Certified Public Accountant Business Environment & Concepts

Question 1

Which financial metric measures a company's ability to meet short-term obligations using its most liquid assets?

Accepted Answer

Quick ratio

Answer

Current ratio

Answer

Debt-to-equity ratio

Answer

Return on assets

Question 2

In the context of corporate governance, what is the primary responsibility of a company's audit committee?

Accepted Answer

Overseeing financial reporting and internal controls

Answer

Setting executive compensation

Answer

Approving capital expenditures

Answer

Managing day-to-day operations

Question 3

Which economic concept describes a situation where a market fails to produce an efficient outcome due to external costs or benefits?

Accepted Answer

Market externality

Answer

Comparative advantage

Answer

Opportunity cost

Answer

Economies of scale

Question 4

Under the COSO framework, which component of internal control involves management's philosophy and operating style?

Accepted Answer

Control environment

Answer

Risk assessment

Answer

Control activities

Answer

Information and communication

Question 5

What is the primary purpose of a company's weighted average cost of capital (WACC)?

Accepted Answer

To evaluate investment projects as the discount rate

Answer

To determine dividend payout ratios

Answer

To calculate accounts receivable turnover

Answer

To measure employee productivity

Question 6

In a supply chain context, which strategy involves holding minimum inventory and relying on frequent supplier deliveries?

Accepted Answer

Just-in-time inventory

Answer

Economic order quantity

Answer

Safety stock method

Answer

ABC analysis