Accounting and Finance MCQs

Progressive taxes and unemployment benefits automatically moderate economic fluctuations.
They support demand in downturns and restrain it in booms.

Present value discounts future cash to reflect time and risk.
It allows cash flows at different dates to be compared.

IRR is the break-even discount rate in present-value terms.
A project is generally acceptable if IRR exceeds the required return.

The quick ratio usually excludes inventory and prepayments.
It focuses on assets more readily available to meet obligations.

During downturns, lower tax payments cushion disposable income.
During expansions, higher payments limit demand growth.

Compounding causes investment growth to accelerate over time.
The frequency and rate of compounding affect future value.

Nonconventional cash flows may produce multiple IRRs.
For mutually exclusive projects, NPV is usually the better value criterion.

Investors require compensation for bearing uncertainty.
Expected return rises with systematic risk in standard finance theory.

Discretionary measures require legislative or executive action.
Examples include a new infrastructure program or tax adjustment.

Discounting is the reverse of compounding.
A higher discount rate produces a lower present value.

Payback emphasizes liquidity and speed of recovery.
The basic method ignores time value and cash flows after payback.

Imperfectly correlated assets offset some individual fluctuations.
Diversification cannot eliminate economy-wide systematic risk.