Business Finance Learning Quizzes for Advanced Diploma in Public Services

Question 1

Which component is NOT included in a balance sheet?

Accepted Answer

Income

Answer

Assets

Answer

Liabilities

Answer

Equity

Question 2

Which financial ratio assesses a company's capacity to cover its short-term financial obligations?

Accepted Answer

Current ratio

Answer

Debt-to-equity ratio

Answer

Gross profit margin

Answer

Return on assets

Question 3

Which accounting principle requires businesses to record transactions when they occur, irrespective of cash flow?

Accepted Answer

Accrual accounting

Answer

Cash accounting

Answer

Double-entry accounting

Answer

Going concern

Question 4

The cost of goods sold refers to:

Accepted Answer

The cost of inventory sold during a period

Answer

The cost of inventory purchased during a period

Answer

The difference between revenue and profit

Answer

The total cost of all assets owned by a company

Question 5

Which of the following is NOT a depreciation method?

Accepted Answer

Fixed-percentage depreciation

Answer

Straight-line depreciation

Answer

Declining-balance depreciation

Answer

Units-of-production depreciation

Question 6

The financial statement that provides a snapshot of a company's assets, liabilities, and equity at a specific point in time is the:

Accepted Answer

Balance sheet

Answer

Income statement

Answer

Cash flow statement

Answer

Statement of changes in equity

Question 7

Which of the following is NOT a legitimate source of finance for businesses?

Accepted Answer

Donations from friends and family

Answer

Debt financing

Answer

Equity financing

Answer

Retained earnings

Question 8

Calculate the gross profit of a business with sales revenue of £100,000 and a cost of goods sold of £60,000.

Accepted Answer

£40,000

Answer

£60,000

Answer

£100,000

Answer

£160,000

Question 9

Which financial statement reports a business's financial position at a specific point in time?

Accepted Answer

Balance sheet

Answer

Profit and loss statement

Answer

Cash flow statement

Answer

Income statement

Question 10

A current ratio of less than 1 indicates that:

Accepted Answer

The business has more current liabilities than current assets

Answer

The business has more assets than liabilities

Answer

The business has more current assets than current liabilities

Answer

The business has more liabilities than assets

Question 11

What is the fundamental difference between fixed costs and variable costs?

Accepted Answer

Fixed costs remain constant regardless of output, while variable costs vary with output

Answer

Fixed costs vary with output, while variable costs remain constant

Answer

Both fixed and variable costs vary with output

Answer

Fixed costs are always higher than variable costs

Question 12

Calculate the return on equity (ROE) for a business with net income of £20,000 and total equity of £100,000.

Accepted Answer

20%

Answer

50%

Answer

100%

Answer

200%

Question 13

Which of the following is not an element that belongs in a profit and loss (P&L) statement?

Accepted Answer

Assets

Answer

Revenue

Answer

Expenses

Answer

Profit

Question 14

A positive cash flow indicates that:

Accepted Answer

The business has more money coming in than going out.

Answer

The business has more money going out than coming in.

Answer

The business is in a state of financial equilibrium.

Answer

The business is experiencing a loss.

Question 15

Which of the following financial ratios measures a company's ability to meet its short-term obligations?

Accepted Answer

Current ratio

Answer

Debt-to-equity ratio

Answer

Profit margin

Answer

Return on investment

Question 16

What is the main purpose of a balance sheet?

Accepted Answer

To provide a snapshot of a company's financial position at a specific point in time.

Answer

To show the movement of cash in and out of a business over a period of time.

Answer

To measure a company's profitability.

Answer

To assess a company's risk profile.

Question 17

The formula for calculating the profit margin is:

Accepted Answer

Profit / Revenue

Answer

Revenue / Profit

Answer

Expenses / Revenue

Answer

Profit / Expenses

Question 18

Which of the following is not a component of a balance sheet?

Accepted Answer

Income statement

Answer

Assets

Answer

Liabilities

Answer

Owner's equity

Question 19

A company's profit margin is calculated by dividing:

Accepted Answer

Net income by total revenue

Answer

Total expenses by net income

Answer

Total assets by total liabilities

Answer

Net income by total assets

Question 20

Which financial ratio measures a company's short-term liquidity?

Accepted Answer

Current ratio

Answer

Return on equity

Answer

Debt-to-equity ratio

Answer

Inventory turnover ratio

Question 21

The main purpose of a cash flow statement is to:

Accepted Answer

Show the flow of cash

Answer

Report a company's profitability

Answer

Summarize a company's financial position

Answer

Calculate a company's tax liability

Question 22

Which accounting principle requires expenses to be recorded in the period they occur?

Accepted Answer

Matching principle

Answer

Going concern principle

Answer

Consistency principle

Answer

Materiality principle

Question 23

A company's working capital is calculated as:

Accepted Answer

Current assets minus current liabilities

Answer

Current liabilities minus current assets

Answer

Total assets minus total liabilities

Answer

Total liabilities plus total equity

Question 24

The primary goal of financial management is to:

Accepted Answer

Maximize shareholder wealth

Answer

Minimize the cost of capital

Answer

Comply with regulatory requirements

Answer

Ensure availability of funds

Question 25

Which of the following is not a type of cost classification?

Accepted Answer

Actual vs. budgeted

Answer

Fixed vs. variable

Answer

Direct vs. indirect

Answer

Operating vs. non-operating