Business Certifications Business Certifications Financial Management & Budgeting

Question 1

What does ROI stand for in a business context?

Accepted Answer

Return on Investment

Answer

ROI (Return on Investment) measures the profitability of an investment relative to its cost.

Question 2

Which financial statement reports a company's revenues, expenses, and profit over a specific period?

Accepted Answer

Income Statement

Answer

The income statement (also called the profit and loss statement) reports revenues, expenses, and net profit over a defined period.

Question 3

A budget variance is best described as:

Accepted Answer

The difference between budgeted and actual amounts

Answer

Budget variance is the difference between the planned (budgeted) amount and the actual amount spent or earned.

Question 4

What is zero-based budgeting?

Accepted Answer

A budget built from scratch each period, requiring justification for every expense

Answer

Zero-based budgeting requires managers to justify every expense from zero each budget cycle rather than using prior period figures as a baseline.

Question 5

Which ratio measures a company's ability to pay its short-term obligations?

Accepted Answer

Current ratio

Answer

The current ratio (current assets divided by current liabilities) measures a company's liquidity and short-term debt-paying ability.

Business Certifications Practice Test