Commerce Exam  >  Commerce Tests  >  Test: Business Arithmetic- 2 - Commerce MCQ

Test: Business Arithmetic- 2 - Commerce MCQ


Test Description

18 Questions MCQ Test - Test: Business Arithmetic- 2

Test: Business Arithmetic- 2 for Commerce 2024 is part of Commerce preparation. The Test: Business Arithmetic- 2 questions and answers have been prepared according to the Commerce exam syllabus.The Test: Business Arithmetic- 2 MCQs are made for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Business Arithmetic- 2 below.
Solutions of Test: Business Arithmetic- 2 questions in English are available as part of our course for Commerce & Test: Business Arithmetic- 2 solutions in Hindi for Commerce course. Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free. Attempt Test: Business Arithmetic- 2 | 18 questions in 18 minutes | Mock test for Commerce preparation | Free important questions MCQ to study for Commerce Exam | Download free PDF with solutions
Test: Business Arithmetic- 2 - Question 1

Amul Milk Pvt. Ltd. is conducting campus placement to hire new workforce for their new branch in Patiala, Punjab. The HR team went to a college campus nearby to select around 20 candidates. While conducting the personal interviews of selected 25 candidates, the HR asked one of them to explain what does he understand by the term ‘Production Cycle’. He responded confidently by saying that it is the time period between receiving the raw material and converting them into final finished goods.
Considering the candidate’s response, state whether his statement is true or false. 

Detailed Solution for Test: Business Arithmetic- 2 - Question 1

Production Cycle: The production cycle is comprised of all activities related to the conversion of raw materials into finished goods. The cycle has several distinct components, involving the design of products, their incorporation into a production schedule, manufacturing activities, and a cost accounting feedback loop.
For example, the production cycle for the windows manufacturing enterprise would be much shorter, than for the automobile manufacturers.

Test: Business Arithmetic- 2 - Question 2

Sohan’s firm has a capital of ₹ 10,00,000; Sales of ₹ 5,00,000; Gross profit of ₹ 2,00,000 and Expenses of ₹ 1,00,000. He has hired a chartered account to work and manage his accounts. The CA, while working on the sales and profits, etc. found that the return on investment for the firm will be 10%. Sohan doubted the calculation of the CA. Keeping in view the above scenario, state whether the CA’s calculation was true or false.

Detailed Solution for Test: Business Arithmetic- 2 - Question 2

Return on Investment (ROI) Formula:

  • First method:
  • Second method:
1 Crore+ students have signed up on EduRev. Have you? Download the App
Test: Business Arithmetic- 2 - Question 3

Given are the arithmetic skills in Column 1. Match them with their correct formulae in Column 2.

Detailed Solution for Test: Business Arithmetic- 2 - Question 3

Correct Formula Match:

Test: Business Arithmetic- 2 - Question 4

Given are the arithmetic skills in Column 1. Match them with their correct definition in Column 2.

Detailed Solution for Test: Business Arithmetic- 2 - Question 4

Correct Match:

Test: Business Arithmetic- 2 - Question 5

State Whether the Following Statements are True or False.
Q. Rent is an example of variable cost.

Detailed Solution for Test: Business Arithmetic- 2 - Question 5
  • Variable costs may include Commission on sales, credit card fees, wages of part-time staff, etc.
  • Fixed costs may include Depreciation, interest paid on capital, rent, salary, property taxes, insurance premium, etc.
Test: Business Arithmetic- 2 - Question 6

State Whether the Following Statements are True or False.
Q. Gross margin and gross profit are one and the same. 

Detailed Solution for Test: Business Arithmetic- 2 - Question 6
  • Gross profit margin shows the percentage of revenue that exceeds a company's costs of goods sold.
  • Gross profit margin is calculated by subtracting the cost of goods sold from total revenue for the period and dividing that number by revenue.
Test: Business Arithmetic- 2 - Question 7

State Whether the Following Statements are True or False.
Q. Sales mix is the proportion in which two or more products are sold.

Detailed Solution for Test: Business Arithmetic- 2 - Question 7

Sales mix is the proportion in which two or more products are sold.
For the calculation of break-even point for sales mix, following assumptions are made in addition to those already made for CVP analysis:

  • The proportion of sales mix must be predetermined.
  • The sales mix must not change within the relevant time period.

The calculation method for the break-even point of sales mix is based on the contribution approach method. Since we have multiple products in sales mix therefore it is most likely that we will be dealing with products with different contribution margin per unit and contribution margin ratios. This problem is overcome by calculating weighted average contribution margin per unit and contribution margin ratio. These are then used to calculate the break-even point for sales mix.

Test: Business Arithmetic- 2 - Question 8

State Whether the Following Statements are True or False.
Q. Working capital is required to meet day-to-day expenses and to facilitate smooth functioning of the business.

Detailed Solution for Test: Business Arithmetic- 2 - Question 8

It is said that working capital is the lifeblood of a business. Every business needs funds in order to run its day-to-day activities.
The importance of working capital can be better understood by the following: Without adequate working capital an entity cannot meet its short-term liabilities in time.

