UNIT 6: BUSINESS FINANCE

MULTIPLE CHOICE QUESTIONS.

1. Identify the source which denotes cash inflow for a business:

(a) Sales Receipts
(b) Owner’s Equity
(c) Sale of Assets
(d) Salary & Bonus
Ans d
2. Identify the source which denotes cash outflow for a business:
(a) Purchase of Building
(b) Purchase of Raw materials
(c) Purchase of Plant & Machinery
(d) Sale of Assets
Ans d
3. Expenditure can be equated to outflow of money. Expenditure can also be
interchangeably used by entrepreneurs as:-
(a) Expense
(b) Cost
(c) None of the above
(d) Both 1&2
Ans d
4. Identify cost used for acquiring assets as well as for acquiring initial raw materials.
(a) Start-up cost
(b) Operational Cost
(c) Fixed Cost
(d) Variable Cost
Ans a
5. Choose items on which expenses will not remain fixed in nature:
(a) Rent
(b) Office lighting
(c) Salary
(d) Sales Commission
Ans d
6. Name the book in which all the cash transactions are recorded:
a. Passbook
b. Cash book
c. Balance sheet
d. Cash flow
 Ans (b)

7. Cash flow projection shows:

a. How cash is expected to flow in or flow out.
b. Maintain records of profit.
c. Maintain records of expenses.
d. Both option B&C

Ans. (a)
8. Which one is to be consider as inflow of cash:
a. Raw material purchased.
b. Sales commission
c. Sale of assets
d. Insurance premium.

Ans C
9. Identify the activity which is not consider to be cash outflow.
a. Loan received
b. Interest earned
c. Sales receipts
d. Purchased of fixed assets

Ans (d)
10. Statement that enables us to determine the profit over a period of time is:
a. Cash flow statement
b. Income statement
c. Cash flow projection
d. Both A & C

Ans (b)
11. Identify the “unit of sale” for a dairy business-
a. kilogram
b. piece/number
c. litre
d. hour
Ans – (c) litre
12. What is the ‘money’ charged by the enterprise for an ‘unit of sale’ to a customer
referred as-
a. Unit cost
b. Unit price
c. Gross profit
d. Variable cost
Ans – (b) Unit price
 13. In a business, which term is used for purchase of an asset, paying dues, buying
raw materials-
a. income
b. expenditure
c. sales
d. profits
Ans – (b) expenditure

14. The last column in the cash register represents or shows –

a. cash balance
b. profit
c. purchase
d. sales
Ans – (a) cash balance
15. The “unit of sale” used by a Textile shop –
a. square feet
b. kilogram
c. dozen
d. meter (fixed width)
Ans – (d) meter (fixed width)
16. Income statement is also referred as:
a. Profit and loss statement
b. Cash flow statement
c. Budget Statement
d. None of the above
Ans –(a) profit and loss statement

17. Following is the example of non-cash expense:

a. Salary
b. Power
c. Depreciation
d. Stationery
Ans: (c) salary
18. Cash flow statement shows the data for which period of time:
a. Future
b. Current
c. Past
 d. Past and Future Both
Ans : (C) past
19. Cash flow projection shows the data for which period of time:
a. Current
b. Future
c. Past
d. Past and Future both
Ans: ( b) Future
20. Break-even point is calculated to determine;
a. Only profit
b. Only loss
c. No profit no loss
d. Both profit and loss
Ans: (c) No profit no loss

