Question 1

Which of the following would you associate with the Director's report?

Accepted Answer

A)  Cash flow statement 
B)  Five year summary 
C)  Business review 
D)  Balance sheet 
A)  Cash flow statement 
B)  Five year summary 
C)  Business review 
D)  Balance sheet C

Question 2

If one company buys another for less than the net book value of its assets,this is regarded as "negative goodwill" and does not require that the assets and liabilites be revalued at "fair value"

Accepted Answer

A) True 
 B)False  False

Question 3

According to Altman (1983)the amount of working capital in relation to total assets is an important component in predicting the failure of a company,while measures of return on capital employed (ROCE)can not help predict failure

Accepted Answer

A) True 
 B)False  False

Question 4

Deferred taxation is a "liability" that may never have to be paid

Accepted Answer

A) True 
 B)False

Question 5

The Statements of Financial Position for company P and company S are shown below:
 
At the time of the acquisition,the net asset value of S was £50,000.This was £40,000 share capital plus £10,000 retained earnings.If company P owns 75% of Company S,then the consolidated Statement of Financial Position will include:

Accepted Answer

A)  100% of the assets and liabilities of P and 75% of the assets and liabilities of S 
B)  100% of the assets and liabilities of P and 50% of the assets and liabilities of S 
C)  100% of the assets and liabilities of P and 100% of the assets and liabilities of S 
D)  75% of the assets and liabilities of P and 75% of the assets and liabilities of S 
A)  100% of the assets and liabilities of P and 75% of the assets and liabilities of S 
B)  100% of the assets and liabilities of P and 50% of the assets and liabilities of S 
C)  100% of the assets and liabilities of P and 100% of the assets and liabilities of S 
D)  75% of the assets and liabilities of P and 75% of the assets and liabilities of S

Question 6

Which of the following z-scores would suggest a company was not likely to fail?

Accepted Answer

A)  1.86 
B)  2.99 
C)  1.72 
D)  1.90 
A)  1.86 
B)  2.99 
C)  1.72 
D)  1.90

Question 7

The International Accounting Standards Board (IASB)require companies to publish information related to business or geographical segments

Accepted Answer

A) True 
 B)False

Question 8

High levels of debt in a company is always a cause for concern

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not included in the calculation of a Z-Score?

Accepted Answer

A)  Working capital 
B)  Cash Flow 
C)  Market value of equity 
D)  Sales 
A)  Working capital 
B)  Cash Flow 
C)  Market value of equity 
D)  Sales

Question 10

Which of the following are potential indicators of financial distress?
(i) A sudden drop in share price
(ii) Increased turnover
(iii) Increased gearing ratio
(iv)Fall in profits

Accepted Answer

A)  All of them could indicate financial problems 
B)  None of these factors would cause much concern, especially in isolation 
C)  (i), (iii) and (iv) are bad news, but increased turnover would be good news 
D)  (i) and (iv) are indicators, but (ii) and (iii) are improvements to the financial position 
A)  All of them could indicate financial problems 
B)  None of these factors would cause much concern, especially in isolation 
C)  (i), (iii) and (iv) are bad news, but increased turnover would be good news 
D)  (i) and (iv) are indicators, but (ii) and (iii) are improvements to the financial position

Question 11

When a company is in financial distress,creditors may suffer direct financial loss,but shareholders can not loose their investment because they have limited liability

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is correct?

Accepted Answer

A)  In a group or consolidated statement of financial position the share capital of the parent company and its subsidiaries are shown 
B)  In a group or consolidated statement of financial position the retained earnings of the parent company and its subsidiaries are shown 
C)  In a group or consolidated statement of financial position the figures for non-current assets and current assets of the parent company and its subsidiaries are added together 
D)  All of the above statements are correct 
A)  In a group or consolidated statement of financial position the share capital of the parent company and its subsidiaries are shown 
B)  In a group or consolidated statement of financial position the retained earnings of the parent company and its subsidiaries are shown 
C)  In a group or consolidated statement of financial position the figures for non-current assets and current assets of the parent company and its subsidiaries are added together 
D)  All of the above statements are correct

Question 13

Which of the following z-scores would suggest a company was likely to fail?

