B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: BEC 4 — Questions and Answers
Question 1: Which financial ratio measures how efficiently a company collects its receivables?
- Inventory turnover ratio
- Accounts receivable turnover ratio (Correct answer)
- Debt-to-equity ratio
- Return on assets
Correct answer: Accounts receivable turnover ratio
Accounts receivable turnover (net credit sales ÷ average accounts receivable) indicates how many times per period a company collects its average receivable balance.
Question 2: In the context of IT systems, which term describes the process of converting data into an unreadable format to protect it from unauthorized access?
- Hashing
- Tokenization
- Encryption (Correct answer)
- Compression
Correct answer: Encryption
Encryption transforms plaintext into ciphertext using an algorithm and key, making data unreadable without the corresponding decryption key.
Question 3: A company's degree of operating leverage (DOL) measures:
- The ratio of debt to equity in the capital structure
- The sensitivity of operating income to changes in sales volume (Correct answer)
- The efficiency of asset utilization
- The proportion of variable costs in total costs
Correct answer: The sensitivity of operating income to changes in sales volume
DOL quantifies how a percentage change in sales translates into a percentage change in operating income (EBIT), reflecting the impact of fixed operating costs.
Question 4: Under the COSO Internal Control – Integrated Framework, which component involves policies and procedures that ensure management directives are carried out?
- Control environment
- Risk assessment
- Control activities (Correct answer)
- Monitoring activities
Correct answer: Control activities
Control activities are the actions established through policies and procedures that help ensure management's responses to risks are effectively carried out.
Question 5: Which monetary policy action would the Federal Reserve take to stimulate a slowing economy?
- Increase the reserve requirement
- Sell government securities on the open market
- Raise the federal funds rate target
- Lower the discount rate (Correct answer)
Correct answer: Lower the discount rate
Lowering the discount rate reduces borrowing costs for banks, encouraging them to lend more and stimulating economic activity.
Question 6: A company's cash conversion cycle (CCC) is calculated as:
- Days inventory outstanding + days payable outstanding − days sales outstanding
- Days sales outstanding + days inventory outstanding − days payable outstanding (Correct answer)
- Days payable outstanding − days sales outstanding + current ratio
- Days inventory outstanding − days sales outstanding + quick ratio
Correct answer: Days sales outstanding + days inventory outstanding − days payable outstanding
CCC = DIO + DSO − DPO; it measures the time between paying for inventory and collecting cash from customers.
Question 7: Which type of business combination occurs when two companies in the same industry and at the same production stage merge?
- Vertical merger
- Conglomerate merger
- Horizontal merger (Correct answer)
- Reverse merger
Correct answer: Horizontal merger
A horizontal merger combines companies that are direct competitors operating at the same stage of production in the same industry.
B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: BEC 4
Which financial ratio measures how efficiently a company collects its receivables?