Event Finance Multi Choice

Exam

Practice Questions

Section A - Pricing Theory

Question 1
Which of the following statements best defines a fixed cost?
A. A fixed cost
change
B. A fixed cost
C. A fixed cost
volume
D. A fixed cost
E. None of the

is set at the beginning of the year and will not

is fixed for one level of sales volume
will not change directly in proportion with sales
behaves in the same way as a marginal cost
above

Question 2
Which of the following costs are variable?
Cost

10,000 units

1
2
3
4
A.
B.
C.
D.
E.

200,000
80,000
180,000
100,000

30,000
units
600,000
480,000
180,000
300,000

Costs 1 and 4
Costs 1 and 2
Costs 2 and 3
Costs 3 and 4
None of the costs are variable

The following information relates to questions 3 to 5

A typical 10 night package incurs the following costs:
Transport costs
Hotel Accommodation
Food & Beverage
Insurance
Administration costs

10,000 per tour [inclusive of VAT]

100 per person per night
40 per person per night
400 per person per tour
3,500 [inclusive of VAT]

Question 3
The total fixed costs [excluding VAT] are:
A.
B.
C.
D.
E.

13 500.00
11 250.00
16 200.00
1 295.00
none of the above

Question 4
The total variable costs per person per tour [excluding VAT] are:
A.
B.
C.
D.
E.

1 800.00
1 400.00
5 400.00
5 800.00
none of the above

Question 5
Assuming that a maximum of 50 people can be accommodated on each
tour, what is the total cost per person [excluding VAT] per tour?
A.
B.
C.
D.
E.

90 000.00
1 800.00
2 025.00
225.00
none of the above

Question 6
A business has a total cost per person of 125 and aims to make a net
profit of 10%. What would the minimum selling price [including VAT]
need to be in order to achieve this?
A.
B.
C.
D.
E.

138.89
120.25
137.50
125.00
none of the above

The information below relates to questions 7 to 9

Selling Price
Variable cost per
person
Total fixed costs
Maximum capacity

240 [including VAT]

120 [excluding VAT]
3,600 [excluding VAT]
60 units

Question 7
Assuming that the business sells all 60 units, the financial result will
be?
A.
B.
C.
D.
E.

1,068 profit
3,600 profit
1,200 profit
1,200 loss
none of the above

Question 8
If the business discounted its selling price to 180 [including VAT] which
of the
following statements is CORRECT?
A.
B.
C.
D.
E.

There would be a positive contribution per person of 60

There would be a positive contribution per person of 30
There would be a negative contribution
There would be a profit of 30
None of these statements is correct

Question 9
The minimum price which the company could accept would be:
A.
B.
C.
D.
E.

3,600
120
144
3,720
none of the above

Question 10
A business sells programmes for 3.00 each [including VAT]. Each
programme has a variable cost of 75 pence and fixed costs are 25,000
per year. How many programmes does the business need to sell each
year in order to breakeven?
A.
B.
C.
D.

Less than 10,000

Between 10,000 and 12,000
Between 12,000 and 14,000
Between 14,000 and 16,000

E. More than 16,000

Section B Ratio Analysis

Question 1
Which of these statements can best be considered as correct?
A.
B.
C.
D.
E.

Return on Capital shows the amount invested in a business

Capital less current liabilities represents return on capital employed
Return on capital shows the financial return of a business
Return on capital represents total assets less current liabilities
None of the above

Question 2
Which ONE of the following statements is INCORRECT?
A.
B.
C.
D.
E.

Working capital can be improved by reducing debtor days

Working capital can be improved by increasing creditor days
A reduction in stock days improves working capital
Working capital appears on the balance sheet of a business
All of the above statements are incorrect

Question 3
The ratio that calculates the time taken by a business to collect money
from customers is known as:
A
B
C
D
E

creditor days ratio

current ratio
debtor days ratio
stock days ratio
none of the above

Question 4
The current ratios of five businesses are shown below. Which business
has the most money tied up in liquid resources?
Business
Business
Business
Business
Business
A
B
C
D
E

1
2
3
4
5

1.1:1
1.6:1
1.2:1
2.9:1
2.5:1

Business
Business
Business
Business
Business

1
4
2
5
3

The following information is relevant to questions 5 to 8

Summarised Balance Sheets as at 31st March
2012
99,485

2011
46,650

40,145
40,210
12,092

50,455
43,370
5,790

92,447

99,615

36,862
0

42,475
0

36,862

42,475

155,070

103,790

Capital as at 1st April

Add Net Profit

159,980
44,870

155,070
47,680

Less Drawings

204,880
40,000

202,750
60,000

Capital as at 31st March

164,850

142,750

9,780

38,960

155,070

103790

Fixed assets
Current assets
Stock
Debtors
Bank
Less Current Liabilities
Trade creditors
Bank overdraft

