Engineering Economics MCQs

1. Which one of the following questions is relevant to the construction estimates :

a) Did the estimators precisely evaluate site conditions ?

b) Did the estimators use short cut methods which may be un realistic in their situation ?

c) How much money will the contractor's risk, loosing if he Were to submit bid on the raw estimate of cost.

d) All of these

2. The ratio obtained by dividing 'quick assests' by current liabilities is called

a) Turnover ratio

b) Acid test ratio

c) Solvency ratio

d) None of these.

3. Which one of the following definitions, is correct ?

a) The ratio of total debt to share holder's equity is called 'debt ratio'.

b) The ratio debt-to-total assests is called Debt-to-total assest ratio.

c) The ratio of earnings before interest and taxes for a particular reporting period to the amount of interest charges for the period, is called interest coverage ratio.

d) All of these

4. Pick up the element of the cost from the following:

a) direct material

b) direct labour

c) Over head

d) All of these

5. The estimator for definitive estimates must be able :

a) and an all-around construction expert.

b) to read the plans and specifications to determine accurate quantities of permanent materials and installed Equipment.

c) to express the job material requirements in dimensions suitable for costing and construction supplies.

d) none of these

6. Pick up the correct statement from the following:

a) The change in the amount of money over a given time period is called 'time value' of money, a most important concept in engineering economy.

b) The manifestation of the time value of money is termed as interest.

c) interest on borrowing = present amount owed - original loan

d) All of these.

7. Which one of the following is included in financial ratios of the firm ?

a) Profitability ratio

b) Liquidity ratio

c) Ratio of overall performances

d) All of these

8. Pick up the correct statement from the following:

a) The financial ratio summarises some aspect of the firm's financial condition at the time of preparing a balance sheet.

b) Both the numerator and denominator of financial ratios come directly from the balance sheet.

c) Income statement ratios compare a flow item from the income statement to another flow item form the income statement

d) All of these

9. Refer to the cash flow diagram of uniform gradient in a cash flow (in the given figure), the gradient is :

a) Rs 10000 per year

b) Rs 15000 per year

c) Rs 20000 per year

d) Rs 25000 per year

10. In the cash-flow diagram shown in the given figure

a) Equal deposits of Rs 3000 per year (A) are made, starting now.

b) The rate of interest is 10% per yearaccount

c) The amount accumulated after the seventh deposit is to be computed

d) All of these

11. The estimate based on a detailed quantity survey and furnishes the most accurate and reliable estimate possible is known as

a) Conceptual estimate

b) Definitive estimate

c) Probabilistic estimate

d) None of these

12. The sunk costs include :

a) a past expenditure

b) an unrecovered balance

c) an invested capital that cannot be retreived

d) All of these

13. Current assests less inventories divided by current liabilities is known as

a) Liquidity ratio

b) Current ratio

c) Acid-Test (or Quick) ratio

d) Debts ratio

14. Which one of the following statements is correct?

a) The number of years required to recover the initial cash investment in a project, is called Pay Back period (PBP).

b) The discount rate that equates the present value of the expected Net Cash Flows (CFs) with the Initial Cash Outflow (ICO) is known as internal rate of return.

c) The present value of the proposal's net cash flows, less the proposal's initial cash outflow is known as the Net Present Value (NPV)

d) All of these

15. The alternatives which are standalone solutions for given situations in engineering involve :

a) a purchase cost (first cost)

b) the yearly costs of maintaining the assest (annual maintenance and operating cost)

c) the anticipated resaleable value (salvage value) and the interest return (rate of return)

d) All of these

16. The ratio of current assests to current liabilities is known as

a) Liquidity ratio

b) Current ratio

c) Acid-Test (or Quick) ratio

d) Debts ratio

17. Pick up the correct statement from the following:

a) An annuity is a series of equal payments occurring at equal period of time.

b) Annuity is called an equal payment or uniform payment series.

c) An annuity may have periods of time of any length but should always be of equal length.

d) All the above.

