ACCA FM - Chapter 1 Quiz

Morgan Co use the return on capital employed ratio to assess the company's performance.

The results for 20Y0 were as follows:

 

Sales $150,000

Operating Profit $72,000

Total assets $70,000

Equity finance $40,000

Non-current liabilities $20,000

Current liabilities $10,000

 

Calculate the ROCE for 20Y0 (give your answer to the nearest whole percentage).

 

The ROCE for 20Y0 is

Which of the following are the THREE main decisions facing the financial manager in a company?

• Dividend decision

• Financing decision

• Lease or buy decision

• Investment decision

• Asset replacement decision

1.     ABC Co and DEF Co are listed companies in the same country. Their P/E ratios and share prices are shown below.

ABC Co:

P/E ratio - 8

Current share price ex div - $5

DEF Co:

P/E ratio - 12

Current share price ex div - $3.90

 

Which of the following statements will best explain the higher P/E ratio of DEF Co?

• DEF Co is a much larger company than ABC Co.

• DEF Co is regarded as a higher risk investment than ABC Co.

• DEF Co has higher earnings per share growth prospects than ABC Co.

• DEF Co retains a higher proportion of its annual post-tax profits than ABC Co.

Which of the following will NOT reduce the agency problem experienced by shareholders?

• Salary bonuses for management based on financial performance.

• The use of corporate governance codes of best practice.

• The granting of share options to management.

• The use of restrictive covenants in bond deeds.

At the end of 20X8 the share price of Craddock Co is $4.50 which includes a capital gain of $0.50 from the beginning of the period. A dividend of $0.20 has been declared for 20X8.

What is the total shareholder return as a % to 1 decimal place?

Not for profit organisations attempt to achieve value for money (VFM) by seeking three E's.

The three E's are:

• Economy, Efficiency and Effectiveness

• Efficiency, Electronic commerce and Effectiveness

• Economy, Ergonomic and Easily achievable

• Ethical, Efficient and Economic

A connected stakeholder deals with a company on a regular basis but is not part of the organisation itself.

 

Which THREE of the following are connected stakeholders?

• Bankers

• Customers

• Employees

• Shareholders

• Local Communities

The figures in the table below are an extract from the statement of profit or loss of Boon Co.

Reserves are $4.5m. There are 3.5m ordinary shares in issue (nominal value 50 cents each) with a market price of $2.

 

Profit before tax

$2,500,000

Less: tax

$750,000

Profit after tax

$1,750,000

Dividend

$500,000

Retained profits

$1,250,000

 

What is the price/earnings (P/E) ratio?

• 1.0

• 2.8

• 4.0

• 5.6

1.     The figures in the table below are an extract from the statement of profit or loss of Arnold Co.Reserves are $4.5m. There are 3.5m ordinary shares in issue (nominal value 50 cents each) with a market price of $2.

 

Profit before tax

$2,500,000

Less tax

$750,000

Profit after tax

$1750,000

Dividend

500,000

Retained Profits

$1,250,000

 

What is the dividend yield?

(Ignore taxation.)

• 7%

• 20%

• 30%

• 40%