Free Practice Questions for IoD Finance for Non-Finance Directors

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Sample IoD Finance for Non-Finance Directors Practice Questions

Try these sample questions to review concepts for the IoD Finance for Non-Finance Directors exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which statement best describes a company director's financial role at board level?

A.Non-executive directors have no duty to review financial reports

B.Only the finance director may ask questions about the accounts

C.Directors may rely solely on auditors and never need to challenge management numbers

D.Every director shares collective responsibility for stewardship of the company's finances and for understanding key financial information

Explanation: UK company law and good governance expect the board as a whole to oversee financial stewardship. Non-finance directors are not expected to be accountants, but they must understand and challenge material financial information rather than deferring entirely to the CFO or auditors.

2Why must non-finance directors develop financial literacy for board work?

A.So they can evaluate business plans, question financial information and contribute effectively to board decisions

B.Because statutory accounts never need board approval

C.Because IoD rules ban accountants from boards

D.Because only finance jargon is allowed in board minutes

Explanation: The IoD Finance for Non-Finance Directors module aims to demystify finance so directors can assess organisational health, interrogate plans and join boardroom financial debate with confidence. Literacy supports challenge and decision quality, not replacement of the CFO.

3Under UK company law principles relevant to directors, which action best supports discharging financial duties?

A.Delegating all financial oversight permanently to the marketing director

B.Approving dividends without checking distributable reserves

C.Ignoring cash forecasts if the profit and loss looks strong

D.Ensuring the company keeps adequate accounting records and that the board reviews reliable financial information

Explanation: Directors must ensure proper accounting records are kept and that they have information needed to monitor performance and solvency. Approving distributions without reserves, ignoring cash, or abandoning oversight to an unsuitable delegate undermines those duties.

4When reviewing a proposed dividend, what should directors primarily confirm from a financial duty perspective?

A.That the company has sufficient distributable profits and can pay without jeopardising solvency

B.That the marketing budget was cut last year

C.That the share price rose yesterday

D.That peer firms paid a similar dividend last quarter only

Explanation: Legal and prudent dividend decisions require distributable reserves and ongoing ability to meet liabilities. Peer comparisons, share-price moves or marketing cuts do not substitute for reserves and solvency assessment.

5Which board behaviour best reflects effective financial challenge by a non-finance director?

A.Refusing to read board packs because finance is 'too technical'

B.Asking how key assumptions, risks and cash timing underpin the numbers presented

C.Accepting every forecast without asking about assumptions

D.Focusing only on non-financial culture topics and never on numbers

Explanation: Effective challenge probes assumptions, risks and cash timing behind reported figures. Non-finance directors add value by testing coherence of plans with strategy and operations, not by avoiding the numbers or rubber-stamping forecasts.

6How should the board relate to the chief financial officer (CFO) on financial information?

A.Only the chair may speak to the CFO about finance

B.The CFO alone signs the accounts so other directors have no role

C.The board should never question the CFO because that damages trust

D.The board should use the CFO's expertise while retaining collective responsibility to understand and challenge material financial reports

Explanation: The CFO is the board's primary finance expert, but responsibility for accounts and oversight remains collective. Healthy boards rely on the CFO while testing explanations, alternatives and risks rather than outsourcing judgement.

7Which situation most clearly signals that directors should intensify scrutiny of financial health?

A.Consistently strong cash conversion matching reported profits

B.A one-off seasonal peak in inventory that management has explained and funded

C.Rising reported profits while cash balances fall and creditor days lengthen without a clear explanation

D.A planned capital investment already approved with funded financing

Explanation: Divergence between profit and cash, plus stretching payables, can indicate working-capital stress or earnings quality issues. Boards should probe such patterns early rather than waiting for a crisis.

8What is a primary financial responsibility of directors regarding going concern?

A.To ignore liquidity if assets exceed liabilities on the balance sheet

B.To consider whether the company can continue in operation for the foreseeable future and make appropriate disclosures

C.To avoid reading cash-flow forecasts because they are management tools only

D.To guarantee personal payment of all company debts at all times

Explanation: Going concern assessment is a board responsibility: directors must consider whether the entity can continue operating for the foreseeable future and ensure reporting reflects that assessment. Balance-sheet solvency alone does not replace cash and outlook analysis.

9In an insolvency-risk context, which director mindset is most appropriate?

A.Take early advice, monitor cash and creditor positions carefully, and avoid worsening creditor outcomes through reckless decisions

B.Continue declaring large dividends to maintain share price regardless of cash

C.Increase personal drawings from company funds without records

D.Prioritise only shareholders once any creditor is unpaid for a day

Explanation: When insolvency risks rise, directors must act carefully regarding creditors, cash and new commitments. Early advice and prudent monitoring protect stakeholders better than preserving dividends or informal extractions.

10Which statement about approving annual accounts is most accurate for directors?