Test: Business Arithmetic- 2 - Question 9

State Whether the Following Statements are True or False.
Q. Operating Cycle is also referred to as the Cash Community Cycle.

Detailed Solution for Test: Business Arithmetic- 2 - Question 9

The cash operating cycle (also known as the working capital cycle or the cash conversion cycle) is the number of days between paying suppliers and receiving cash from sales.
Cash operating cycle = Inventory days + Receivables days – Payables days.

Test: Business Arithmetic- 2 - Question 10

State Whether the Following Statements are True or False.
Q. Current liabilities represent short-term source of funds.

Detailed Solution for Test: Business Arithmetic- 2 - Question 10

Current liabilities are a company's short-term financial obligations that are due within one year or within a normal operating cycle. An operating cycle, also referred to as the cash conversion cycle, is the time it takes a company to purchase inventory and convert it to cash from sales.

Test: Business Arithmetic- 2 - Question 11

State Whether the Following Statements are True or False.
Q. The Cash Conversion Cycle is the length of time between a firm’s purchase of inventory and the receipt of cash from accounts receivable.

Detailed Solution for Test: Business Arithmetic- 2 - Question 11
  • The cash conversion cycle (CCC) is a formula in management accounting that measures how efficiently a company's managers are managing its working capital.
  • The CCC measures the length of time between a company's purchase of inventory and the receipts of cash from its accounts receivable.
Test: Business Arithmetic- 2 - Question 12

State Whether the Following Statements are True or False.
Q. Gross working capital is the sum total of all current liabilities of the business.

Detailed Solution for Test: Business Arithmetic- 2 - Question 12

Gross working capital is the sum total of all the current assets of a company, whereas net working capital is the difference between the current assets and the current liabilities of a company.

Test: Business Arithmetic- 2 - Question 13

State Whether the Following Statements are True or False.
Q. Longer the operating cycle, working capital quantum is more.

Detailed Solution for Test: Business Arithmetic- 2 - Question 13
  • Longer the operating cycle time, the more is the working capital required. Thus, it follows that depending upon the length of working cycle, the requirement for working capital varies from enterprise to enterprise.
  • Operating cycle is an important concept in management of cash and management of working capital.
  • The operating cycle reveals the time that elapses between outlay of cash and inflow of cash.
  • Quicker the operating cycle less amount of investment in working capital is needed and it improves the profitability.
Test: Business Arithmetic- 2 - Question 14

State Whether the Following Statements are True or False.
Q. Usage rate is the average rate at which the inventory is drawn over a period.

Detailed Solution for Test: Business Arithmetic- 2 - Question 14

Inventory usage is how much inventory a business has used over a specific time frame. It's similar to COGS, but it speaks to the number of units sold and not their monetary value. It's also called inventory consumption. That's called the inventory usage rate.

Test: Business Arithmetic- 2 - Question 15

State Whether the Following Statements are True or False.
Q. Low ROI indicates more efficient management and utilization of total funds invested.

Detailed Solution for Test: Business Arithmetic- 2 - Question 15
  • Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.
  • ROI tries to directly measure the amount of return on a particular investment, relative to the investment's cost.
  • A low Return on Investment Ratio (ROI) indicates Improper utilization of resources and Over investment in assets.
Test: Business Arithmetic- 2 - Question 16

State Whether the Following Statements are True or False.
Q. Order lead time is an average time that elapses between placing an order and receiving the goods.

Detailed Solution for Test: Business Arithmetic- 2 - Question 16

A lead time is the latency between the initiation and completion of a process.
For example, the lead time between the placement of an order and delivery of new cars by a given manufacturer might be between 2 weeks and 6 months, depending on various particularities.

Test: Business Arithmetic- 2 - Question 17

State Whether the Following Statements are True or False.
Q. Reorder point = Average daily usage rate × Lead time in days.

Detailed Solution for Test: Business Arithmetic- 2 - Question 17

Reorder point = Average daily usage rate × Lead time in days.
Multiply the maximum number of daily orders by the maximum lead time that may be required in case of supplier delays. Multiply the average number of daily orders by the average lead time. Subtract the result of Step 2 from the result of Step 1.

Test: Business Arithmetic- 2 - Question 18

State Whether the Following Statements are True or False.
Q. ROE represents the quantity of an item which is most economical to order when fresh supplies are required.

Detailed Solution for Test: Business Arithmetic- 2 - Question 18

Return on equity ratio can be described as a financial ratio that helps measure a company's proficiency to generate profits from its shareholders' investments. This profitability helps to gauge a company's effectiveness when it comes to using equity funding to run its daily operations.

Information about Test: Business Arithmetic- 2 Page
In this test you can find the Exam questions for Test: Business Arithmetic- 2 solved & explained in the simplest way possible. Besides giving Questions and answers for Test: Business Arithmetic- 2, EduRev gives you an ample number of Online tests for practice

Top Courses for Commerce

Download as PDF

Top Courses for Commerce