Financial Literacy for Managers
Chapter Exam Questions
Course Introduction
Financial Literacy for Managers provides an essential foundation in financial concepts, tools, and practices relevant to effective business decision-making. This course equips managers with the knowledge and skills necessary to interpret financial statements, assess company performance, and make informed budgeting and investment decisions. Emphasizing real-world applications, the course covers topics such as cash flow management, financial ratios, forecasting, and the principles of cost control. By the end of the course, participants will be able to confidently analyze financial data, communicate financial information to stakeholders, and integrate financial insights into their strategic planning processes.
Recommended Textbook
Accounting for Non Specialists 7th Australian Edition by Atrill McLaney
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Chapter 1: Introduction to Accounting
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Q1) An objective of a business could be:
A)financial survival.
B)maximise profit.
C)maximise sales.
D)all of the above.
Answer: D
Q2) What is another name commonly used for the balance sheet?
A)profit and loss statemen
B)statement of financial performance
C)statement of financial position
D)statement of change in owners' equity.
Answer: C
Q3) Which of the following in not one of the reasons for the increasing turbulence in the business environment?
A)the deregulation of domestic markets
B)rapidly changing technology
C)increasing volatility of financial markets
D)the development of a more global economy
Answer: A
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Chapter 2: Measuring and Reporting Financial Position
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Sample Questions
Q1) Which of the following is a liability?
A)Drawings.
B)Prepaid insurance.
C)Accounts payable.
D)Cash at bank.
Answer: C
Q2) Which of these is not an asset?
A)Accounts payable.
B)Loan to J Troja.
C)Accounts receivable.
D)Both A and B.
Answer: A
Q3) The accounting convention that requires items in the statement of financial position to be valued at their acquisition cost is the:
A)matching convention.
B)realisation convention.
C)money measurement convention.
D)historic cost convention.
Answer: D
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Chapter 3: Measuring and Reporting Financial Performance
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Q1) Which accounting statement is specifically designed to measure and report on how much profit an entity has made?
A)the statement of cash flows.
B)the statement of financial position.
C)the statement of financial performance.
D)all of the above.
Answer: C
Q2) What is the expense in the statement of financial performance which represents the purchase price of the goods that have been sold?
A)payments for stock.
B)cost of sales.
C)sales.
D)merchandise.
Answer: B
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Chapter 4: Introduction to Limited Companies
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Questions
Q1) Small proprietary companies are relieved of many of the reporting requirements to which public companies are subject. A company is deemed to be 'small' if it satisfies two of three specified criteria. Which of the following is not one of the criteria?
A)It has consolidated gross profits of less than $30 million.
B)Its consolidated gross assets at the end of the financial year are less than $12.5 million.
C)It employs fewer than 50 employees at the end of the financial year.
D)It has consolidated gross operating revenue of less than $25 million
Q2) A shareholder in Company C owns 2,000 shares bought for $1 each. The company decides to make a bonus issue of one new share for every two existing shares held. How many shares does the shareholder now have in Company C?
A)3,000 shares.
B)1,500 shares.
C)500 shares.
D)1,000 shares.
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Chapter 5: Regulatory Framework for Companies
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Sample Questions
Q1) To whom do auditor's report?
A)shareholders.
B)directors.
C)Both A and B.
D)Australian Tax Office.
Q2) Organised stock exchanges provide which of the following benefits?
A)Facility for companies to raise new capital.
B)Allows shareholders to easily sell their shares.
C)Increases the amount of regulation for the listed company.
D)Both A and B.
Q3) If a company's investment in another company is between 20% and 50%, the company invested in is typically known as a/an:
A)subsidiary company.
B)associate company.
C)parent company.
D)holding company.
Q4) Three key groups associated with companies are directors, shareholders and auditors.
a. Explain the relationship between these three groups.
b. Define a reporting entity and a disclosing entity.
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Chapter 6: Measuring and Reporting Cash Flows
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Q1) When reconciling profit with net cash flow from operating activities:
A)subtract increases in current assets and add increases in current liabilities.
B)add increases in current assets and subtract increases in current liabilities.
C)add increases in current assets and add increases in current liabilities.
D)none of the above.
Q2) $54,000 is owed to suppliers for inventory purchases at the beginning of the year and $44,000 is owed at the end of the year. If annual credit purchases of inventory are $180,000, the cash paid to suppliers for the year is:
A)$170,000.
B)$150,000.
C)$190,000.
D)$214,000.
Q3) The item that would not be included in the operating section of a statement of cash flows is:
A)Cash interest received.
B)Cash received from the sale of surplus machinery.
C)Cash received from sales.
D)Cash payment of expenses.
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Chapter 7: Corporate Social Responsibility and Sustainability Accounting
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Q1) Which of the following would not be seen as a positive CSR disclosure?
A)Recycling materials.
B)Rehabilitating mining sites.
C)Admission of excessive pollution emissions.
D)Using environmental audits.
Q2) Which of these is an example of an environmental disclosure in an annual report?
A)Implementation of tree planting schemes.
B)Introduction of environmental audits.
C)Sponsoring environmental achievement awards.
D)All are examples.
Q3) The major challenge seen for triple bottom line reporting is:
A)Not everything can be measured financially.
B)The production of each of the three parts of the report.
C)Environmental activities are often measured negatively.
D)The integration of economic prosperity, social justice and environmental quality.