A.Accounts may be approved without considering notes and accounting policies

B.Only the auditor needs to be satisfied; directors need not read the accounts

C.Only executive directors may approve accounts

D.The board must satisfy itself that the accounts give a true and fair view (or equivalent fair presentation) before approval

Explanation: Directors approve the accounts and must be satisfied they present fairly / give a true and fair view. Auditors provide an opinion, but approval remains a board act requiring engagement with the statements, notes and policies.

About the IoD Finance for Non-Finance Directors Exam

Finance for Non-Finance Directors is the IoD Certificate in Company Direction module that builds board-level financial literacy: interpreting statements under accounting principles, using ratios to judge organisational health, distinguishing management accounts from statutory reports, comparing sources of finance, and applying capital investment appraisal (including NPV/DCF). The associated Award exam is a 45-minute, 16-question MCQ assessment (20 marks).

Exam sponsor: Institute of Directors (IoD). The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

Standalone modular computer-based exam for the Award in Finance for Non-Finance Directors, one of four modules toward the IoD Certificate in Company Direction (SCQF credit-rated; Finance award at SCQF Level 8). 16 multiple-choice questions: 12 one-mark and 4 two-mark items (20 marks total), from a randomised bank. Delivered online with remote invigilation (Civica Assess). Full attendance on the associated course is required to sit the module exam. Exams must be taken within two years of course completion.

Time Limit

45 minutes

Passing Score

At least 50% to pass; 75% or above for a distinction. The IoD does not release numerical scores—results are reported as pass, fail or distinction.

Exam / Certification Fees

Three-day course list price (excl. VAT, confirm on iod.com): £4,450 non-member / £3,825 member. First exam attempt is typically included with the course booking. Certificate module exam re-sits are published at £175 (confirm current examinations page). Four-module Certificate packages that include first-sit exam fees are priced separately on the Certificate page.

Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Official sources

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

15%

Director Financial Roles & Responsibilities

Stewardship, accounts approval, dividends/solvency, going concern and constructive challenge of financial information.

25%

Financial Statements & Accounting Principles

Primary statements, accruals and related concepts, classification, provisions and profit versus cash.

20%

Financial Ratios & Organisational Health

Liquidity, leverage, returns, margins, working-capital days and valuation multiples for board monitoring.

12%

Management Accounts vs Statutory Reports

Internal MI and board packs versus statutory reporting, audit scope, variances, forecasts and KPIs.

13%

Sources of Finance

Equity, debt, retained earnings, working-capital finance, leasing, capital markets and cost of capital.

15%

Capital Investment Appraisal

NPV, IRR, payback, relevant cash flows, sensitivity and break-even for investment decisions.

Preparing for the IoD Finance for Non-Finance Directors Exam

What You Need to Know

Passing score: At least 50% to pass; 75% or above for a distinction. The IoD does not release numerical scores—results are reported as pass, fail or distinction.
Assessment: Standalone modular computer-based exam for the Award in Finance for Non-Finance Directors, one of four modules toward the IoD Certificate in Company Direction (SCQF credit-rated; Finance award at SCQF Level 8). 16 multiple-choice questions: 12 one-mark and 4 two-mark items (20 marks total), from a randomised bank. Delivered online with remote invigilation (Civica Assess). Full attendance on the associated course is required to sit the module exam. Exams must be taken within two years of course completion.
Time limit: 45 minutes
Exam / certification fees: Three-day course list price (excl. VAT, confirm on iod.com): £4,450 non-member / £3,825 member. First exam attempt is typically included with the course booking. Certificate module exam re-sits are published at £175 (confirm current examinations page). Four-module Certificate packages that include first-sit exam fees are priced separately on the Certificate page. Official sources

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IoD Finance for Non-Finance Directors: Suggested Study Strategy

1Practise reading a full set of primary statements together—balance sheet, income statement and cash flow—so you can explain profit-versus-cash gaps before the exam scenarios.

2Drill the core ratio set (current/quick, gearing, ROCE, debtor/creditor/stock days, interest cover) with quick calculations; two-mark IoD items often need assimilation of a short scenario.

3For investment appraisal, know when to use NPV versus payback or IRR, and always separate sunk costs from incremental future cash flows in board-style questions.

Frequently Asked Questions

What is the IoD Finance for Non-Finance Directors exam?

It is the modular Award exam for Finance for Non-Finance Directors within the IoD Certificate in Company Direction. It assesses board-level financial literacy—statements, ratios, management versus statutory information, funding choices and investment appraisal—via a 45-minute, 16-question multiple-choice paper (20 marks).

How many questions and how long is the live IoD module exam?

Each Certificate modular exam is 45 minutes with 16 multiple-choice questions: twelve one-mark items and four two-mark items (20 marks total), drawn from a randomised question bank and taken online under remote invigilation.

What is the pass mark for the IoD Finance module exam?

Candidates need at least 50% to pass and 75% or above for a distinction. The IoD does not release numerical scores; results are reported as pass, fail or distinction.

How many practice questions are in this free bank and what do they cover?

This bank has 100 multiple-choice questions weighted to the module's published learning outcomes: director financial responsibilities, financial statements and accounting principles, financial ratios, management versus statutory accounts, sources of finance, and capital investment appraisal.