Lesson 5.1.1

5.1.1 Accounting and finance objectives Quiz: OCR Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 5.1.1, Accounting and finance objectives: 20 multiple choice questions for the OCR Business (H431), Unit 5: Accounting and finance, written with Revision Ninja.

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The 20 questions

  1. Which financial objective measures profit earned relative to the capital invested in the business?

    • Revenue growth
    • Return on capital
    • Cash flow forecasting
    • Cost minimisation

  2. What is typically the primary financial objective for a brand-new start-up business?

    • Market dominance
    • Profit maximisation
    • Survival
    • High dividend payout

  3. Which type of expenditure refers to spending on non-current assets like machinery and buildings?

    • Working capital
    • Operating expense
    • Revenue expenditure
    • Capital expenditure

  4. Which term describes day-to-day spending on items such as wages, raw materials, and utility bills?

    • Retained profit
    • Revenue expenditure
    • Capital expenditure
    • Non-current liability

  5. What does a low gearing ratio indicate about a company's overall financial structure?

    • Low liquidity level
    • High financial risk
    • High borrowing costs
    • Low financial risk

  6. Which financial objective ensures a business maintains sufficient liquidity to meet short-term debts?

    • Profit target
    • ROCE maximisation
    • Cash flow target
    • Cost leadership

  7. How do public limited companies primarily measure the objective of increasing shareholder value?

    • Higher wage costs
    • Share price growth
    • Higher gearing ratios
    • Increased inventory levels

  8. Which internal factor is most likely to influence a firm's specific financial objectives?

    • Competitor pricing
    • Interest rate changes
    • Corporate objectives
    • Economic growth

  9. A factory sets a goal to lower production waste by 15%. Which objective is this?

    • Cost minimisation
    • Capital structure
    • Revenue growth
    • Shareholder returns

  10. A business has sales revenue of £200,000 and cost of sales of £120,000. What is gross profit?

    • £120,000
    • £80,000
    • £320,000
    • £60,000

  11. A business finances 75% of its long-term capital through bank loans. How is its gearing described?

    • Negative gearing
    • High gearing
    • Zero gearing
    • Low gearing

  12. Investing surplus cash into long-term machinery increases profitability but reduces which short-term metric?

    • Gross profit
    • Overheads
    • Gearing
    • Liquidity

  13. A retailer aims to increase annual sales revenue from £1m to £1.2m. What type of target is this?

    • Capital structure
    • Cost reduction
    • Profit margin
    • Revenue growth

  14. If current assets are £50,000 and current liabilities are £30,000, what is the working capital?

    • £1.67
    • £15,000
    • £20,000
    • £80,000

  15. A rapidly expanding firm collapses because it runs out of cash despite making a profit. What is this called?

    • Insolvency risk
    • Under-capitalisation
    • Diversification
    • Overtrading

  16. If the Bank of England raises interest rates, a highly geared firm will likely focus on which target?

    • Raising dividends
    • Increasing loans
    • Higher spending
    • Debt reduction

  17. Operating profit is £40,000 and capital employed is £200,000. What is the Return on Capital Employed?

    • 80%
    • 20%
    • 25%
    • 5%

  18. Extending supplier credit terms from 30 to 60 days improves cash flow but risks damaging which relationship?

    • Customers
    • Lenders
    • Shareholders
    • Suppliers

  19. What is a key drawback of choosing equity financing over debt financing to meet capital objectives?

    • Higher interest costs
    • Default risk
    • Ownership dilution
    • Mandatory repayment

  20. Why can a profitable firm still experience severe cash flow difficulties?

    • High overhead costs
    • Increased share capital
    • Credit sales
    • Low sales prices

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