MATCH THE COLUMNS

1. Match the following elements on the basis of receipts of money:
A) Inflow I Purchase of Computer
B) Outflow II Loss
III Profit
Iv Sales receipts
Ans A-IV, B-I
2 Match the following elements on the basis of economics of the business.
A) Unit of Sale I Measure at which one unit of sale is sold
B)Unit cost II Excess of unit Price over unit cost.
C)Unit Price III The measure of what products are sold
D) Gross Profit IVCost incurred by a company to produce,
sell one unit of sale of a particular product.
Ans A-III, B-IV, C-I D-II
3 Match the following elements on the basis of management of money
A) Expenditure I It is a value of the resource that was used
up in order to earn the revenue during the
time period.
B) Expense II It is a payment or disbursement
Ans- A-II, B-I
4. Match the following elements on the basis of type of Cost:
A)Start up Cost I Payment of monthly rent
B)Operational Cost II Buying & installing machine
III Purchase of a house for family
IV Payment of Dividends
Ans A-II, B-I
5. Match the following elements on the basis of their meanings:
A) Fixed Cost I Considers all dat to day operational costs
B) Variable Cost II Cost incurred to acquire assests
III Does not get affected by changing Sales
Volume
IV Cost will vary exactly in the same
proportion as the output.
Ans A-III, B-IV
6. Match the given concepts with its related meaning.
A. Unit Cost I. A book where all the cash transactions
related to a business are recorded
B. Cash register II. The cost incurred by a company to
produce, store and sell one unit of sale
C. Operational cost III. The statement that enables us to
determine the profit over a period of
time
D. Income statement IV. The costs incurred for carrying out
day to day operations of the business
or enterprise
Ans: A-II, B- IV, C-II, D- III
7. Match the following businesses with their appropriate “unit of sale”:
A. Real Estate Developer I. Time: hour
B. Lawyer II. Price / Dozen
C. Baker III. Litre
D. Dairy IV. Square feet
Answers: A-IV, B-I, C-II, D-III
8. Match with the category the examples belong to:
A. Cash inflows I. depreciation
B. Cash outflows II. gross profits
III. owner’s equity
 IV. purchase of land
(Answers:A-III, B- IV)
9.Match the examples with the appropriate category:
A. payments made specifically for I. expenditure
consuming goods and services
B. value of money consumed to produce a II. expense
current or future outcome
C. outflow of money through cash or III. cost
cheque
D. cost at which an asset is computed after IV. depreciation
using it over a period of time
Answers: (A- II, B -III, C- I, D – IV)

10. Match the terms with their appropriate meanings:

A. Fixed Cost I. cost that varies exactly in the same
proportion as the output
B. Variable Cost II. it includes all the cost of operations
III. costs that are not dependent on the
level of output
IV. cost which is incurred initially when a
business is started
(Answers: A-IV, B-I)
11. Match the following financial documents with their related meaning:
A. Cash flow projection I. profit and loss account
B. income statement II. the point at which the company neither
makes a profit nor a loss
c. Cash is expected to flow in and out of
business

Ans. A (3), B(I)

12. Match the following terms on the with the business arithmetic activities it relates to
A. Cash flow statement I. Profit and loss statement
B. breakeven point II. historical cash statement
III. the point at which the company neither
makes a profit nor loss

Ans A(II) B(III)

13. Match the following flows of cash with reference to the activities undertaken.
A. Cash inflow I. Assets purchased
B. Cash outflow II. claim received from insurance company
III. depreciation
Ans A(II) B(I)
14. Match the following costs on the basis of types of investment so done:
A. startup cost I. Salary given to employee
B. Fixed cost II. Equipment purchased
III. Raw Material purchased
Ans A(II), B(I)
15. Match the following activitieswith its related unit of sale.

A. Consultancy services I. Kilogram

B. Vending of fruits. II. Litre
III. Time/ hour
Ans A(III) ,B(I)

16. Match the following identifying the types of activities:

A. Cash Flow projection I. Profit and loss statement

B. Cash flow statement II. Past activities

III. Futuristic Cash activities

Ans A (III), B(I)

17. Match the following documents with its related utilities:

A. Income- Statement I. To know no profit no loss point

B. Cash Flow Projection II. To know profits and losses
III. To know anticipated cash inflow and
out flow for the future
IV To know future sales targets
Ans A(II), B. (III)
18. Match the following concepts wih the meanings given below :

A. Break- even point I. To determine the profit over a period

B. Income statement II. Which show how cash flowed in and
out of a business.

C. Cash flow projection III. It is amounting a level of sales that it

must generate to equal its expense

D. Cash flow statement IV. Which shows the cash that is

anticipated to be generated over a period
in the future
 Ans A(III), B(I), C(IV), D(II)

