Reference no: EM131328911

1. Which of the following would definitely improve both gross profit as reported in the Income Statement and gross profit margin (assuming cost price per unit stays the same)?

A. Selling more units at a higher selling price per unit.

B. Selling more units at a lower selling price per unit.

C. Selling fewer units at a higher selling price.

D. Selling fewer units at a lower selling price.

2. Using the following data, calculate Return on total Capital Employed (ROCE):

Shareholders' funds	£100,000
10% Loan	£200,000
Current Liabilities	£100,000
Net Profit before Interest and Taxes	£50,000
Taxation Rate	30%

A. 30%

B. 16.7%

C. 25%

D. 21%

3. Which of the following would reduce net profit but have no effect on gross profit?

A. a reduction in spend on training of distribution staff

B. reducing the commission rate paid to salesmen

C. negotiating a lower purchase price for raw materials

D. an increase in IT support costs for the accounting package used

4. If current assets are £40,000, the current ratio is 2:1 and the acid test is 1.5:1, then the value of inventory is:

A. £80,000

B. £40,000

C. £10,000

D. £20,000

5. How would an increase in administration costs affect reported profits?

A. Decrease Operating Profit, but has no effect on Gross Profit.

B. No impact on Operating Profit but will decrease Gross Profit.

C. No impact on Operating Profit, but will increase Gross Profit.

D. Increase Operating Profit, but decreases Gross Profit.

6.Which of the following statements about the Statement of Financial Position is not true?

A. total assets = total liabilities + equity

B. total assets - total liabilities = shareholders' funds

C. total equity + total assets + total liabilities = shareholders' funds

D. non current assets + current assets - total liabilities = equity

7. Which of the following is not a cost associated with holding inventory?

A. obsolesence

B. insurance

C. deterioration

D. depreciation

8. If current assets are £30,000, and the current ratio is 1.5, then the value of current liabilities is:

A. £30,000

B. £45,000

C. £10,000

D. £20,000

9. Using the following data, calculate Return on Shareholder's Funds (ROSF):

Shareholders' funds	£200,000
Long term loan at 10% interest	£100,000
Net Profit before Interest and Taxes	£50,000
Taxation Rate	30%

A. 14%

B. 16.7%

C. 21%

D. 30%

10.In the context of financial structure, which of the following statements is not true?

A. high levels of gearing may be perceived as risky, because of the company's commitment to pay a given sum of interest, regardless of how much profit is generated

B. the gearing ratio considers the significance of a company's debt relative to equity

C. the interest cover ratio equals the rate of interest payable on a loan

D. as long as the return generated from borrowed funds exceeds the rate of interest payable, the ordinary shareholders will benefit.