio at December 31,20 × 7,was closest to:
A) 0.6 to 1.
B) 1.1 to 1.
C) 1.8 to 1.
D) 2.0 to 1.
Page 15
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Chapter 14: How Well Am I Doing Financial Statement
Analysis
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Sample Questions
Q1) If the direct method to prepare the operating section of the cash flow statement is used instead of the indirect method,changes will be required in the financing and investing sections too.
A)True
B)False
Q2) An increase in a noncash asset will be reported as a source of cash on the cash flow statement.
A)True
B)False
Q3) If an entity both sells capital assets and purchases capital assets during the year,only the net cash inflow or outflow will be reported in the investing section of the cash flow statement.
A)True
B)False
Q4) The operation activities section of the cash flow statement will exclude changes in all noncurrent balance sheet accounts.
A)True
B)False
Q5) Financial statements for Larned Company appear below:
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