Q4) Briefly outline the essence of the balance scorecard approach.
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Chapter 8: Analysis and Interpretation of Financial Statements
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Q1) Which ratio is considered to be the primary measure of overall profitability as it assesses how effectively the business has used its funds?
A)return on ordinary shareholders' funds.
B)gross profit margin.
C)return on capital employed.
D)operating profit margin.
Q2) Success Ltd has a price-earnings ratio of 5 and earnings per share of 22 cents. Its issued capital consists of 2,000,000 $1 ordinary shares. The market price per share is:
A)$1.10.
B)$1.00.
C)$4.40.
D)none of the above.
Q3) A company with a higher level of gearing will have:
A)a high liabilities/total assets ratio.
B)a lower owners' equity/total assets ratio.
C)a higher owners' equity/total assets ratio.
D)Both A and B.
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Chapter 9: Cost-Volume-Profit Analysis and Relevant
Costing
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Q1) Pretty Dolls Pty Ltd usually sell 30,000 dolls per annum. This year, they have excess stock of 10,000 dolls; they usually retail the dolls at $35 per unit. Their variable cost per unit is $20 and their annual fixed costs are $30,000. They have received 'a one time only expression of interest' from an overseas retail chain to purchase 7,500 units at $29 per unit. What would be the best advice you could provide to Pretty Dolls?
A)Do not accept the order, as it is not worthwhile pursuing 'a one time only expression of interest.'
B)Do not accept the offer, as a loss will be incurred.
C)Do not accept the order, as the variable cost plus the fixed costs per unit amount to $30 per unit.
D)Accept the offer, as it will lead to a $9 per unit contribution to fixed costs.
Q2) Semi-fixed costs are best defined as:
A)having both fixed and variable elements.
B)varying over time.
C)costs ignored in cost-volume-profit analysis.
D)none of the above.
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Chapter 10: Full Costing
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Q1) Refer to the table above. The total direct costs incurred in erecting the 4,000 metres of fencing is:
A)$11,000.
B)$9,000.
C)$9,500.
D)$10,000.
Q2) Anything for which a separate measurement of cost is desired is called a: A)cost unit.
B)job.
C)article.
D)fixed cost object.
Q3) Refer to the information above. The direct costs incurred in providing a perm to a client would be:
A)all costs mentioned above.
B)hairdresser salary, shampoo, and conditioner.
C)hairdresser salary, colour and perm solution.
D)hairdresser salary.
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Chapter 11: Budgeting
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Q1) Budgets are said to be useful in promoting forward thinking and identification of short-term problems, because:
A)management can foresee future promotion opportunities.
B)management can react to problem areas as they occur.
C)potential problem areas can be identified early enough to allow management to explore ways of overcoming the problem.
D)all of the above.
Q2) Which of the following could not be a possible cause of an adverse (unfavourable)materials usage variance?
A)Faulty machinery.
B)Poor quality materials.
C)An increase in the price of the raw materials.
D)Inexperienced workers.
Q3) How is a budget best defined?
A)as a forecast for a future period of time.
B)as a prediction for a future period.
C)as a non-financial plan for a future period of time.
D)as a financial plan for a future period of time.
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Chapter 12: Capital Investment Decisions
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Q1) Using the Net Present Value method, the decision rule for projects when finance is not a restriction is:
A)take on all projects with a positive NPV.
B)select the project with the largest cash inflows.
C)select the project where the cash inflows are greatest in the early years of the project.
D)select the project with cash flows equal to the initial investment.
Q2) What is the formula for net present value per $1 of investment?
A)Net Present Value/Investment.
B)Net cash flows/ Investment.
C)Present value of inflows/initial investment.
D)Present values of inflows/present value of outflows.
Q3) Which of these factors influences the returns required by investors from an investment project?
A)Interest foregone.
B)Inflation.
C)Risk premium.
D)All are influences.
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Chapter 13: The Management of Working Capital
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Q1) Total purchases are $150,000 and credit purchases are 80% of total purchases. If accounts payable at the beginning of the period are $15,000 and at the end of the period are $13,000, the average settlement period for accounts payable, in days, is:
A)50 days.
B)42.6 days.
C)49 days.
D)74 days.
Q2) Violet Pty Ltd usually takes 50 days to pay its suppliers. In order to encourage prompt payment, supplier T offers Violet Pty Ltd a 1.5% discount for payment within 10 days. What is the annual percentage cost of the discount to Violet Pty Ltd? A)20%.
B)18.25%.
C)13.7%.
D)2%.
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Chapter 14: Financing the Business
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Q1) Purple Ltd has 10 million ordinary shares which were issued at 80 cents each. The shares are currently valued on the stock exchange at $1.60 per share. The directors of Purple Ltd have decided to make a one-for-eight rights issue at $1.50 per share.
REQUIRED:
a)Calculate the price of a share following the rights issue.
b)Calculate the value of the rights offer on a per share basis.
Q2) Select the correct statement.
A)To remain competitive, it is usually best for a firm to take longer to collect money owing by accounts receivable.
B)By exercising tighter control over accounts receivable, it may be possible for a firm to release funds for other purposes.
C)By lessening control over accounts receivable, it may be possible for the firm to make accounts receivable balances available for other purposes.
D)None of the statements is correct.
Q3) Discuss the advantages and disadvantages of a company issuing long-term debt, e.g., debentures, compared to raising funds through an issue of shares.
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