B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: BEC 3 — Questions and Answers
Question 1: Which of the following best describes the 'matching concept' as it applies to financial management decisions?
- Matching revenues with the period they are earned
- Financing long-term assets with long-term capital sources (Correct answer)
- Matching debits with credits in journal entries
- Pairing each cost center with a revenue center
Correct answer: Financing long-term assets with long-term capital sources
In financial management, the matching principle means funding permanent or long-term assets with long-term debt or equity rather than short-term sources.
Question 2: A company operating in a perfectly competitive market will maximize profit by producing at the output level where:
- Total revenue equals total fixed costs
- Marginal cost equals marginal revenue (Correct answer)
- Average total cost is minimized
- Price equals average variable cost
Correct answer: Marginal cost equals marginal revenue
Profit maximization occurs at the quantity where MC = MR; in perfect competition MR equals market price, so firms produce where MC = P.
Question 3: Enterprise Risk Management (ERM) frameworks typically categorize risks into which major types?
- Financial, operational, strategic, and compliance risks (Correct answer)
- Market, credit, liquidity, and reputational risks
- Internal, external, controllable, and uncontrollable risks
- Short-term, long-term, insurable, and non-insurable risks
Correct answer: Financial, operational, strategic, and compliance risks
COSO's ERM framework classifies risk objectives—and thus risk categories—as strategic, operations, reporting, and compliance, commonly summarized as strategic, operational, reporting, and compliance risks.
Question 4: When a company uses the internal rate of return (IRR) method, a project is acceptable if:
- IRR is less than the cost of equity
- IRR exceeds the required rate of return (hurdle rate) (Correct answer)
- IRR equals the net present value
- IRR is greater than the payback period
Correct answer: IRR exceeds the required rate of return (hurdle rate)
If IRR exceeds the hurdle rate (cost of capital), the project generates returns above the minimum required and should be accepted.
Question 5: Which type of e-commerce model describes transactions between a business and its suppliers or other businesses?
- B2C (business-to-consumer)
- C2C (consumer-to-consumer)
- B2B (business-to-business) (Correct answer)
- G2B (government-to-business)
Correct answer: B2B (business-to-business)
B2B e-commerce involves commercial transactions conducted electronically between companies, such as a manufacturer purchasing raw materials online from a supplier.
Question 6: A country experiencing a trade deficit is best described as one where:
- Government expenditures exceed tax revenues
- Imports of goods and services exceed exports (Correct answer)
- Inflation exceeds the target rate
- Foreign direct investment exceeds domestic investment
Correct answer: Imports of goods and services exceed exports
A trade deficit (current account deficit) occurs when a nation imports more goods and services than it exports over a given period.
Question 7: Which capital budgeting technique does NOT consider the time value of money?
- Net present value (NPV)
- Internal rate of return (IRR)
- Payback period (Correct answer)
- Discounted payback period
Correct answer: Payback period
The traditional payback period simply counts years until cumulative cash inflows recover the initial investment, ignoring the timing (time value) of those cash flows.
B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: BEC 3
Which of the following best describes the 'matching concept' as it applies to financial management decisions?