MCQs for practice
1. The person generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and information system functions is the: 
A. treasurer.
B. director.
C. controller.
D. chairman of the board.
E. chief executive officer.
2. The mixture of debt and equity used by a firm to finance its operations is called: 
A. working capital management.
B. financial depreciation.
C. cost analysis.
D. capital budgeting.
E. capital structure.
3. A business owned by a single individual is called a: 
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
for the saleE. limited liability company
4. A business created as a distinct legal entity composed of one or more individuals or entities is called a: 
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. unlimited liability company.
5. The primary goal of financial management is to: 
A. maximize current dividends per share of the existing stock.
B. maximize the current value per share of the existing stock.
C. avoid financial distress.
D. minimize operational costs and maximize firm efficiency.
E. maintain steady growth in both sales and net earnings.
6. A partnership: 
A. is taxed the same as a corporation.
B. agreement defines whether the business income will be taxed like a partnership or a corporation.
C. terminates at the death of any general partner.
D. has less of an ability to raise capital than a proprietorship.
E. allows for easy transfer of interest from one general partner to another.
7. Sensitivity analysis helps you determine the: 
A. range of possible outcomes given possible ranges for every variable.
B. degree to which the net present value reacts to changes in a single variable.
C. net present value given the best and the worst possible situations.
D. degree to which a project is reliant upon the fixed costs.
E. level of variable costs in relation to the fixed costs of a project.
Answer: B
8. Conducting scenario analysis helps managers see the: 
A. impact of an individual variable on the outcome of a project.
B. potential range of outcomes from a proposed project.
C. changes in long-term debt over the course of a proposed project.
D. possible range of market prices for their firm's stock over the life of a project.
E. allocation distribution of funds for capital projects under conditions of hard rationing.
Answer: B
9. Which one of the following is most likely a variable cost? 
A. office rent
B. property taxes
C. property insurance
D. direct labor costs
E. management salaries
Answer: D
10. All else constant, as the variable cost per unit increases, the: 
A. contribution margin decreases.
B. sensitivity to fixed costs decreases.
C. degree of operating leverage decreases.
D. operating cash flow increases.
E. net profit increases.
Answer: A
 11. Fixed costs:
I. are variable over long periods of time.
II. must be paid even if production is halted.
III. are generally affected by the amount of fixed assets owned by a firm.
IV. per unit remain constant over a given range of production output. 
A. I and III only
B. II and IV only
C. I, II, and III only
D. I, II, and IV only
E. I, II, III, and IV
Answer: C
12. All else constant, the accounting break-even level of sales will decrease when the: 
A. fixed costs increase.
B. depreciation expense decreases.
C. contribution margin decreases.
D. variable costs per unit increase.
E. selling price per unit decreases.
Answer: B
13. Which of the following are types of break-even analysis? 
A. present value break-even
B. accounting profit break-even
C. mrket value break-even
D. Both A and B
E. Both A and C
Answer: D
The Can-Do Co. is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4%. The expected variable cost per unit is $7 and the expected fixed cost is $36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6% range. The depreciation expense is $30,000. The tax rate is 34%. The sale price is estimated at $14 a unit, give or take 5%. The company bases its sensitivity analysis on the expected case scenario.
 14. What is the earnings before interest and taxes under the expected case scenario? 

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