Choose the Correct Answer from the Given Alternative.
1. All are the objectives of farm planning except:
A. Income improvement
B. Focuses attention on the farm organization’s goals
C. Desirable organizational change
D. Helps farmers to make irrational decision on what to do
2. Partial budgeting is different from enterprise budgeting in that:
A. Partial budgeting prepared for only one enterprises
B. A partial budgeting can be compiled more quickly and easily
C. In partial budgeting, the items of income and expenses that will not change are included
D. Information in partial budgeting are appropriate for preparing the whole farm budget
3. Which one of the following is a not component of partial budgeting?
A. Additional cost
B. Total profit
C. Additional income
D. Reduced income
4. Which type of farm budgeting considers only those items of income and expenses which are
affected by the proposed adjustment in the plan?
A. Enterprise budgeting
B. Partial budgeting
C. Whole farm budgeting
D. Complete budgeting
5. When budget prepared for partial substitution of maize for teff plan. The expenses related
with maize are considered as:
A. Additional cost
B. Additional income
C. Reduced income
D. Reduced expenses
6. Which method of computing depreciation estimates equal amounts of annual depreciation for
each year of fixed asset useful life?
A. Declining balance method
B. Straight line methods
C. Double declining method
D. Sum of the year digits methods
7. All are the main use of physical farm records except:
A. To check performance of enterprises
B. For controlling business
C. To detect weaknesses and strengths to guide future decisions
D. To provide information regarding the profitability of the whole farm business
8. Which one of the following is not component of balance sheet?
A. Asset
B. Liabilities
C. Net farm income
D. Owner equity
9. The business ability to generate cash needed to meet cash obligations without seriously
disrupting the production activities is refers to:
A. Solvency
B. Liquidity
C. Net worth
D. Net income
10. Which of the following is measures the overall financial strength and solvency of the
business?
A. Working capital
B. Debt to equity ratio
C. Current ratio
D. Net capital ratio
11. If Net Capital Ratio value is greater than 1 (NCR>1); the business is:
A. Safer and solvent
B. Just solvent but not safer
C. Just safer but not solvent
D. Insolvent
12. e values of the business asset after deduction or liabilities at given point of time equal to:
A. Debt capital
B. Total capital
C. Net worth
D. Total liability
13. Which method of inventory valuation used to value those assets that loss their value over
time?
A. Valuation at cost
B. Net selling price
C. Cost less depreciation
D. Market price
14. Which inventory valuation technique is used to value long term assets like land?
A. Valuation at cost
B. Net selling price
C. Cost less depreciation
D. Income capitalization
15. Which method of computing depreciation is easy, simple and usually very satisfactory for
most purposes?
A. Straight line method
B. Diminishing balance method
C. Sum –of- the –year`s-digits-methods
D. Compound interest method
16. Which method of computing depreciation, overestimates depreciation during the earlier years
and underestimates depreciation during the later years of the useful life of the asset?
A. Straight line method
B. Sum of the years digits method
C. Declining balance method
D. Compound interest method
17. Which one of the following is not an example of Liquid assets?
A. Cash
B. Bank balance
C. Feeder livestock
D. Machinery
18. Suppose that fixed equipment costs 1000 birr and expected to last for 5 years. The salvage
value after 5 years is birr 50. What is the first year depreciation value of the fixed equipment
by using diminishing balance method?
A. 200 birr
B. 400 birr
C. 600 birr
D. 800 birr
19. The difference of gross income value and operating expenses is refers to:
A. Net cash income
B. Net operating income
C. Net farm income
D. Gross income