18. The construction estimate of a project is used by :

a) the owner of the facility

b) the consulting architect/engineer

c) the contractor of the project

d) All of these

19. Both architect and engineer make use of the cost estimate of the project:

a) for site selection

b) for designing of the project

c) for choosing alternatives

d) All of these

20. If a is the base amount expenditure, b is the increase in the operation cost each year over a period of n years, the total cost of maintenance is :

a) a + (n + 1) b

b) a + (n - 1) b

c) a x (n - 1) b

d) a - (n - 1) b

21. The more critical (or severe) test of the firm's liquidity can be judged by :

a) Liquidity ratio

b) Current ratio

c) Acid-Test (or Quick) ratio

d) Debts ratio

22. Ratio analysis of a construction firm is used for analysis by :

a) share holders

b) firm's management

c) financial analysts

d) All of these.

23. Pick up the correct statement from the following:

a)

b) Over head cost per unit = Overhead ratio x direct labour cost/unit

c) both (a) and (b)

d) neither (a) nor (b)

24. Probabilistic estimating of a construction project includes:

a) Labour

b) Productivity

c) wage scale

d) All of these

25. A construction estimate is used

a) to judge tentatively or approximate value of the project

b) to produce a statement of the approximate cost

c) to decide an approximation of the value of the project and not the exact cost.

d) None of these

26. Pick up the correct statement from the following:

a) The capital required to get a project started, is called first cost.

b) The costs associated with a new or existing project that remain unaffected by the changes in activity level over the normal range of operation of the project, are called fixed costs.

c) The group of costs that vary proportionately to the changes in the activity level of a new or existing project are called variable costs.

d) All of these

27. Present worth Annuity (PWA) is generally known as (PSC-2079 )

a) Premium annuities

b) Income annuities

c) Future annuities

d) All of these

28. Pick up the ratio which gives us sufficient information by which to judge the financial condition and performance of the firm, from the following:

a) Liquidity ratio

b) Financial leverage ratio

c) Activity ratio

d) None of these

29. Pick up the correct statement from the following:

a) The ratios which show profitability in relation to sales and those which show profitability in relation to investment, are called profitability ratios.

b) The ratio of gross profit and net sales, is called profitability in relation to sales ratio.

c) The ratio of net profit after taxes to total assests is known as profitability in relation to investment ratio

d) All of these

30. The financial analysis helps to judge:

a) The operational efficiency of the firm

b) The financial position of the firm.

c) Both (a) and (b)

d) Neither (a) nor (b)

31. If interest is paid more than once in a year, i is the rate of interest per year, n is the number of periods in years and m is a number of periods per years, compound amount factor (CAF) is :

a)

b)

c)

d)

32. In a cash flow series :

a) uniform gradient signifies that an income or disbursement changes by the same amount in each interest period.

b) Either an increase or a decrease in the amount of a cash flow is called the gradient.

c) The gradient in the cash flow may be positive or negative.

d) All of these

33. If P is principal amount, i is the rate of interest and n is the number of periods in years, then the interest factor is :

a) (1 + ni)

b) (ni - 1)

c) ni

d) None of these

34. Pick up the correct statement from the following:

a) Ratio analysis is the procedure of determining and interpreting numerical relationship of various items of the financial statement.

b) All financial ratios are obtained by relating two sets of information contained in a Single financial statement.

c) The relationship between two accounting figures expressed mathematically, is known as a financial ratio.

d) All of these

35. Pick up the correct statement from the following:

a) The ability of a company to meet obligations which are likely to mature in short term, is called liquidity.

b) The liquidity ratio may be defined as a relationship of current liabilities and current assests and advances.

c) The liquidity ratios are used to indicate the financial position of the firm.

d) All of these

36. The capital Recovery Factor (equal payments) of Capital Recovery Annuity is :

a)

b)

c)

d) None of these.

37. Current ratio is :

a)

b)

c)

d) None of these.

