Finance Quiz

Which ONE of the following relates to the ability of a business to pay its debts as they fall due?

• growth

• liquidity

• efficiency

• profitability

The managers of a business pursue an objective of having adequate cash flow.

What possible conflict of objectives can result from this action?

• a conflict between the objectives of efficiency and growth

• a conflict between the objectives of profitability and growth

• a conflict between managers and shareholders of the business

• a conflict between managers and short-term creditors of the business

Which term refers to the extent to which the current assets of a business exceed the current liabilities of that business?

• growth

• liquidity

• solvency

• profitability

A company issues shares directly to investors,usually an institution, rather than making a public offering.

What type of equity finance is this?

• placement

• new issue

• rights issue

• share purchase plan

Which of the following is a characteristic of equity finance?

• The finance must be repaid at a future date

• The returns to the suppliers of finance are called dividends

• Suppliers of finance have no rights of ownership over the business

• Suppliers of finance have prior claim on assets in the event of liquidation

Which of the following is a type of short-term external source of funds?

• leasing

• overdraft

• mortgages

• debentures

Which financial institution is most likely to issue debentures as a method of raising finance?

• unit trust

• investment bank

• public company

• superannuation fund

What is the role of the Australian Securities Exchange (ASX)?

• to supervise the banking system

• to regulate the operation of companies

• to investigate breaches of the Corporations Act

• to make markets for the sale and purchase of shares

Which ONE of the following items would be found in the income statement of a business?

• equipment

• investments

• gross profit

• accounts payable

A business has current liabilities of $200 000 million and current assets of $250 000 million.

Which of the following statements correctly describes the position of the business?

• The business has a current ratio of 0.8:1 and has a liquidity problem

• The business has a current ratio of 1.25:1 and has a liquidity problem

• The business has a current ratio of 0.8:1 and does not have a liquidity problem

• The business has a current ratio of 1.25:1 and does not have a liquidity problem