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Question 01

Horizontal analysis is:

a) the calculation of the relative weighting of components within a particular financial period.

b) the comparison of the current year's figures with the previous year's figures.

c) the comparison of one company's results with another company.

d) the comparison of the profit and loss account with the balance sheet.

Question 02

ROCE means:

a) Return on Current Expenses

b) Reserves of Capital Equity

c) Return on Capital Employed

d) Ratio of Capital Employed

Question 03

Which one of the following circumstances might cause the gross margin to increase?

a) More goods sold, but at lower prices. Cost of sales stays unchanged

b) More goods sold, at higher prices. Cost of sales stays unchanged

c) Less goods sold, but at higher prices. Cost of sales increased at the same rate as sales prices

d) Closing stock has been materially undervalued

Question 04

Which one of the following pairs will always change in tandem with each other?

a) Gross Margin and net margin

b) Gross Margin and ROCE

c) Gross Margin and Mark-up

d) Mark-up and ROCE

Question 05

A company starts its year with stock of £2m and ends it with £3m. If it had an overall cost of sales of £12.5m, what was its stock turn in days?

a) 85 days

b) 1,825 days

c) 73 days

d) 7.3 days

Question 06

Which definition of 'over-trading' is most correct?

a) The company's financial base is not at present strong enough to cope with its sales levels

b) The company will definitely go out of business

c) The company has only sold legitimate, non-pirated goods

d) The company has sold record quantities during the financial year

Question 07

An advantage to shareholders in a low-geared company is:

a) high levels of borrowed money could lead to greater expansion and profit levels.

b) low levels of borrowed money mean less of an interest burden on the company and less chance of the company being unable to pay dividends.

c) low gearing always means higher profits and dividends than a high geared company.

d) low geared companies pay high interest rates to shareholders.

Question 08

Four companies have the following P/E ratios: A 17, B 24, C12, D 8. Which of the following statements about the companies is incorrect?

a) B's share price must be twice that of C

b) A's share pricD has the lowest share price relative to its earnings per sharee is 17 times its earnings

c) D has the lowest share price relative to its earnings per share

d) B has the Stock Market's greatest expectations for future profit growth

Question 09

A company shows a dividend cover of 3 times. This means that:

a) shareholders can expect to receive a dividend that is 3 times the value of their shares.

b) the year's dividends are 3 times last year's equivalents.

c) the final dividend is 3 times greater than the interim dividend.

d) the amount available for dividend is 3 times the amount of the dividends.

Question 10

One of the criticisms of accounting information has been:

a) the information is always incorrect.

b) accountants never follow rules and regulations.

c) inflation is not normally reflected within the financial statements.

d) companies should report the future instead of the past.

Oxford University Press, Online Resource Centre, Chapter 12.

Chapter 12

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