#1
What is the primary goal of budgeting in financial management?
To control and plan financial activities
ExplanationBudgeting aims to regulate and strategize financial actions.
#2
In the context of budgeting, what is the primary function of a master budget?
To plan and coordinate the activities of all sub-budgets.
ExplanationThe master budget coordinates activities across all sub-budgets for comprehensive planning.
#3
What is the primary focus of a production budget?
Estimating the cost of producing goods.
ExplanationProduction budgets concentrate on estimating the cost of manufacturing goods.
#4
Which financial statement provides an overview of a company's financial position at a specific point in time?
Balance sheet
ExplanationThe balance sheet offers a snapshot of a company's financial status at a specific moment.
#5
What does the term 'operating budget' typically include?
Day-to-day operational expenses.
ExplanationOperating budgets encompass day-to-day operational expenses.
#6
What is the primary focus of a marketing budget?
Estimating the cost of advertising and promotion.
ExplanationMarketing budgets center around estimating the costs of advertising and promotion.
#7
Which budgeting method involves estimating future expenses based on historical data and adjusting for any expected changes?
Incremental budgeting
ExplanationIncremental budgeting relies on past data, adjusting for anticipated modifications.
#8
What is the formula for calculating the variance between budgeted and actual expenses?
(Budgeted Expenses - Actual Expenses) / Actual Expenses
ExplanationVariance is computed as the difference between budgeted and actual expenses, normalized by actual expenses.
#9
What is the key advantage of using a rolling budget in financial planning?
It provides flexibility by continuously updating future periods.
ExplanationRolling budgeting offers adaptability through continuous updates for future periods.
#10
Which budgeting approach involves setting budgets based on the activities that drive costs rather than historical data?
Activity-based budgeting
ExplanationActivity-based budgeting sets budgets according to cost-driving activities, not just historical data.
#11
What is the primary purpose of a capital budget?
To allocate funds for long-term investments.
ExplanationCapital budgets allocate funds for long-term investments.
#12
Which budgeting method involves setting budgets to zero at the beginning of each budgeting period and justifying all expenses?
Zero-based budgeting
ExplanationZero-based budgeting starts fresh each period, justifying all expenses from scratch.
#13
In financial control, what does the term 'liquidity' refer to?
Ability to pay short-term debts
ExplanationLiquidity denotes the capacity to settle short-term debts promptly.
#14
Which financial ratio measures a company's ability to cover its short-term obligations with its short-term assets?
Current ratio
ExplanationThe current ratio gauges the ability to meet short-term obligations with short-term assets.
#15
What is the purpose of a cash flow statement in financial reporting?
To provide information on the sources and uses of cash.
ExplanationCash flow statements offer insights into cash sources and expenditures.
#16
Which financial metric measures the efficiency of a company's operations in generating profits from its revenue?
Net profit margin
ExplanationNet profit margin assesses the efficiency of converting revenue into profits.
#17
In financial management, what does the term 'variance analysis' refer to?
Assessing the differences between budgeted and actual financial performance.
ExplanationVariance analysis evaluates disparities between budgeted and actual financial performance.
#18
In financial control, what is the significance of the debt-to-equity ratio?
Evaluates the financial leverage of a company.
ExplanationThe debt-to-equity ratio assesses the financial leverage of a company.