38. The interest calculated on the basis of 365 days a year, is known as :

a) interest

b) ordinary simple interest

c) exact simple interest

d) None of these

39. If S is the future capital accumulated in n years at the rate of interest i per annum, then present worth is :

a)

b) S(1 + i) ⁿ

c) S(1 + i) ^1/n

d) None of these.

40. In a cash-flow diagram :

a) Time 0 is considered to be the present

b) Time 1 is considered to be the end of time period 1

c) An arrow pointing downward indicates a negative cash flow

d) All of these

41. Each financial ratio is generally compared by

a) a past ratio calculated from the past financial standard of the firm.

b) a ratio developed by using the projected financial statement of the firm.

c) a ratio of some selected firms most progressive and successful at the point of consideration.

d) All of these

42. The key to profitable operation for project cost control, is :

a) To keep the project cost equal to original cost estimate.

b) To keep the project cost equal to subsequent construction budget.

c) To keep the project cost within the cost budget and knowing when and where job costs are deviating.

d) None of these

43. The annuity which refers to a debt payment for recovering the initial amount or capital in equal periodical payments, is known as;

a) Present Worth Annuity

b) Sinking fund annuity

c) Compound annuity

d) Capital recovery annuity

44. The product of CAF (S P) and PWF (S P) is:

a) 1/2

b) 1

c) 1/3

d) 1/4

45. Pick up the correct reason for making conceptual (or preliminary) estimate from the following:

a) To have a check on a definitive cost estimate.

b) To check qoutations from contractors and/or sub contractors.

c) To compute target estimate for the owner while drawings and specifications are in initial stage.

d) All of these.

46. Pick up the correct statement from the following:

a) A NPV profile graph shows the curvilinear relationship between the net present value of the project and discount rate employed.

b) In a NPV profile, if discount rate is zero, then net present value is simply total cash inflows less the total cash outflows of the project.

c) As the discount rate increases, the net present value profile slopes downward to the right.

d) All of these

47. The project contractor relies on the cost of the estimate :

a) for submission of a competitive bid for a lumpsum contract

b) for a unit price contract

c) for preparation of a definitive estimate to help negotiate contract.

d) All of these

48. The wages of supervisors and material handlers are charged as :

a) Over head

b) direct labour cost

c) indirect labour cost

d) None of these

49. The CRF (ep) is also known as: [CRF(EP) - 8% - 7], where

a) 8% is the rate of interest per year

b) money is borrowed for n = 7 years

c) both (a) and (b)

d) Neither (a) nor (b)

50. Annuities involve:

a) a series of payments

b) all payments of equal amount

c) payment at equal time intervals

d) All of these

51. If a seller recovers his capital along with accumulated compensating interest not in one single lumpsum payment but in periodical equal payments, over time :

a) Capital Recovery Annuity fs availed

b) Present work Annuity is availed

c) Sinking Fund Annuity is availed

d) Sinking Fund Annuity is availed

52. Which method is adopted to develop an approximate or conceptual estimate for perimeter works for buildings from the following:

a) Base unit method

b) Cost per function method

c) Cost per cubic metre method

d) Cost per linear metre method

53. Pick up the correct method adopted for developing the approximate or conceptual estimates from the following :

a) Base unit method

b) Cost per square metre

c) Cost per linear unit

d) All of these

54. The financial analysis :

a) helps a share holder to compare the expected return on his investment in the firm against the expected return from other alternative investment.

b) helps a bank to know the financial position of the firm for granting a loan to the firm.

c) helps to judge the success of the firm's financial plans.

d) All of these.

