FAR — Financial Accounting & Reporting — Quiz 85

Questions in this quiz (10)

1. Which formula calculates the margin of safety ratio?

   • Margin of Safety ÷ Total Sales
   • Margin of Safety ÷ Total Sales
   • Margin of Safety ÷ Total Sales
   • Margin of Safety ÷ Total Sales
   • Fixed Costs ÷ Sales
   • Fixed Costs ÷ Sales
   • Fixed Costs ÷ Sales
   • Fixed Costs ÷ Sales
   • Net Income ÷ Revenue
   • Net Income ÷ Revenue
   • Net Income ÷ Revenue
   • Net Income ÷ Revenue
   • Contribution Margin ÷ Fixed Costs
   • Contribution Margin ÷ Fixed Costs
   • Contribution Margin ÷ Fixed Costs
   • Contribution Margin ÷ Fixed Costs

2. Which of the following best defines operating leverage?

   • Use of debt financing
   • Use of debt financing
   • Use of debt financing
   • Use of debt financing
   • The proportion of fixed costs in operations
   • The proportion of fixed costs in operations
   • The proportion of fixed costs in operations
   • The proportion of fixed costs in operations
   • Inventory turnover rate
   • Inventory turnover rate
   • Inventory turnover rate
   • Inventory turnover rate
   • Asset utilization ratio
   • Asset utilization ratio
   • Asset utilization ratio
   • Asset utilization ratio

3. Which of the following occurs when a company has high operating leverage?

   • Profits are unaffected by sales changes
   • Profits are unaffected by sales changes
   • Profits are unaffected by sales changes
   • Profits are unaffected by sales changes
   • Small changes in sales significantly impact profits
   • Small changes in sales significantly impact profits
   • Small changes in sales significantly impact profits
   • Small changes in sales significantly impact profits
   • Variable costs decrease automatically
   • Variable costs decrease automatically
   • Variable costs decrease automatically
   • Variable costs decrease automatically
   • Fixed costs become variable
   • Fixed costs become variable
   • Fixed costs become variable
   • Fixed costs become variable

4. Which formula is used to calculate operating leverage?

   • Contribution Margin ÷ Net Income
   • Contribution Margin ÷ Net Income
   • Contribution Margin ÷ Net Income
   • Contribution Margin ÷ Net Income
   • Net Income ÷ Sales
   • Net Income ÷ Sales
   • Net Income ÷ Sales
   • Net Income ÷ Sales
   • Sales ÷ Assets
   • Sales ÷ Assets
   • Sales ÷ Assets
   • Sales ÷ Assets
   • Revenue ÷ Expenses
   • Revenue ÷ Expenses
   • Revenue ÷ Expenses
   • Revenue ÷ Expenses

5. Which of the following best describes capital budgeting?

   • Planning short-term expenses
   • Planning short-term expenses
   • Planning short-term expenses
   • Planning short-term expenses
   • Evaluating long-term investment projects
   • Evaluating long-term investment projects
   • Evaluating long-term investment projects
   • Evaluating long-term investment projects
   • Recording operating expenses
   • Recording operating expenses
   • Recording operating expenses
   • Recording operating expenses
   • Preparing financial reports
   • Preparing financial reports
   • Preparing financial reports
   • Preparing financial reports

6. Which of the following is commonly used in capital budgeting decisions?

   • Net present value
   • Net present value
   • Net present value
   • Net present value
   • Current ratio
   • Current ratio
   • Current ratio
   • Current ratio
   • Profit margin
   • Profit margin
   • Profit margin
   • Profit margin
   • Inventory turnover
   • Inventory turnover
   • Inventory turnover
   • Inventory turnover

7. Which capital budgeting method determines how long it takes to recover an investment?

   • Payback period
   • Payback period
   • Payback period
   • Payback period
   • Net present value
   • Net present value
   • Net present value
   • Net present value
   • Internal rate of return
   • Internal rate of return
   • Internal rate of return
   • Internal rate of return
   • Contribution margin
   • Contribution margin
   • Contribution margin
   • Contribution margin

8. Which capital budgeting method accounts for time value of money?

   • Payback method
   • Payback method
   • Payback method
   • Payback method
   • Net present value
   • Net present value
   • Net present value
   • Net present value
   • Break-even analysis
   • Break-even analysis
   • Break-even analysis
   • Break-even analysis
   • Contribution margin analysis
   • Contribution margin analysis
   • Contribution margin analysis
   • Contribution margin analysis

9. Which of the following best describes internal rate of return (IRR)?

   • Expected rate of return for an investment
   • Expected rate of return for an investment
   • Expected rate of return for an investment
   • Expected rate of return for an investment
   • Total revenue generated
   • Total revenue generated
   • Total revenue generated
   • Total revenue generated
   • Average project cost
   • Average project cost
   • Average project cost
   • Average project cost
   • Amount invested
   • Amount invested
   • Amount invested
   • Amount invested

10. Which managerial accounting tool evaluates long-term investment decisions?

    • Capital budgeting analysis
    • Capital budgeting analysis
    • Capital budgeting analysis
    • Capital budgeting analysis
    • Horizontal analysis
    • Horizontal analysis
    • Horizontal analysis
    • Horizontal analysis
    • Vertical analysis
    • Vertical analysis
    • Vertical analysis
    • Vertical analysis
    • Liquidity analysis
    • Liquidity analysis
    • Liquidity analysis
    • Liquidity analysis