Net Assets
Financed By :

Long Term Liabilities

Bank Loans

Summarised Profit and Loss Accounts for the year ending 31st March
2012

2011

Turnover
Less Cost of sales

500,350
160,840

597,500
252,275

Gross Profit
Less Overhead Expenses

339,510
294,640

339,225
291,545

44,870

47,680

195,624
193,008

178,704
260,220

Net Profit for the year

Additional information :
Credit purchases
Credit sales

Question 5
The figure for working capital as at 31st March 2012 is:
A
B
C
D
E

155 070
55 585
103 790
57 140
none of the above

Question 6
Which of the following statements is CORRECT?
A
B
C
D
E

Between 2011 and 2012 the acid test ratio has decreased
Between 2011 and 2012 the acid test ratio has increased
Between 2011 and 2012 the acid test ratio has stayed the same
In 2012 the acid test ratio is below the benchmark of 1:1
none of the above statements is correct

Question 7
Which of the following statements is CORRECT?
A
B
C
D
E

Between 2011 and 2012 the stock days ratio has decreased
Between 2011 and 2012 the stock days ratio has increased
Between 2011 and 2012 and the stock days ratio has stayed the
same
The stock days ratio should always be more than 50 days
none of the above statements is correct

Question 8
Which of the following statements is CORRECT?
A
B
C
D
E

the debtor days ratio has increased between 2011 and 2012 but
the creditor days ratio has decreased
the creditor days ratio has increased between 2011 and 2012
but the debtor days ratio has decreased
the debtor days ratio has increased between 2011 and 2012
and the creditor days ratio has also increased
the debtor days ratio has decreased between 2011 and 2012
and the creditor days ratio has also decreased
both the debtor days ratio and creditor days ratio have stayed
the same

The following information relates to questions 9 and 10

Net Profit %
Gross Profit %
Sales

Lima
20%
64%
150,000

Tango
22%
60%
150,000

Lima and Tango are similar operations

Question 9
Which of the following statements is CORRECT?
A
B
C
D
gross
E

Tango is managed with lower overheads than Lima

Lima is managed with lower overheads than Tango
there is no difference between Lima and Tango
it doesnt matter about overheads because Lima has a better
profit percentage
none of these statements is correct

Question 10
Which of the following statements is INCORRECT?
A
Limas Net Profit % is 9.1% lower than Tangos but the Gross
Profit % is 6.7% higher
B
the sales figure is used to calculate both gross and net profits
C
Limas Net Profit % is 2% lower than Tangos but the Gross Profit
% is 4% higher
D
Limas gross profit percentage is 6.7% higher than Tangos gross
profit percentage
E
none of these statements is incorrect

Section C- Budgetary Control

The following information relates to questions 1 to 4

The following data has been extracted from the operating budgets of
the Severn Organisation for 2013.
Sales
May
June
July

10,250
9,250
9,650

Purchas
es
3,600
3,100
2,900

Sales

60% cash

Purchase
s
Overhea
ds

80% cash

Overhea
ds
1,940
1,900
1,850

Depreciati
on
750
700
720

40% one months

credit
20% two months
credit

100% cash

Notes:
Expenditure on new equipment will be 2,000 in June and 3,800 in July
Question 1
The amount of money received from cash sales in May is:
A.
B.
C.
D.
E.

6,150
10,250
4,100
8,200
None of the above

Question 2
The amount of money received in June from credit sales is:
A
B
C
D
E

3,700
5,550
9,250
4,100
None of the above

Question 3
The amount of money paid in July for credit purchases is:
A.
B.
C.
D.
E.

720
620
520
580
None of the above

Question 4
The total payments figure for July is:
A.
B.
C.
D.
E.

9,270
8,570
4,890
8,690
None of the above

The following information relates to questions 5 to 7

The following data has been extracted from the operating budgets of
the Thames Organisation for 2013.
Sales
January
Februar
y
March
April

254,00
0
203,00
0
323,00
0
264,00
0

Purchas
es
170,000

Wages
34,000

Overhea
ds
22,000

Depreciati
on
8,000

136,000

28,000

18,700

8,000

216,000

36,400

24,200

8,000

177,000

33,400

23,600

8,000

Notes:
Sales

60% cash

40% two months

credit
Purchase 10% cash
90% one months
s
credit
Overhea
50% cash
50% one months
ds
credit
Wages are paid as incurred
Stock as at 1st February
Stock as at 30th April

33,000
29,000

New fixed assets costing 38,000 will be purchased in January and paid
for in the following month.