Accepted Answer

A)  1.86 
B)  2.99 
C)  1.72 
D)  1.90 
A)  1.86 
B)  2.99 
C)  1.72 
D)  1.90

Question 14

A one-off loss is likely to be a major problem for company

Accepted Answer

A) True 
 B)False

Question 15

The following segmental information is provided for Powerage Ltd.
$\begin{array}{lcccc}
&\text { Audio America } & \text { Audio Europe } & \text { Visual America } & \text { Visual Europe } \
&£ \mathrm{m}&£ \mathrm{m}&£ \mathrm{m}&£ \mathrm{m}\\
\text { Sales } & 600 & 360 & 70 & 120 \
\text { Operating profit } & 18 & 20 & 17 & 16 \
\text { Net operating assets } & 240 & 300 & 30 & 40
\end{array}$

Which segment has the lowest profit sales ratio?

Accepted Answer

A)  Audio America 
B)  Audio Europe 
C)  Visual America 
D)  Visual Europe 
A)  Audio America 
B)  Audio Europe 
C)  Visual America 
D)  Visual Europe

Question 16

In a group or consolidated balance sheet,the retained earnings figure for the group is the sum of the retained earnings for the parent company and all of the retained earnings for each subsidiary

Accepted Answer

A) True 
 B)False

Question 17

Which of the following would not form part of the financial statements?

Accepted Answer

A)  Statement of changes in equity 
B)  Cash flow statement 
C)  Income statement 
D)  Directors' remuneration report 
A)  Statement of changes in equity 
B)  Cash flow statement 
C)  Income statement 
D)  Directors' remuneration report

Question 18

"Minority interest" refers to the owners of shares which have no voting rights

Accepted Answer

A) True 
 B)False

Question 19

The following segmental information is provided for Powerage Ltd.
$\begin{array}{lcccc}
&\text { Audio America } & \text { Audio Europe } & \text { Visual America } & \text { Visual Europe } \
&£ \mathrm{m}&£ \mathrm{m}&£ \mathrm{m}&£ \mathrm{m}\\
\text { Sales } & 600 & 360 & 70 & 120 \
\text { Operating profit } & 18 & 20 & 17 & 16 \
\text { Net operating assets } & 240 & 300 & 30 & 40
\end{array}$

Which segment is producing most sales in relation to capital employed?

Accepted Answer

A)  Audio America 
B)  Audio Europe 
C)  Visual America 
D)  Visual Europe 
A)  Audio America 
B)  Audio Europe 
C)  Visual America 
D)  Visual Europe

Question 20

The following segmental information is provided for Powerage Ltd.
$\begin{array}{lcccc}
&\text { Audio America } & \text { Audio Europe } & \text { Visual America } & \text { Visual Europe } \
&£ \mathrm{m}&£ \mathrm{m}&£ \mathrm{m}&£ \mathrm{m}\\
\text { Sales } & 600 & 360 & 70 & 120 \
\text { Operating profit } & 18 & 20 & 17 & 16 \
\text { Net operating assets } & 240 & 300 & 30 & 40
\end{array}$

Which segment is most profitable in relation to capital employed?

Accepted Answer

A)  Audio America 
B)  Audio Europe 
C)  Visual America 
D)  Visual Europe 
A)  Audio America 
B)  Audio Europe 
C)  Visual America 
D)  Visual Europe

Which of the following would you associate with the Director's report?

If one company buys another for less than the net book value of its assets,this is regarded as "negative goodwill" and does not require that the assets and liabilites be revalued at "fair value"

According to Altman (1983)the amount of working capital in relation to total assets is an important component in predicting the failure of a company,while measures of return on capital employed (ROCE)can not help predict failure

Deferred taxation is a "liability" that may never have to be paid

Which of the following z-scores would suggest a company was not likely to fail?

The International Accounting Standards Board (IASB)require companies to publish information related to business or geographical segments

High levels of debt in a company is always a cause for concern

Which of the following is not included in the calculation of a Z-Score?

Which of the following are potential indicators of financial distress? (i) A sudden drop in share price (ii) Increased turnover (iii) Increased gearing ratio (iv)Fall in profits

When a company is in financial distress,creditors may suffer direct financial loss,but shareholders can not loose their investment because they have limited liability

Which of the following statements is correct?

Which of the following z-scores would suggest a company was likely to fail?

A one-off loss is likely to be a major problem for company

The following segmental information is provided for Powerage Ltd. Audio America Audio Europe Visual America Visual Europe £ £ £ £ Sales 600 360 70 120 Operating profit 18 20 17 16 Net operating assets 240 300 30 40 Which segment has the lowest profit sales ratio?

