389 exam-style questions on Finance and accounts with answers and explanations. Six real samples below — the full set is free with an account.
Which of the following is an INTERNAL source of finance?
Answer: retained profit
Internal finance comes from within the business (retained profit, sale of assets, working capital). Loans, share issues and trade credit are external sources.
Which of the following is a LONG-TERM source of finance?
Answer: mortgage
A mortgage is repaid over many years, making it long-term. Overdrafts, trade credit and factoring are short-term ways of managing working capital.
What is the main advantage of Net Present Value (NPV) over the payback and ARR methods?
Answer: It accounts for the time value of money
NPV discounts each future net cash flow to its present value, so it accounts for the time value of money, which payback and ARR ignore. It is not quicker or simpler than those methods and still depends on forecast cash flows.
A decision rule for NPV states that a stand-alone project should be accepted when:
Answer: NPV is positive (greater than zero)
A positive NPV means the present value of future inflows exceeds the initial cost, so the project adds value at the chosen discount rate.
Which of the following is a source of internal finance?
Answer: retained profit
Retained profit comes from within the business (past earnings reinvested). Loans, overdrafts and share issues are external sources of finance.
Which of the following is an example of capital expenditure?
Answer: Purchasing a delivery van
Capital expenditure is spending on long-term fixed assets such as a delivery van; wages, raw materials and utilities are recurring revenue expenditure on day-to-day running costs.
That was 6 of 389 Finance and accounts questions.
Practise all 389 freeA student writes: 'Total contribution = total revenue - total costs.'
See the correction →A student calculates the acid-test (quick) ratio by dividing current assets by current liabilities and then subtracting the inventory (stock) figure from the result.
See the correction →A student calculates the average rate of return on a $200 000 machine with total net cash inflows of $320 000 over 4 years as (320 000 ÷ 4) ÷ 200 000 × 100 = 40 %.
See the correction →DistinguishAO2 · 4–6 marks
Make the difference clear for BOTH terms — a definition of one of them is only half an answer.
StateAO1 · 2 marks
One word or one short sentence. No explanation, no working: the mark is for the fact itself.
OutlineAO1 · 2 marks
A brief account or summary: the main points in two or three sentences, no evaluation.
389 Finance and accounts questions — free with an account. Spaced repetition, streaks and full exam simulations included.
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