CAM CAM Financial Management & Budgeting 1

Question 1

Which budgeting method requires managers to justify every expense from zero each budget cycle?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires all expenses to be justified anew each period rather than basing them on prior-year figures.

Question 2

A cost that remains constant regardless of the level of business activity is called a:

Accepted Answer

Fixed cost

Answer

Fixed costs, such as rent or salaries, do not change with fluctuations in production or service volume.

Question 3

What financial document summarizes an organization's assets, liabilities, and equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet provides a snapshot of an organization's financial position on a given date.

Question 4

When actual spending exceeds the budgeted amount for a line item, this is known as a:

Accepted Answer

Unfavorable variance

Answer

An unfavorable (or adverse) variance occurs when actual costs are higher than budgeted, indicating overspending.

Question 5

Which financial ratio measures an organization's ability to pay short-term obligations using its most liquid assets?

Accepted Answer

Quick ratio

Answer

The quick ratio (acid-test ratio) excludes inventory from current assets, providing a stricter liquidity measure than the current ratio.

(CAM) Certified Administrative Manager Practice Test