Question 5
In the profit & loss account, for the 3 months ending 30th April, the
figure for sales would be:
A.
B.
C.
D.
E.

780,000
1,044,000
790,000
474,000
none of the above

Question 6
In the profit and loss account, for the 3 months ending 30th April, the
figure for Cost of Sales would be:
A.
B.
C.
D.
E.

591,000
699,000
703,000
533,000
none of the above

Question 7
In the profit and loss account, for the 3 months ending 30th April, the
total expenses figure would be:
A.
B.
C.
D.
E.

226,300
188,300
164,300
90,500
none of the above

Question 8
Cash Budgets are widely used in service based industries. Decide
whether each of the following statements is true or false.
1.

A Cash Budget is a summary of the expected receipts of cash

and payments of cash over a specified period of time.

2.

Cash budgets are useful for accounting for the depreciation of

fixed assets.

A.
B.
C.
D.

Statement 1 is true and Statement 2 is false

Statement 1 is false and Statement 2 is true
Both Statements are true
Both Statements are false

Question 9
Which ONE of the following statements is INCORRECT?
A
Budgeting reflects the impact of strategic and project plans
B
Budgeting assists managers in the planning of allocating
resources
C
Budgeting sets future business targets and enables managers
to
compare actual performance and to take appropriate action
D
Budgeting enables managers to plan their bonus targets for the
following year
E
All of the above statements are incorrect
Question 10
If the opening bank balance for a company was 500 for August 2013,
the total receipts were 5,500, depreciation was 150 and the total
payments were 8,500, what would the closing bank balance be August
2013?
A. (3,400)
B. (2,500)
C. (2,650)
D. 2,500
E. None of the above

Section D- Event Cost Categorisation

Question

Any commentary about numbers does NOT need one of the following?
a)
b)
c)
d)
e)

Communication
Information
Data
Payment terms
None of these

Question

Who would be most likely to approve an event budget for a corporate

event?
a)
b)
c)
d)
e)

The Event Manager

The Client
The Bank Manager
The Event Sponsors
None of these

Question

What is NOT a role of the event budget?

a)
b)
c)
d)
e)

Act to forecast an events financial future

Assists in programme development
Can be described as a quantified statement of plans
Identify expenditure and incomes sources
None of these

Question

What is NOT a reason for sponsoring an event?

a)
b)
c)
d)
e)

Promotion of brand
Donating
Corporate Social Responsibility
Brand alignment
None of these

Question

What is a fixed cost at an event?

a)
b)
c)
d)
e)

Food and drink costs

Accommodation costs
Delegate pack costs
Room hire costs
None of these

Question

What is NOT an example of a conference expense?

a)
b)
c)
d)
e)

Speakers
Legal fees & insurance
Registration booths
Translation services
None of these

Question

Mismanagement of event finance can lead to which of the following?

a)
b)
c)
d)
e)

Safety concerns
Crowd control
Legal problems
Operational risks
All of these

Question

Who would NOT normally see the financial statements of an events

organisation?
a)
b)
c)
d)
e)

The Client/Investor
The creditors
Major sponsor
Finance Manager
None of these

Question 9

Financial Statements are reports on the financial performance of

organisations. They provide data on:
a)
Projections for the upcoming financial year
b)
Where money comes from, what money is spent on and how
much money is available for use
c)
Comparative company data to companies in similar industries
d)
All of the above
e)
None of the above
Question 10
The primary function of the Income Statement is to:
a)
Show the company's value as of a given point in time
b)
Determine if the company will have enough cash to operate
properly
c)
Determine taxes owed or not owed
d)
Compare the company's assets against the company's liabilities
e)
Measure the company's financial performance over a period of
time

Level 5 - Formulae Required for Ratio Analysis

Questions
1.

Return on Capital
Employed (ROCE)

Net Profit x 100

Capital at start of the
period

2.

Asset Turnover

Turnover
Capital at start of
period

3.

Gross Profit
Margin

Gross Profit

x 100

Turnover
4.

Net Profit Margin

Net Profit x 100

Turnover

5.

Fixed Asset
Turnover

Turnover
Fixed Assets

6.

Stock Days

Stock x 365
Cost of Sales

7.

Debtor Days

Debtors x 365
Credit Sales

8.

Creditor Days

Creditors x 365
Credit Purchases

9.

Current Ratio

Current Assets
Current Liabilities

1
0.

Quick Ratio
(Acid Test)

Current Assets
Stock
Current Liabilities