55. Pick up the correct statement regarding financial statement analysis from the following.

a) Final analysis always involves the use of various financial statements i.e., balance sheet and income statement.

b) The balance sheet is the summary of assests, liabilities and owner's equity of business at a point in time.

c) The income statement is the summary of revenues and expenses of a firm over a particular period of time.

d) All the above

56. The owner of the construction company makes use of the estimate :

a) to determine the capital investment costs.

b) to determine economic feasibility of the project.

c) to determine the tax, insurance and evaluation purpose.

d) All of these

57. Which one of the following is not a construction estimate ?

a) Initial feasibility estimate

b) Conceptual preliminary budget

c) Definite estimate

d) None of these

58. Pick up the method used for project evaluation and selection in capital budgetting from the following:

a) pay back period

b) Internal ratio of return

c) Profitability index

d) All the above

59. Pick up the correct statement from the following:

a) The ratio of current assests, loans and advances, and the current liquidity is called current ratio.

b) Larger the current ratio, larger is the margin of safety.

c) The operating profit is the difference between gross profit and operating expenses.

d) All of these

60. A project construction cost estimate includes:

a) the labour and material cost

b) the equipment and over head cost

c) the profit of the contractor

d) All of these

61. In the cash flow diagram shown in the given figure

a) The first disbursement occurs at the end of year 2

b) The second disbursement occurs at the end of year 4

c) The second receipt occurs at the end of year 3

d) All of these

62. Pick up the correct statement from the following:

a) The receipts and disbursements in a given time interval are referred to as cash flow.

b) The assumptions that all cash flows occur at the end of the interest period, is known as the end of period convention.

c) A cash flow diagram is a graphical representation of cash flows drawn on a time scale.

d) All of the above.

63. A person took a loan for Rs 100,000 for 10 years at 11% compound interest. The person desires to pay off the amount in 10 equal annual instalments. The amount of each instalment is:

a) Rs 5638

b) Rs 6638

c) Rs 7738

d) None of these

64. Renu Bala deposits Rs 1200 now, Rs 800 two years from now and Rs 1000 five years from now. If the savings bank's rate of interest in 5%, she will receive an amount of Rs X 10 years from now, where X is

a) Rs 3415

b) Rs 4225

c) Rs 4413

d) Rs 4826

65. Pick up the correct statement from the following:

a) The capital required to get a project started is the first cost.

b) The first cost is a single cash flow or a series of cash flows that are made in the beginning of the activity's life span

c) The first cost of purchasing a car is the sum of the down payment, taxes and dealers charges.

d) All of these

66. Pick up the correct statement from the following:

a) Engineering economy is a collection of mathematical techniques which simplify economic comparisons

b) Engineering economy is a decision assistance tool by which one method will be chosen as the most economically one.

c) For understanding the engineering economy, one should be able to classify the basic terminology and fundamental concepts of economy.

d) All of these.

67. Keeping in view, the feasibility order of magnitude, the preliminary, conceptual or budget estimates, are prepared by :

a) architect/engineer

b) construction manager

c) owner himself/herself

d) None of these

68. The construction manager uses the estimate of the project

a) to tell the owner of the project to take his/her financial decision.

b) to advise the architect/engineer regarding design cost parameter especially in value engineering analysis.

c) to control the project during its construction.

d) All of these

69. If P is principal amount, i is the rate of interest per annum and n is the number of periods in years, the compound amount factor (CAF) is :

a) (1 + i) ⁿ

b) (1 + i) ^(1/2n)

c) sqrt (n + i)

d) None of these

70. Liquidity ratios are used :

a) to measure a firms ability to meet short-cut obligations.

b) to compare short term obligations to short-term resources available to meet these obligations.

c) to obtain much insight into the present cash solvency of the firm and the firm's ability to remain solvent in the event of adversity.

d) All of these

71. Earning per share is the most important ratio for

a) share holders

b) banks

c) company's management

d) All of these

72. Pick up the correct statement from the following:

a) The difference between sales revenue and cost of goods sold, is known as 'Gross Profit.'

b) The gross profit percentage is the average profit margin obtained on goods sold.

c) The relationship of contribution to sales is known as contribution ratio

d) All of these

73. Pick up the main purpose of project cost control from the following :

a) To signal immediate warning of uneconomic operations

b) To provide a feed back to the estimator

c) To promote cost consciousness

d) All of these