IIA-CIA-Part3 Practice Test

IIA-CIA-Part3 Practice Test practice questions, page 5 of 26, with answer review and explanations.

Question 21

Preferred stock is less risky for investors than is common stock because:

  1. Common stock pays dividends as a stated percentage of face value.
  2. Common stock has priority over preferred stock with regard to earnings and assets.
  3. Preferred dividends are usually cumulative.
  4. Preferred stock with no conversion feature has a higher dividend yield than does convertible preferred stock.

Question 22

Which of the following borrowing options is an unsecured loan?

  1. Second-mortgage financing from a bank.
  2. An issue of commercial paper.
  3. Pledged accounts receivable.
  4. Asset-based financing.

Question 23

In an analysis of alternative credit-management policies, which of the following components will cause the net present value of receivables on credit sales to increase, if everything else remains constant?

  1. A tougher collections policy that reduces the bad debt loss ratio.
  2. A higher cost per unit sold.
  3. A longer average collection period.
  4. An increase in the cost of capital.

Question 24

Which of the following budgets must be prepared first?

  1. Cash budget.
  2. Production budget.
  3. Sales budget.
  4. Selling and administrative expenses budget.

Question 25

Which of the following performance measures would be appropriate for evaluating an investment center, which has responsibility for its revenues, costs, and investment base, but would not be appropriate for evaluating cost, revenue, or profit centers?

  1. A flexible budget.
  2. Variance analysis.
  3. A contribution margin income statement by segment.
  4. Residual income.