19. Match the following types of costs with how they are incurred :

A. Fixed cost I. Royalty

B. Variable cost II. Office lighting
C. Start-up Cost III. Water in a soft drink company
D. Semi Variable cost IV. Acquiring land to set up business
Ans: A (II), B(I), C(IV), D(III)

20. Match the following businessess with their unit of sale:

A. Auditor I. litre

B. Textile shop owner II. Kilogram/pound

C. Builder of houses III. Meter

D. Baker IV. time hour

V. Square Feet
Ans: A(IV), B(III),C(V),D(II)

FILL IN THE BLANKS

1. All cash transactions are to be recorded in a book called a ____________ book.
2. Owners’ money invested in the business is known as ____________.
3. The perks given to employees like travel allowances, medical allowances are also
known as _________________.
4. Depreciation of assets is not considered to be a cash ___________.
5. When buyer pays for the product at a later date, it is called ________________.
6. Unit of sales can be defined as the measure of what products are ________________.
7. Excess of Unit Price over Unit Cost is known as the _____________ margin.
8. Expenditure is a payment or _____________.
9. Cost which is incurred initially to start a business is called _____________ cost.
10. Cost which vary as a total cost to the organisation when output varies is called as
_____________ cost.
11. The movement of money in or out of a business is _______
12. The main economic activity for starting a business is to earn ________.
13. The _______ period of not making any profit.
14. The _______cost which is incurred initially to start a business.
15. A business breakeven point is the amount or level of ________ that it must generate
in order to equal its sales.
 16. At the break even level ______ is equal to the total expenses.
17. The terms ‘start up’ and ________ are used interchangeably.
18. It shows the ______of the company for a specified duration.
19. Income statement is also referred as _______
20. A ______ break even point is the amount or level of sales or revenues that is must
generate in order to equal its expenses.
21. All cash transactions are to be recorded in a book called___________.
22. The receipts of money in a business is called _________ and the payments are
called________.
23. In contra entry, when money is withdrawn from the bank one entry is in the cash
column and the other is in the _________ column.
24. The cost incurred by a company to produce, store and sell one unit of sale of a
particular product or service is termed as _________.
25. Excess of Unit Price over Unit Cost is known as the ____________.
26. Operational costs incurred during the course of business comprise of __________ and
___________.
27. Accounting is about counting, adding and subtracting costs, so ________ ability is
crucial for running a business.
28. The expenses for acquiring assets as well as initial raw material relates to ________
cost.
29. The balance in the cash register shows the __________ of the firm.
30. The money coming in the business in the form of grant paid by the government can be
referred to __________.
31. Statement that enables us to determine the profit and loss over a period is known as
______.
32. The income statement is important because it shows the ______ of a company during
the time interval.
33. Income statement is also referred as________.
34. Gross profit is calculated as the difference between total sales and ______
35. The movement of money in and out of a business during specific period refers
as_________
36. It describes the cash inflows and outflows that has occurred in the past is
called_______
37. It shows the cash that is anticipated to be generated over a chosen period in the future
is called______
38. The period in which firms is not making any profit is called ______ period.
39. When there is no profit no loss exits referred as _______________
40. At the break-even level ________________is equal to the total expenses.

Ans:
1 Cash 2 Equity 3 Employee benefits 4 outflow 5 selling on credit
6 sold 7 unit gross 8 disbursement 9 start up 10 variable
11 Cash flow 12 Profit 13 Gestation 14Break-even 15 Start up
16 Cost 17 One time 18 Profitability 19 P&L statement/income statement
20 Business. 21 Cash book 22) Cash inflows; cash outflows 23) Bank
24 Unit Cost 25 Unit Gross Profit 26 Fixed, Variable 27Arithmetic
28 Start up 29 Cash balance 30 Government Subsidy.
31 Profit and loss statement/Income statement 32 Profitability
33 Profit and loss statement 34 Cost of goods sold 35 Cash flow
36 Cash flow statement 37 Cash flow projection 38 Gestation period
39 Break- even point 40Sales

