Top 22 Budject & Planning Objective Type Questions & Answers

1. Budgets perform the function of:
a. Predicting interest rates.
b. Determining a firm’s sustainable rate of growth.
c. Providing the basis for taking corrective action.
d. Calculating plowback ratios.
Ans: c
2. Which of the following items would NOT be included in the cash budget?
A. Depreciation charges
B. Payments to suppliers
C. Cash receipts
D. Taxes
Ans: a
3. A flexible budget differs from a fixed budget in that more than one set of input values for variables such as Sales are used.
a. True
b. False
Ans: a
4. Which of the following would be classified as spontaneous liabilities?
A. Accounts receivable
B. Accounts payable
C. Notes payable
D. Long-term debt
Ans: b
5. Which of the following would decrease the need for additional discretionary financing, everything else constant?
a. The firm anticipated higher sales growth.
b. The firm’s net profit margin was lower.
c. The firm paid a higher percentage of earnings out as cash dividends.
d. The firm retained a higher percentage of earnings.
Ans: d


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