Question 1

A high price/earnings (P/E)ratio indicates that a company is profitable

Accepted Answer

A) True 
 B)False  False

Question 2

The following information is available for companies A,B,C and D:
$$\begin{array} { l c r r r } 
& \text { A } & { \text { B } } & \text { C } & { \text { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 & 500,000 \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$

If you are interested in obtaining a regular income from your investment,which company would you invest in?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D A

Question 3

The following information is available for companies A,B,C and D:
$$\begin{array} { l c c r r } 
& \mathbf { A } & \mathbf { B } & \mathbf { C } & { \mathbf { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 & 500,000 \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$
Which company has the highest dividend per share?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D A

Question 4

Which of the following statements is correct?

Accepted Answer

A)  A low price/earnings ratio might might mean investors are expecting earnings per share to increase in coming years 
B)  A high price/earnings ratio may signify that the previous years earnings were unusually low 
C)  A young company that has recently floated on the stock exchange will probably have a low price/earnings ratio 
D)  All of the above statements are correct 
A)  A low price/earnings ratio might might mean investors are expecting earnings per share to increase in coming years 
B)  A high price/earnings ratio may signify that the previous years earnings were unusually low 
C)  A young company that has recently floated on the stock exchange will probably have a low price/earnings ratio 
D)  All of the above statements are correct

Question 5

Which of the following statements is correct?

Accepted Answer

A)  A bull market is when share prices are rising 
B)  A bull market is when share prices are falling 
C)  A bear market is when share prices are rising 
D)  Statements B and C are both correct 
A)  A bull market is when share prices are rising 
B)  A bull market is when share prices are falling 
C)  A bear market is when share prices are rising 
D)  Statements B and C are both correct

Question 6

Systematic risk refers to the risk due to what happens in the market generally

Accepted Answer

A) True 
 B)False

Question 7

Which of the following can influence a companies share price?

Accepted Answer

A)  Other companies in the same sector reporting poor results 
B)  Scandal and gossip 
C)  Financial journalist offering share tips to readers 
D)  All of the above 
A)  Other companies in the same sector reporting poor results 
B)  Scandal and gossip 
C)  Financial journalist offering share tips to readers 
D)  All of the above

Question 8

Which of the following statements is correct?

Accepted Answer

A)  You can buy shares by directly contacting the company you want to buy shares in 
B)  It is usually quite difficult to buy the shares of unlisted companies 
C)  It is difficult for investors to make profits when share prices are rising 
D)  All of the above statements are correct 
A)  You can buy shares by directly contacting the company you want to buy shares in 
B)  It is usually quite difficult to buy the shares of unlisted companies 
C)  It is difficult for investors to make profits when share prices are rising 
D)  All of the above statements are correct

Question 9

Total profits divided by number of ordinary shares is known as:

Accepted Answer

A)  Dividend cover 
B)  Price/earnings ratio 
C)  Earnings per share 
D)  Dividend yield 
A)  Dividend cover 
B)  Price/earnings ratio 
C)  Earnings per share 
D)  Dividend yield

Question 10

The following information is available for companies A,B,C and D:
$$\begin{array} { l r r r r } 
& \text { A } & { \text { B } } &{ \text { C } } &{ \text { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 &  { 500,000 } \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$
Which company has the lowest dividend yield?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 11

The following information is available for companies A,B,C and D:
$$\begin{array} { l c r r r } 
& \text { A } & { \text { B } } & \text { C } & { \text { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 & 500,000 \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$

Which company has the highest dividend cover?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 12

Which of the following statements is false?

Accepted Answer

A)  "tracker" investment funds buy shares in the companies that make up an index, such as the FTSE 100 
B)  The performance of "tracker" funds is often better than funds where the managers use their own expertise to select the best investments 
C)  Inclusion on the FTSE 100 will not affect demand for a companies shares 
D)  When a company is about to be removed from the FTSE 100 its share price is likely to fall 
A)  "tracker" investment funds buy shares in the companies that make up an index, such as the FTSE 100 
B)  The performance of "tracker" funds is often better than funds where the managers use their own expertise to select the best investments 
C)  Inclusion on the FTSE 100 will not affect demand for a companies shares 
D)  When a company is about to be removed from the FTSE 100 its share price is likely to fall

Question 13

Which of the following statements is false?

