Question

1.Regarding the differences between financial accounting and management accounting, which of the following statements is correct?

Select one:
a. Financial reports are produced at more frequent intervals than management reports
b. Financial reports are prepared for internal users whereas management reports are prepared for external users
c. Financial reports provide more forecast data than management reports
d. Financial reports reflect past performance whereas management reports are concerned with the future as well as the past

2.

The DuPont method decomposes return on equity into

Select one:
a. operating profit margin and total asset turnover.
b. return on assets and the equity multiplier.
c. return on assets and the debt ratio.
d. net profit margin, total asset turnover and the equity multiplier.

3.

How are fixed costs best defined?

Select one:
a. as fixed for all time.
b. as fixed for 6 months.
c. as fixed for a given number of products.
d. as fixed in relation to changes in activity over the relevant range of output.

Answer 1

1) d. Financial reports reflect past performance whereas management reports are concerned with the future as well as the past

Management reports are prepared more frequently than Financial reports and not the other way around. Financial reports are for shareholders and for external users. Financial reports reflects the past performance and management reports uses budget and forecast data as well.

2). d. net profit margin, total asset turnover and the equity multiplier.

Dupont method gives return on equity as:

ROE= (Net Income/Revenue)*(Revenue/Total Assets)*(Total Assets/Equity)

So, Net Profit Margin, Total Asset Turnover and Equity Multiplier.

3). d. as fixed in relation to changes in activity over the relevant range of output