Lesson 2.4.2b
2.4.2b Use and limitations of financial information in decision making Quiz: Pearson Edexcel Business, Unit 9
20 questions
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Lesson 2.4.2b, Use and limitations of financial information in decision making: 20 multiple choice questions for the Pearson Edexcel GCSE Business (1BS0), Unit 9: Making financial decisions, written with Revision Ninja.
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The 20 questions
-
What is a major limitation of using past financial data to make decisions?
- Instantaneous data access
- Absolute calculation accuracy
- Outdated market conditions
- Guaranteed future success
-
What is the main risk of relying on a single year of business accounts?
- High inflation rates
- Guaranteed tax increases
- Unusual one-off events
- Low staff turnover
-
What crucial information do financial accounts typically fail to show?
- Operating expenses
- Staff morale levels
- Interest payments
- Total sales revenue
-
Why might a business report rising profit while its cash balance falls?
- High credit sales
- Lower supplier prices
- Rapid loan repayment
- Increased tax rebates
-
What is a key drawback of using average figures to judge business performance?
- Increasing tax liabilities
- Concealing extreme variations
- Reducing net profit
- Overstating total revenue
-
What does a high net profit combined with low cash reserves indicate?
- Liquidity risk
- Guaranteed bankruptcy
- Excessive inventory
- Zero tax liability
-
Which factor reduces the usefulness of financial information for managers?
- Delayed data publication
- Standardised accounting rules
- Audited annual reports
- Detailed cost breakdowns
-
Why do managers combine marketing data with financial data for decisions?
- Contextualising sales trends
- Calculating corporation tax
- Setting dividend payouts
- Determining wage rates
-
What is a limitation of comparing profit margins with a competitor?
- Different accounting methods
- Equal market share
- Identical product ranges
- Similar wage structures
-
What is the main weakness of using a single month of sales data for investment?
- Excessive taxation
- Seasonal distortion
- Staff redundancy
- High audit costs
-
Why might comparing profit margins with a competitor be misleading?
- Identical product ranges
- Different cost structures
- Guaranteed future sales
- Equal market share
-
Which factor could make a manager distrust financial information?
- Regular auditing
- Financial bias
- Government regulation
- Transparent reporting
-
What is a major limitation of accruals accounting for cash management?
- Misleading cash flow
- Delayed profit calculation
- Inaccurate tax returns
- Excessive bank charges
-
What is a risk of ignoring non-financial factors in business decisions?
- Reduced tax liability
- Immediate cost savings
- Ignoring staff morale
- Guaranteed higher profits
-
A business has sales of £120,000 but its sales forecast was £150,000. What is the percentage shortfall against the forecast?
- 25%
- 80%
- 20%
- 30%
-
Which issue commonly affects financial data taken from a rival business?
- Mandatory publication
- Incomplete data
- Absolute accuracy
- Daily updates
-
Why should a business use multiple sources of information for expansion?
- Reduces error risk
- Eliminates competition
- Increases borrowing costs
- Guarantees market share
-
What is a key limitation of using past sales charts for pricing decisions?
- Shows future inflation
- Measures employee skill
- Omits customer response
- Predicts competitor costs
-
Why might financial figures be misleading for a single product line?
- Exempt taxation
- Shared overheads
- Guaranteed demand
- Zero production costs
-
What critical factor is completely ignored by profit figures alone?
- Cash timing
- Wages paid
- Direct material costs
- Total sales revenue
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