Reference no: EM132963018

Problem 1: Which of the following statements are correct regarding the ABC method of inventory control?

I. It is based on minimising the total of holding costs plus ordering costs

II. It classifies inventory into categories based on value

III. It applies mainly to manufacturing firms

IV. It results in a minimal level of inventory delivered just in time for production

V. It requires that most effort and resources are spent on managing high value items

Problem 2: Which of the following are characteristics of finance leases that make them attractive sources of finance?

I. Companies are now allowed to keep them off the balance sheet

II. Ease of borrowing

III. Avoiding large cash outflows required to purchase the asset

Problem 3: Which of the following are consequences of a relatively high level of gearing:

I. Increased return on assets

II. Increased risk to shareholders

III. Increased return on equity, as long as return on assets exceeds the interest rate