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C37FF2

HERIOT-WATT UNIVERSITY

SCHOOL OF MANAGEMENT AND LANGUAGES

____________

Student’s Name…………………………………………

Student IdentifcationNumber………………………………………….

This question ppe! "ust #e hn$e$ to the %e&tu!e! #e'o!e %e(in) the

e*"intion !oo"

Finance and Financial Reporting

March 20!

M"#$I%#& '()I'& $&S$*!0 minutes+

  Stu$ents shou%$ tte"pt ALL questions

+%ese ns,e! on the Multiple 'hoice $est ,ns-er Sheet

p!o(i$e$

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E&h question &!!ies equ% "!.s

Choose on%/ one ns,e! 'o! e&h question

1.  As asset is a resource held by a business. For a particular item to be treatedas an asset, for accounting purposes, it should have certain essentialcharacteristics. Which one of the following is NOT one of the essentialcharacteristics?

 A. it is probable that the item will generate future economic benefit. the business has a right to control the item!. the business has legal title of the item". the item can be reliably measured in financial terms

2. #A current asset is an asset that is e$pected to be realised within %%%%.after the balance sheet date&

Which of the following phrases completes the above statements? A. si$ months. nine months!. twelve months". eighteen months

The following information relates to questions 3 to 4 inclusivelac' and (artners has listed the following amounts in its statement of financialposition)

*

an' overdraft +,uildings -+,Trade payables /,Trade receivables -0,Ta$es payable within / year /+,(lant 1 e2uipment 0/,3hare capital 4par value 5-+p6 -+,7etained profits -88,"ebentures 90,:nventories -+,

3. What is the amount of total current liabilities? A *-+,. *0,!. *-;+,". None of the above

4. What is the mar'et value of lac' and (artners? A. *-+,. *+/8,!. *++

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5. The following are business transactions of a retailer)(urchased - items of cost *9 each for cash. Total *."elivered /- items to credit customers at a selling price of *; per item. Total*9.!ollection of cash from credit customers for ast=in, first=out 4>:FO6!. Average cost for period purchases". First=in, first=out 4F:FO6

8. Which one of the following statements is false?

 A !ash is the lifeblood of a business and without it the business will die A profitable company will never run out of cash! 7apidly e$panding companies can sometimes face a cash shortage" :f cash outflows e$ceed cash inflows on an on=going basis, the business will

eventually run out of cash

9. The "epreciation e$pense has which of the following effects on cash flows)

 A. decreases operating cash flows. decreases investment cash flows!. decreases financing cash flows". no cash flow impact

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The following information relates to questions 10 to 12 inclusived@s nterprises >td:ncome statement for year ended 0/ "ecember ear ;

*m3ales 0-

!ost of sales 4/td in ear ; */8m

3tatement of financial position as at 0/ "ecember ear ;

*m *mNon=current assets 9/8!urrent assets)

:nventories /Trade receivables -0!ash / /00

Total assets +9<

3hare !apital and 7eserves:ssued share capital) ordinary shares of

5-+ pence/-+

7etained profits 0+/9;8

/C "ebentures 9!urrent liabilities

Trade payables /Ta$ation /+ 00

Total e2uity and liabilities +9<

Dar'et price per share at 0/ "ecember ear ; was */.- per share

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10. What is the operating profit margin? A. -+C. 9-C!.8/C". /0/C

11. What is the return on ordinary shareholdersE funds? A. /-.C. /8.C!. 9.C". 8.C

12. What is the trade receivables settlement period? 4Assume that the amount ofopening and closing receivables are the same6

 A. /+.0 days

. -8.- days!. 99.- days". /0;.8 days

13. Which of the following statements best describes a limited liability company?

 A. :n law, it is regarded as having a separate e$istence from its owners. :t is normally owned and managed by the same persons!. :t is normally a non=profit ma'ing organiation". :t is normally owned by Gust one person

14. ou have been as'ed to provide finances to a company. Which one of thefollowing forms of finance should offer you the lowest rate of return togetherwith the lowest ris'?

 A. An unsecured loan. (reference shares!. A secured loan". Ordinary shares

15. Which of the following is NOT a characteristic of a preference share?

 A. Hnpaid dividend accrues until it can be paid. "o not usually have voting rights unless dividends fall into arrears!. :t is more li'e debt than a share in its characteristics". 7an's last for payment in the event of company li2uidation

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16.  A company has -,, ordinary shares of +p in issue. The current mar'etprice is *+. per share. The directors are about to ma'e a bonus issue of+, shares. What is the e$pected mar'et price per share after the bonusissue?

 A. *.9. *9.!. *+.". *-.

17. !ompany A owns 8C of the ordinary share capital of company . Which oneof the following is the correct description of the investment in the company A@sstatement of financial position?

 A. A non=current asset investment. An associated company

!. An intangible asset". A Goint venture

18.  Which of the following is NOT correct about bonus issues)

 A. The total number of shares in the company will increase. The mar'et value of the company will increase!. The share price of the company will decrease". The e2uity 4boo' value6 of the company will remain the same

19. !ompany I enters into an agreement with the owner of an asset, !ompany ,giving !ompany I the right to use the asset over a period of time, in return fora regular series of payments. >egal ownership of the asset will not changehands. Which type of medium=term company finance is this arrangement?

 A. credit sale. leasing!. hire purchase". trade credit

20.  A company has 9,, shares with mar'et price */. each. Through arights issue, shareholders are offered / share at */.+ for every + shares held.What is the e$=rights price?

 A. */.+. */.;+!. */.". *-./

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No "!.s !e $e$u&te$ 'o! ,!on) ns,e!s.

ulti!le "hoice Test #nswer $heet

$tu%ent&s 'ame((((((((((((((((

$tu%ent )%entification num*er(((((((((((((((((.+or each question !lace a tic, -   in the a!!ro!riate column

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(eriot/att "niersit1School of Management and Languages: Accountancy, Economcs and !nance

Multiple 'hoice $est ,ns-er Sheet

Student’s Name…………………………………………

Student Identifcation number…………………………………………….

For each uestion place a tic3 *  + in the appropriate column

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6uestion :  

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