Accepted Answer

A)  When the price of a company's shares is too high, demand for those shares will fall 
B)  The price of a company's shares is determined by the company itself 
C)  If a company's shares are not in demand, the share price will fall until some investors decide the shares are good value 
D)  All of the above statements are false 
A)  When the price of a company's shares is too high, demand for those shares will fall 
B)  The price of a company's shares is determined by the company itself 
C)  If a company's shares are not in demand, the share price will fall until some investors decide the shares are good value 
D)  All of the above statements are false

Question 14

The following information is available for companies A,B,C and D:
$$\begin{array} { l c r r r } 
& \text { A } &  { \text { B } } & \text { C } & { \text { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 & 500,000 \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$
Which company has the largest market capitalization

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 15

A balanced portfolio can eliminate unsystematic risk

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is false?

Accepted Answer

A)  On a cash flow statement, investors expect to see a positive figure for cash generated from operating activities 
B)  On a cash flow statement, investors expect to see a positive figure for cash generated from investing activities 
C)  On a cash flow statement, investors expect to see a negative figure for cash generated from investing activities 
D)  On a cash flow statement, investors are interested in whether a company has increased/decreased borrowings 
A)  On a cash flow statement, investors expect to see a positive figure for cash generated from operating activities 
B)  On a cash flow statement, investors expect to see a positive figure for cash generated from investing activities 
C)  On a cash flow statement, investors expect to see a negative figure for cash generated from investing activities 
D)  On a cash flow statement, investors are interested in whether a company has increased/decreased borrowings

Question 17

Current share price divided by earnings per share is known as:

Accepted Answer

A)  Price/earnings ratio 
B)  Dividend yield 
C)  Dividend cover 
D)  Market capitalization 
A)  Price/earnings ratio 
B)  Dividend yield 
C)  Dividend cover 
D)  Market capitalization

Question 18

The following information is available for companies A,B,C and D:
$$\begin{array} { l c r r r } 
& \text { A } & { \text { B } } & \text { C } & { \text { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 & 500,000 \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$

Which company has the highest earnings per share?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 19

The following information is available for companies A,B,C and D:
$$\begin{array} { l c r r r } 
& \text { A } & { \text { B } } & \text { C } & { \text { D } } \
\text { Number of ordinary shares } & 1,000,000 & 1,250,000 & 750,000 & 500,000 \
\text { Current share price } & £ 2.50 & £ 3.00 & £ 1.50 & £ 1.75 \
\text { Total profits after tax } & £ 200,000 & £ 225,000 & £ 150,000 & £ 250,000 \
\text { Total ordinary dividends } & 100,000 & 100,000 & 50,000 & 40,000
\end{array}$$
Which company has the lowest price/earnings ratio?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 20

The only factor that influences a companies share price is the profit it has made

Accepted Answer

A) True 
 B)False

A high price/earnings (P/E)ratio indicates that a company is profitable

Which of the following statements is correct?

Which of the following statements is correct?

Systematic risk refers to the risk due to what happens in the market generally

Which of the following can influence a companies share price?

Which of the following statements is correct?

Total profits divided by number of ordinary shares is known as:

Which of the following statements is false?

Which of the following statements is false?

A balanced portfolio can eliminate unsystematic risk

Which of the following statements is false?

Current share price divided by earnings per share is known as:

The only factor that influences a companies share price is the profit it has made

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

Cash Flow Statements: Understanding and Preparation

Advanced Interpretation of Company and Group Accounts

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 5: How the Stock Market Assesses Company Performance

A high price/earnings (P/E)ratio indicates that a company is profitable

Which of the following statements is correct?

Which of the following statements is correct?

Systematic risk refers to the risk due to what happens in the market generally

Which of the following can influence a companies share price?

Which of the following statements is correct?

Total profits divided by number of ordinary shares is known as:

Which of the following statements is false?

Which of the following statements is false?

A balanced portfolio can eliminate unsystematic risk

Which of the following statements is false?

Current share price divided by earnings per share is known as:

The only factor that influences a companies share price is the profit it has made

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

Cash Flow Statements: Understanding and Preparation

Advanced Interpretation of Company and Group Accounts

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