In a group or consolidated balance sheet,the retained earnings figure for the group is the sum of the retained earnings for the parent company and all of the retained earnings for each subsidiary

Which of the following would not form part of the financial statements?

"Minority interest" refers to the owners of shares which have no voting rights

The following segmental information is provided for Powerage Ltd. Audio America Audio Europe Visual America Visual Europe £ £ £ £ Sales 600 360 70 120 Operating profit 18 20 17 16 Net operating assets 240 300 30 40 Which segment is producing most sales in relation to capital employed?

The following segmental information is provided for Powerage Ltd. Audio America Audio Europe Visual America Visual Europe £ £ £ £ Sales 600 360 70 120 Operating profit 18 20 17 16 Net operating assets 240 300 30 40 Which segment is most profitable in relation to capital employed?

The Statement of Financial Position Balance Sheetand What It Tells Us

The Income Statement Profit and Loss Account

The Development of Financial Reporting

Ratios and Interpretation: a Straightforward Introduction

How the Stock Market Assesses Company Performance

Cash Flow Statements: Understanding and Preparation

Current Issues in Financial Reporting

Bookkeeping to Trial Balance

Trial Balance to Final Accounts

Financing a Business

Management of Working Capital

Introduction to Management Accounting

Investment Appraisal

Budgetary Planning and Control

Absorption Costing

Marginal Costing and Decision-Making

Standard Costing and Variance Analysis

Incomplete Records

Filters

Exam 7: Advanced Interpretation of Company and Group Accounts

Which of the following would you associate with the Director's report?

If one company buys another for less than the net book value of its assets,this is regarded as "negative goodwill" and does not require that the assets and liabilites be revalued at "fair value"

According to Altman (1983)the amount of working capital in relation to total assets is an important component in predicting the failure of a company,while measures of return on capital employed (ROCE)can not help predict failure

Deferred taxation is a "liability" that may never have to be paid

Which of the following z-scores would suggest a company was not likely to fail?

The International Accounting Standards Board (IASB)require companies to publish information related to business or geographical segments

High levels of debt in a company is always a cause for concern

Which of the following is not included in the calculation of a Z-Score?

Which of the following are potential indicators of financial distress? (i) A sudden drop in share price (ii) Increased turnover (iii) Increased gearing ratio (iv)Fall in profits

When a company is in financial distress,creditors may suffer direct financial loss,but shareholders can not loose their investment because they have limited liability

Which of the following statements is correct?

Which of the following z-scores would suggest a company was likely to fail?

A one-off loss is likely to be a major problem for company

The following segmental information is provided for Powerage Ltd. Audio America Audio Europe Visual America Visual Europe £ £ £ £ Sales 600 360 70 120 Operating profit 18 20 17 16 Net operating assets 240 300 30 40 Which segment has the lowest profit sales ratio?

In a group or consolidated balance sheet,the retained earnings figure for the group is the sum of the retained earnings for the parent company and all of the retained earnings for each subsidiary

Which of the following would not form part of the financial statements?

"Minority interest" refers to the owners of shares which have no voting rights

The following segmental information is provided for Powerage Ltd. Audio America Audio Europe Visual America Visual Europe £ £ £ £ Sales 600 360 70 120 Operating profit 18 20 17 16 Net operating assets 240 300 30 40 Which segment is producing most sales in relation to capital employed?

The following segmental information is provided for Powerage Ltd. Audio America Audio Europe Visual America Visual Europe £ £ £ £ Sales 600 360 70 120 Operating profit 18 20 17 16 Net operating assets 240 300 30 40 Which segment is most profitable in relation to capital employed?

The Statement of Financial Position Balance Sheetand What It Tells Us

The Income Statement Profit and Loss Account

The Development of Financial Reporting

Ratios and Interpretation: a Straightforward Introduction

How the Stock Market Assesses Company Performance

Cash Flow Statements: Understanding and Preparation

Current Issues in Financial Reporting

Bookkeeping to Trial Balance

Trial Balance to Final Accounts

Financing a Business

Management of Working Capital

Introduction to Management Accounting

Investment Appraisal

Budgetary Planning and Control

Absorption Costing

Marginal Costing and Decision-Making

Standard Costing and Variance Analysis

Incomplete Records

Filters