TRUE OR FALSE
State whether the following statements are true or false.
1. Incentives are payments given to employees based on their performance only.
2. Money spent on publicizing their product through newspaper, TV, brochures etc. is
known as personal selling.
3. The money paid to the employees in the form of salary & Bonus is an example of
Cash Outflow.
4. All cash transactions are to be recorded in a book called cash register.
5. Sale of Scrap is the money coming in by selling finished goods etc.
6. Profit is considered as cash inflow.
7. Unit cost is also known as Cost of Goods sold.
8. In simple terms, expenditure can be equated to inflow of money.
9. Salary paid to the employee during initial periods of start-up comes under operational
costs.
10. Operational Costs are categorized into fixed & variable costs.
11. Depreciation is not a cash flow expense.
12. When the buyer pays the money to the seller at a later date it is called cash
transaction.
13. Unit cost is also referred as cost of goods sold.
14. Wages paid based on production is an example of variable cost.
15. The income statement is important because it shows the profitability of a company
during a specified time interval.
16. At the breakeven level, total sales revenue is always equal to total expenses.
17. A fixed cost is a cost that change with an increase or decrease in the amount of goods
produced or sold.
18. Expenses are derived, and cost are incurred.
19. Quite often the terms ‘start-up’ and ‘one time’ cost are used interchangeably.
20. Excess of unit price over unit cost is known as unit gross margin.
21. ‘Government Subsidy’ leads to cash flowing out of the business.
22. When the buyer pays the money to the seller at a later date, it is buying on credit.
23. Simplicity in the format for keeping a track of credit transactions ensures that
reconciliation becomes easy.
24. Unit of sale is the measure of what products are sold.
25. Start-ups costs refer to costs for carrying out day to day operations of the business.
26. Operational cost is comprised of Fixed, Variable, and Start-up Cost.
27. Cash withdrawal from bank, entry is made both in cash and bank accounts.
28. The balance in the cash register represents the profit of the firm.
29. Cash flows out when company pays bonus to its employees.
30. Profits are considered as cash inflows of the business.
31. Income statement is also known as statement of operations.
32. Profitability cannot be calculated by income statement.
33. Issue of equity share is an example of cash inflow activity.
34. Cash flow statement is historical in nature.
35. Cash flow projection is futuristic in nature.
36. Break- even point is expressed only in term of unit.
37. For an entrepreneur Breakeven point is very critical because by knowing that break-
even point one can begin to set targets.
38. Break- even point also helps in profit planning and goal setting.
39. When the buyer pays the money to the seller at later date it is called cash transaction.
40. Unit cost refers to the variable cost.

Answers
1.False 2 False 3 True 4 True 5 False 6 False
7 True 8 False 9 False 10 True 11 True 12False
13 True 14 True 15 True 16 True 17 False 18 False
19 True 20 True 21 False 22 True 23 True 24 True
25 False 26 False 27 True 28 False 29 True 30 False
31 True 32 False 33 True 34 True 35 True 36 False
37 True 38 True 39 False 40 True
 PICTORIAL QUESTIONS
Q1. Identify Unit of Sale in the picture below:

Q2.Identify the name of concept linked with picture below:

Q3. Cash Register reflects -receipts and the payments .In reference to the given statement
identify the ‘flows’ in the picture:
Q4. Identify Unit of Sale in the picture below:

Q5.Identify the document shown below:

Q6. Identify the ‘unit of sale’ incase of the picture depicted below :

Q7. Identify the concept depicted in the diagram below.

Q8.Complete the formula.

Q.9 Identify the document from the format given below.

Q.10 Identify the type of operational cost shown in the following graph.
Answers
1. Litre
2. Cash Register
3. Cash Outflow, Cash Inflow
4. Kilograms
5. Income Statement
6. Time – hour
7. Breakeven point
8. Total salesS
9. Cash register
10. Variable Cost