COMM112 Financial Information for Business Exam Semester 1 2026 | Lincoln University

COMM112 Financial Information for Business

SECTION A [Total: 75 marks] Multiple-Choice Questions

Select the most appropriate answer for each question.

The questions in this section have equal weighting (1.5 marks each).

1. Which one of the following stakeholders is an internal stakeholder? 

a) Managers
b) Lenders
c) Suppliers
d) Customers

2. Which one of the following information types is informal?

a) Annual reports
b) NZX share price
c)  Lunchroom discussions
d) Media releases

3. Which one of the following statements about the balance sheet is not correct?

a) Balance sheet shows all the resources that are controlled by the business and all the business debts.
b) Balance sheet is a flow report.
c) Balance sheet shows the liquidity of the business.
d)Balance sheet shows the risk associated with the business.

4. Which one of the following financial statement items is a noncurrent asset?

a) Cash
b) Accounts receivables
c) Equipment
d) Inventory

5. Which one of the following statements indicates the effect of a 'Cash sale' on Revenue and Asset?

a) Revenue: increase - Asset: increase
b)Revenue: decrease - Asset: decrease
c) Revenue: increase-Asset: decrease
d) Revenue: decrease-Asset: increase

6. Which one of the following activities is an operating activity?

a) Purchase of an equipment
b) Purchase of electricity on credit
c) Sale of a land
d)Withdrawing cash by owner

7. Which one of the following items is not subject to GST?

a) University fee
b) Internet bills
c) Interest on bank saving accounts
d)Gym membership

8. Which one of the following actions indicates low stakeholder accountability?

a) Asking for employee feedback
b) Asking for customer feedback
c) Asking for community feedback
d) Asking for owner feedback

9. Which one is not a pillar of corporate responsibility?

a) Ethical
b) Economic
c) Social
d) Environmental

10. Which one of the following financial statement components is shown in a balance sheet?

a) Sale
b) Accumulated depreciation
c) Depreciation expense
d) Rent income

11. Under the straight-line method, depreciation expense...

a) Increases every year
b) Decreases every year
c) Remains constant every year
d) Follows no specific pattern

12. For an asset owned for more than one year, the depreciation expense for the year, calculated using reducing-balance at the rate of 20%, would be calculated as follows:

a) 20% x cost
b) 20% x accumulated depreciation
c) 20% x (cost-accumulated depreciation)
d) 20% x (cost+ accumulated depreciation)

13. Which one of the following activities is classified as a source of cash?

a) payment to employees for salary
b) Subscribing to an annual insurance policy
c) Purchases of new machinery
d) Receipt from clients for performing a service

14. The need to hold cash as a financial reserve is known as:

a) Safety motive
b) Speculative motive
c) Opportunistic motive
d) Transaction motive

15. A conservative working capital policy means that the business:

a) Faces a low level of risk
b) Has a low level of cash
c) Has a low level of inventory
d) Faces a high level of profitability

16. Which one of the following activities directly affects profit?

a) Collection of debtor accounts
b) Payment of creditor accounts
c) Cash sales
d) Payment of employee's wages that have been owing for a while

17. Higher operating leverage is related to the use of additional:

a) fixed costs
b) variable costs
c) debt financing
d) equity financing

18. Which one of the following activities is an example of debt financing AND its effect on financial leverage?

a) Borrowing money from your mate- Decrease
b) Borrowing money from your mate- Increase
c) Asking your mate to invest in the firm - Decrease
d) Asking your mate to invest in the firm-Increase

19. Which one of the following methods is used by businesses in long term cash flow management?

a) Proper credit checks
b) Effective purchasing and re-ordering systems
c) Disposal of any unused fixed assets
d) Monitoring of accounts payable settlement

20. Which one of the following items is a fixed cost?

a) Rent
b) Employee wages
c) Petrol
d) Commissions

21. The market factors that affect performance include:

a) Structure
b) Interest rates
c) Size
d) Goal congruence

22. Which one of the following activities would lead to extrinsic motivation?

a) Pay rise
b) Experiencing new tasks
c) Doing something that is personally satisfying
d) Choosing to take on more responsibility

23. The approach to budgeting that continually updates the budget by dropping the period just completed and adding a new time period is known as:

a) Zero-based budgets
b) Static budgets
c) Rolling (continuous) budgets
d) Flexible budgets

24. Budgets that are prepared for one level of activity are known as:

a) Zero-based budgets
b) Rolling (continuous) budgets
c) Static budgets
d) Flexible budgets

25. A measure of the difference between actual activity and the standard activity allowed, given the actual output is known as:

a) Financial statement analysis
b) Variance analysis
c)  Flexible budget analysis
d)  Favourable analysis

26. When conducting variance analysis, a favourable variance indicates:

a)  The actual results are worse than expected
b)  The actual results are better than expected
c)  The actual results are good
d)  The actual results are higher than the budget