Sample Quizzes For Preparation: Finance And Accounting Strategy: The Use of Accounting Data To Enable Strategic Decision Making
1. What is the primary purpose of accounting data in strategic decision-making?
A. To monitor employee morale
B. To provide objective financial evidence for long-term planning
C. To improve product design
D. To manage daily operations
2. Which financial statement shows revenues, costs, and profits over a period?
A. Balance sheet
B. Income statement
C. Cash flow statement
D. Directors’ report
3. Which financial statement shows assets, liabilities, and equity at a point in time?
A. Balance sheet
B. Cash flow statement
C. Income statement
D. Auditor’s report
4. Which financial statement shows inflows and outflows of cash?
A. Directors’ report
B. Cash flow statement
C. Balance sheet
D. Profit and loss account
5. Which of the following is a strategic use of the income statement?
A. Assessing liquidity
B. Identifying cost structures to plan strategies
C. Analysing gearing ratio
D. Reviewing asset turnover
6. Which of the following is a strategic use of the balance sheet?
A. Measuring gross profit margin
B. Benchmarking against competitors’ revenue
C. Determining solvency and gearing levels
D. Analysing advertising costs
7. Which financial statement is most useful for dividend policy planning?
A. Balance sheet
B. Income statement
C. Cash flow statement
D. Notes to the accounts
8. Which financial ratio measures profitability relative to capital employed?
A. Current ratio
B. ROCE
C. Inventory turnover
D. Acid test ratio
9. Which ratio assesses a firm’s ability to cover short-term obligations with liquid assets?
A. Gross margin
B. Gearing ratio
C. Current ratio
D. ROCE
10. Which section of an annual report contains independent verification of accounts?
A. Notes to the accounts
B. Directors’ report
C. Auditor’s report
D. Chairman’s statement
11. Which section of the annual report outlines future strategies and dividends?
A. Chairman’s statement
B. Directors’ report
C. CSR report
D. Five-year summary
12. Which section of the annual report provides a high-level summary of market conditions?
A. Notes to the accounts
B. Chairman’s statement
C. Auditor’s report
D. Corporate governance report
13. Which part of the annual report details accounting policies and assumptions?
A. Directors’ report
B. Notes to the accounts
C. Auditor’s report
D. CSR statement
14. Which part of the annual report is increasingly important for ESG investors?
A. CSR/Sustainability report
B. Auditor’s report
C. Balance sheet
D. Income statement
15. Which of the following is NOT typically part of an annual report?
A. Financial statements
B. Market analysis
C. Auditor’s opinion
D. Tax refund claims
16. Why is the auditor’s report useful to investors?
A. It explains dividend policies
B. It gives assurance on the accuracy of financial statements
C. It sets out long-term strategies
D. It provides working capital details
17. Which stakeholder group uses annual reports to assess repayment ability?
A. Employees
B. Creditors/banks
C. Government
D. Local communities
18. Which stakeholder group is most concerned with dividend information?
A. Employees
B. Government
C. Shareholders
D. Customers
19. Which stakeholder group uses annual reports to monitor taxation compliance?
A. Employees
B. Creditors
C. Government
D. Suppliers
20. Which stakeholder group uses annual reports to understand job security?
A. Employees
B. Shareholders
C. Competitors
D. Banks
21. Which of the following is a limitation of using accounting data for strategy?
A. It is forward-looking and uncertain
B. It is purely subjective
C. It may be outdated and historical
D. It cannot be audited
22. Which of the following is a benefit of ratio analysis in strategy?
A. Identifies staff training needs
B. Provides industry comparability
C. Reduces competition
D. Prevents inflation
23. Which ratio would management analyse to improve credit control?
A. Debtor days
B. Gearing ratio
C. Current ratio
D. ROCE
24. Which ratio would best show efficiency in inventory management?
A. Acid test ratio
B. Net profit margin
C. Inventory turnover ratio
D. Dividend cover
25. Which business decision requires strong cash flow forecasts?
A. Deciding dividend payouts
B. Expanding into new markets
C. Cutting employee benefits
D. Pricing premium products
26. What is the purpose of the five-year financial summary in annual reports?
A. To compare competitors’ strategies
B. To show long-term performance trends
