BUS 2010 Fundamental of
Financial Management
Practice Test 1 Exam
Questions with Verified
Solutions A+ Graded.
, 1.1 BUS2010 PRACTICE TERM
TEST 1 SOLUTIONS
This practice test is representative of the types of questions you may encounter on the Term Test, but
does not represent the actual questions on the Term Test.
Section 1 – Multiple Choice
1. In company law, the group to whom boards of directors owe the most responsibility are:
a) Stakeholders
b) Shareholders
c) Lenders
d) Government
Answer b
2. Which of the following best explains why members of a board of directors need to be
independent of management?
a) To ensure the implementation of strategy is carried out effectively
b) Because the board consists of committees
c) Because management would not have enough time to devote to board duties
d) To aid unbiased decision making
Answer d
3. If a company uses $50,000 of its cash to buy an asset then:
A. assets and liabilities will be unchanged.
B. assets will rise $50,000 as will liabilities.
C. assets will rise $50,000 as will shareholders' equity.
D. assets will fall $50,000 and liabilities will rise $50,000.
Answer a
4. The Whackem−Smackem Software Company sold $11 million of computer games in its first year of
operations. The company received payments of $7.5 million for these computer games. The company's
income statement would report:
A. sales revenue of $7.5 million.
B. accounts receivable of $3.5 million.
C. expenses of $3.5 million.
D. sales revenue of $11 million.
Answer d
,5. During its first year of operations, Widgets Incorporated reported sales revenue of $386,000 but
collected only $303,000 from customers. The amount to be reported as accounts receivable at the end
of the year is:
A. $689,000.
B. $386,000.
C. $303,000.
D. $83,000.
Answer d
1
, 6. At the end of last year, the company's assets totalled $860,000 and its liabilities totalled $740,000.
During the current year, the company's total assets increased by $58,000 and its total liabilities
increased by $24,000. At the end of the current year:
A. shareholders' equity was $154,000.
B. shareholders' equity was $120,000.
C. shareholders' equity was $34,000.
D. shareholders' equity was $178,000.
Answer a
8. A company is involved in investing activities when these:
A. activities are directly related to running the core business to earn profits.
B. activities involve buying and selling productive resources with long lives, purchasing investments, and
lending to others.
C. activities involve borrowing from banks and repaying bank loans.
D. activities involve borrowing from receiving contributions from shareholders, or paying dividends to
shareholders.
Answer b
9. Which of the following statements best describes the Balance sheet?
a) It provides information about the financial position of an entity at a specific point in time.
b) It measures the economic performance of the entity over a period of time.
c) It summarizes only the changes to retained earnings during a period.
d) It shows how an entity managed its cash during the reporting period.
Answer A
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