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Engineering Economy MCQ Questions & Answers

Engineering Economy MCQs : This section focuses on the "Engineering Economy". These Multiple Choice Questions (MCQs) should be practiced to improve the Engineering Economy skills required for various interviews (campus interview, walk-in interview, company interview), placement, entrance exam and other competitive examinations.




Question 1

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

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Question 2

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

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Question 3

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.

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Question 4

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

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Question 5

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

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Question 6

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

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Question 7

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

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Question 8

The sunk costs include :

A. a past expenditure
B. an unrecovered balance
C. an invested capital that cannot be retreived
D. All of these

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Question 9

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

A. 01-Feb
B. 1
C. 01-Mar
D. 01-Apr

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Question 10

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

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Question 11

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

A. share holders
B. firm's management
C. Banks of the firm
D. financial analysts

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Question 12

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

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Question 13

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.

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Question 14

Present worth Annuity (PWA) is generally known as

A. Premium annuities
B. Income annuities
C. Future annuities
D. All of these

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Question 15

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

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Question 16

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)

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Question 17

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

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Question 18

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

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Question 19

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

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Question 20

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

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Question 21

Pick up the element of the cost from the following:

A. direct material
B. direct labour
C. Over head
D. All of these

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Question 22

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.

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Question 23

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

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Question 24

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

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Question 25

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)

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Question 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

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Question 27

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

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Question 28

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

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Question 29

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

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Question 30

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

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Question 31

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

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Question 32

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

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Question 33

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

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Question 34

Probabilistic estimating of a construction project includes:

A. Labour
B. Productivity
C. wage scale
D. All of these

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Question 35

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

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