C. To calculate net present value
D. To disclose corporate governance failures
27. Which type of strategic decision is based on strong ROCE and retained profits?
A. Downsizing
B. Market expansion
C. Wage freeze
D. Product withdrawal
28. Which decision would high gearing ratios influence?
A. To finance expansion with more debt
B. To issue new equity instead of borrowing
C. To increase dividend payouts
D. To delay creditor payments
29. Which company strategy is supported by large retained earnings?
A. Relying on government subsidies
B. Share buybacks or reinvestment into R&D
C. Reducing product quality
D. Minimising working capital
30. Which business strategy may be adopted when profitability ratios fall sharply?
A. Expansion into new markets
B. Cost-cutting or restructuring
C. Increasing dividends
D. Maintaining current pricing
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course
Answer key and explanations
1. Correct Answer: B
Explanation: Accounting data provides objective evidence for strategic planning. A, C, D relate to other functions.
2. Correct Answer: B
Explanation: Income statement shows revenue, expenses, and profit. A and C show financial position/cash. D is narrative.
3. Correct Answer: A
Explanation: Balance sheet shows assets, liabilities, and equity. B and C show flows, D is opinion.
4. Correct Answer: B
Explanation: Cash flow statement tracks cash inflows/outflows. Others are unrelated.
5. Correct Answer: B
Explanation: Income statement helps identify cost structures. A and C belong to balance sheet, D to efficiency.
6. Correct Answer: C
Explanation: Balance sheet used to assess solvency and gearing. Others are income statement uses.
7. Correct Answer: C
Explanation: Cash flow statement determines if dividends can be paid. A and B help indirectly, D is explanatory.
8. Correct Answer: B
Explanation: ROCE measures profitability relative to capital employed. Others are liquidity/efficiency ratios.
9. Correct Answer: C
Explanation: Current ratio shows liquidity. Others assess profitability/gearing.
10. Correct Answer: C
Explanation: Auditor’s report verifies accounts. Others are management/narrative.
11. Correct Answer: B
Explanation: Directors’ report outlines future strategy and dividend proposals. Others don’t.
12. Correct Answer: B
Explanation: Chairman’s statement summarises performance and conditions. A, C, D serve other purposes.
13. Correct Answer: B
Explanation: Notes explain policies and breakdowns. Others don’t provide detail.
14. Correct Answer: A
Explanation: CSR report is crucial for ESG investors. Others are traditional reports.
15. Correct Answer: D
Explanation: Tax refund claims are not part of an annual report. Others are required.
16. Correct Answer: B
Explanation: Auditor’s report assures investors of accuracy. Others provide different functions.
17. Correct Answer: B
Explanation: Creditors assess solvency and repayment. A, C, D monitor other concerns.
18. Correct Answer: C
Explanation: Shareholders are most interested in dividends. A, B, D are not primarily dividend-focused.
19. Correct Answer: C
Explanation: Government uses reports to monitor tax and regulation. A, B, D are not correct.
20. Correct Answer: A
Explanation: Employees look to reports for job security. Others have different priorities.
21. Correct Answer: C
Explanation: Accounting data is often historic, not predictive. A, B, D are incorrect.
22. Correct Answer: B
Explanation: Ratios allow comparison across industry and time. A, C, D are not benefits.
23. Correct Answer: A
Explanation: Debtor days assess collection efficiency. Others measure different things.
24. Correct Answer: C
Explanation: Inventory turnover shows stock management efficiency. A, B, D are not.
25. Correct Answer: A
Explanation: Dividend policy requires cash flow strength. B also depends on cash but primarily long-term.
26. Correct Answer: B
Explanation: Five-year summaries show trends. Others are unrelated.
27. Correct Answer: B
Explanation: Strong ROCE supports market expansion. A, C, D suggest weak performance.
28. Correct Answer: B
Explanation: High gearing pushes firms to issue equity. Others increase risk.
29. Correct Answer: B
Explanation: Large retained earnings support reinvestment or buybacks. Others are incorrect.
30. Correct Answer: B
Explanation: Falling profitability ratios call for cost-cutting or restructuring. A, C, D are counterproductive.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course