MCQ On Financial Management

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| By Mehtajimmit

Mehtajimmit

Community Contributor

Quizzes Created: 12 | Total Attempts: 29,873

Questions: 5 | Attempts: 626 | Updated: Mar 20, 2023

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Questions and Answers

1.

For a healthy business the current ratio lies between
- A.
  
  0 to 1.5
- B.
  
  1.5 to 3
- C.
  
  3 to 4.5
- D.
  
  4.5 to 6
Correct Answer
B. 1.5 to 3

Explanation
A current ratio is a measure of a company's ability to cover its short-term liabilities with its short-term assets. A ratio between 1.5 to 3 indicates that the company has enough current assets to cover its current liabilities, which is considered a healthy range. This means that the company is likely able to meet its short-term obligations without any significant issues. A ratio below 1.5 may suggest that the company is struggling to meet its short-term obligations, while a ratio above 3 may indicate that the company has too many current assets that are not being efficiently utilized.

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2.

In ABC analysis ‘A’ class consist of items having ________.
- A.
  
  Accurate records
- B.
  
  Good records
- C.
  
  Minimal records
- D.
  
  No records
Correct Answer
A. Accurate records

Explanation
In ABC analysis, the 'A' class consists of items that have accurate records. This means that these items are closely monitored and their inventory levels are tracked accurately. Accurate records for 'A' class items are important because they are typically high-value items that require careful management to ensure that they are always available when needed. By having accurate records, businesses can make informed decisions regarding the ordering, stocking, and replenishment of these items, ultimately improving efficiency and reducing costs.

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3.

The symptom of large inventory accumulation in anticipation of price rise in future will be indicated by
- A.
  
  Asset turnover ratio
- B.
  
  Working Capital turnover ratio
- C.
  
  Inventory turnover ratio
- D.
  
  All of the above
Correct Answer
C. Inventory turnover ratio

Explanation
The inventory turnover ratio measures how efficiently a company is managing its inventory by calculating the number of times inventory is sold and replaced in a given period. A high inventory turnover ratio indicates that inventory is being sold quickly, which suggests that there is no large inventory accumulation. On the other hand, a low inventory turnover ratio suggests that inventory is not being sold quickly, which could indicate a large inventory accumulation in anticipation of a future price rise. Therefore, the inventory turnover ratio is a reliable indicator of the symptom mentioned in the question.

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4.

The comparison of financial data of same time period of different organisations engaged in similar business.
- A.
  
  Time series analysis
- B.
  
  Cross-sectional analysis
- C.
  
  Spatial data analysis
- D.
  
  None of the above
Correct Answer
B. Cross-sectional analysis

Explanation
Cross-sectional analysis involves comparing the financial data of different organizations engaged in similar business during the same time period. This type of analysis allows for a comprehensive understanding of how different organizations are performing in the same industry. It helps identify trends, patterns, and differences among companies, providing valuable insights for decision-making and benchmarking purposes. Time series analysis, on the other hand, focuses on analyzing the financial data of a single organization over a period of time, while spatial data analysis is unrelated to financial data comparison.

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5.

The following is (are) the limitation of Economic Order Quantity assumption(s).
- A.
  
  Demand may vary throughout the year
- B.
  
  It assumes that the storage space is unlimited
- C.
  
  Prices of materials change throughout the year
- D.
  
  All of the above
Correct Answer
D. All of the above

Explanation
The Economic Order Quantity (EOQ) model assumes that demand is constant, storage space is unlimited, and prices of materials remain constant throughout the year. However, in reality, demand may vary throughout the year due to seasonal fluctuations or changing customer preferences. Additionally, storage space is often limited, and prices of materials can fluctuate due to market conditions. These limitations of the EOQ assumption make it less accurate in practical scenarios and may require adjustments or alternative models to optimize inventory management.

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Current Version
Mar 20, 2023

Quiz Edited by
ProProfs Editorial Team
Apr 21, 2016

Quiz Created by
Mehtajimmit

MCQ On Financial Management

For a healthy business the current ratio lies between

In ABC analysis ‘A’ class consist of items having ________.

The symptom of large inventory accumulation in anticipation of price rise in future will be indicated by

The comparison of financial data of same time period of different organisations engaged in similar business.

The following is (are) the limitation of Economic Order Quantity assumption(s).