# Budject & Planning Multiple choice Questions & Answers

Posted On:May 29, 2019, Posted By: Latest Interview Questions, Views: 1148, Rating :

## Best Budject & Planning Objective type Questions and Answers

Dear Readers, Welcome to Budject & Planning Objective Questions and Answers have been designed specially to get you acquainted with the nature of questions you may encounter during your Job interview for the subject of Budject & Planning Multiple choice Questions. These Objective type Budject & Planning are very important for campus placement test and job interviews. As per my experience good interviewers hardly plan to ask any particular question during your Job interview and these model questions are asked in the online technical test and interview of many IT & Non IT Industry.

### 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

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

### 6. A firm’s sustainable rate of growth (g*) is determined by which of the following:

a. g* = ROE(1 - b).
b. g* = net income/common equity.
c. g* = sales/assets.
d. g* = common equity/assets.
Ans: a

A. True
B. False
Ans: b

a. True
b. False
Ans: a

A. True
B. False
Ans: b

### 10. Which of the following work to automatically reduce the need for discretionary financing as sales increase?

a. Increases in spontaneous liabilities
b. Increases in retained earnings
c. Increases in fixed assets
d. Both a and b above
Ans: d

### 11. A firm is using the DFN model to forecast the additional capital that they need to raise because of a sales increase. Which of the following factors are likely to increase the DFN?

a. The firm has a lot of excess capacity.
b. The firm has a high dividend payout ratio.
c. The firm has a lot of spontaneous liabilities that increase as sales increase.
d. The firm has a high profit margin.
Ans: b

### 12. The first step involved in predicting financing needs is:

a. project the firm's sales revenues and expenses over the planning period.
b. estimating the levels of investment in current and fixed assets that are necessary to support the projected sales.
c. determining the firm's financing needs throughout the planning period.
d. estimating the firm's DFN.
Ans: a

### 13. The Stuff Antique Store has current sales of \$12 million and predicts next year's sales will grow to \$16 million. Current assets are \$3 million and fixed assets are \$4 million. The firm's net profit margin is 6 percent after taxes. Presently, Stuff has \$800,000 in accounts payable, \$1.1 million in long-term debt, and \$5 million (including \$2.5 million in retained earnings) in common equity. Next year, Stuff projects that current assets and liabilities will rise in direct proportion to the forecasted sales, and that fixed assets will rise by \$600,000. The Stuff Antique Store plans to pay dividends of \$400,000 to common shareholders. What are Stuff's total financing needs and discretionary financing needs for the upcoming year?

A. \$8.6 million and \$.27 million.
B. \$7.5 million and \$.25 million.
C. \$6.5 million and \$.15 million.
D. \$5.5 million and \$.45 million.
Ans: a

a. True
b. False
Ans: b

A. True
B. False
Ans: a

A. True
B. False
Ans: A

A. True
B. False
Ans: a

A. True
B. False
Ans: B

A. True
B. False
Ans: B

A. True
B. False
Ans: B

### 21. Which of the following is NOT true about the Master Budget?

a) It is composed of many interrelated budgets.
b) It consists of 2 classes of budgets: Operating Budgets and Financial Budgets.
c) Within the master budget the first budget to be prepared is the sales budget.
d) It constitutes a plan of action for a specified period of time.
e) All of the above are true.
Ans: E

### 22. The Willsey Merchandise Company has budgeted \$40,000 in sales for the month of December. The company's cost of goods sold is 30% of sales. If the company has budgeted to purchase \$18,000 in merchandise during December, then the budgeted change in inventory levels over the month of December is:

A. \$  6,000 increase.
B. \$10,000 decrease.
C. \$22,000 decrease.
D. \$15,000 increase.
Ans: A