Tag: budgeting

Questions Related to budgeting

Arrange the following steps involved in capital budgeting in order of their occurrence:
i. Project selection
ii. Project appraisal
iii. Project generation
iv.Follow up
v. Project execution

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. $ii, iii, i, v, iv$

  2. $iii, ii, i, v, iv$

  3. $i, iii, ii, v, iv$

  4. $i, ii, iii, v, iv$

Show answer
Correct Option: B
Explanation:

Steps involved in capital budgeting in order of their occurrence:-

1. Identify and evaluate potential opportunities
2.Project appraisal

3.Project selection
4.Project execution
5.Follow up

Incremental cash flows in relation to capital budgeting decisions refer to the ____________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Cash flows which are increasing over a period of time

  2. Incremental change in cash flows if the project is extended one year beyond its life period

  3. Cash flows which are directly attributable to the investment

  4. Difference between cash inflow streams and the initial outflow

  5. Comparision between any two cash outflows in a project's life period

Show answer
Correct Option: E
Explanation:

Incremental cash flows are the net additional cash flows generated by a company by undertaking a project. Capital budgeting decisions are based on comparison of a project's initial investment outlay to the future incremental cash flows of the project and its terminal cash flow.

Which of the following is not considered while preparing cash budget?

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Accrual Principle

  2. Difference in Capital and Revenue items

  3. Conservation Principle

  4. All of the above

Show answer
Correct Option: D
Explanation:

A cash budget is an estimation of the cash inflows and outflows for business over a specific period of time. The budget is used to assess whether the entity has sufficient cash to operate. Companies use sales and production forecasts to create a cash budget, along with assumptions about necessary spending and accounts receivable. If a company does not have enough liquidity to operate, it must raise capital by issuing stock or by taking a debt.

A budget is frequently prepared to combine all other budgets in a summary form. It is known as _____________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Sales Budget

  2. Purchase Budget

  3. Cash Budget

  4. Master Budget

Show answer
Correct Option: D
Explanation:

The master budget is the sum total of all the divisional budgets that is prepared by all the divisions. Further, it also includes the financial planning, cash-flow forecast and budgeted profit and loss account and balance sheet of the organization. 


Master Budget is the summary of the divisional budget.

Sum of discounted cash flows is best defined as _____________.

book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

  1. technical equity

  2. defined future value

  3. project net present value

  4. equity net present value

Show answer
Correct Option: C

Cash Flow Statement explains the reason on surplus or deficit of cash.

book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

  1. True

  2. False

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Correct Option: A

Cash Management and Insurance are chief function of the ____________.

book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

  1. Tax Manager

  2. Controller

  3. Treasurer

  4. Accountant

  5. Finance Manager

Show answer
Correct Option: C
Explanation:

The treasurer of an organization deals with the liquid assets of the firm and his responsibilities include cash management and insurance of assets.

Cash Flow is a movement of Cash and Cash Equivalent.

book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

  1. True

  2. False

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Correct Option: A

Cash and Cash Equivalent includes _____________________.

book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

  1. Cash on hand and bank balance.

  2. Marketable Securities.

  3. Short-term investments.

  4. All of the above.

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Correct Option: D

The financial ratio (the best single predictor) that is used in the Beavers Model to predict the failure of a company is the _____________.

book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

  1. Debt-equity ratio

  2. Cash flow to total debt ratio

  3. Price earnings ratio

  4. Return on investment

  5. None of the above

Show answer
Correct Option: B