Practice Test Geeks(APP) Accredited Purchasing Practitioner Certification Practice Test
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Financial Analysis & Reporting Flashcards

7 cards from real APP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Analysis & Reporting flashcards as text

  1. Which costing method assigns manufacturing overhead to products based on the activities that drive costs, rather than volume measures like direct labor hours?

    Answer: Activity-based costing (ABC)

    ABC traces overhead to specific activities (e.g., machine setups, inspections), giving a more accurate picture of true product cost.

  2. When a supplier's balance sheet shows a high proportion of intangible assets relative to total assets, a purchasing practitioner should be concerned about:

    Answer: Asset valuation reliability and liquidation value in case of insolvency

    Intangibles like goodwill can lose value rapidly and have little liquidation value, making the supplier's net worth less reliable.

  3. A make-or-buy financial analysis should include all of the following EXCEPT:

    Answer: Sunk costs already incurred

    Sunk costs are irrelevant to future decisions because they cannot be recovered regardless of the choice made.

  4. In financial ratio analysis, a debt-to-equity ratio greater than 2.0 for a supplier generally signals:

    Answer: High financial leverage and potential solvency risk

    A D/E ratio above 2.0 means the supplier relies heavily on debt financing, increasing vulnerability to interest rate changes and economic downturns.

  5. Which type of cost remains constant per unit but changes in total as production volume changes?

    Answer: Variable cost

    Variable costs are constant per unit but their total rises or falls proportionally with output volume.

  6. A purchasing manager reviewing a supplier's working capital trend over three years notices a steady decline. The most likely implication for the buyer is:

    Answer: The supplier may struggle to fund operations and fulfill orders on time

    Declining working capital reduces operational buffer, increasing the risk that the supplier cannot pay suppliers or maintain inventory to fulfill buyer orders.

  7. Price variance in standard costing is calculated as:

    Answer: (Actual price – Standard price) × Actual quantity purchased

    Purchase price variance measures the cost difference between what was actually paid and the standard price, multiplied by the actual quantity bought.