Question;Chapter;9;Interpretation;of accounts;1.Which of the following is not an essential;prerequisite to permit the successful use of financial;statements;for ratio analysis?;(a);The accounts should use comparable accounting policies.;(b);The accounts should be drawn from similar types of organizations.;(c);The accounts should be available for several accounting periods.;(d);The accounts used should not include forecast financial information.;2.The current ratio is an indicator of which;following characteristic of an organization?;(a);The current level of profitability.;(b);The future level of profitability.;(c);The investment potential.;(d);The liquidity in the short term.;The;following data was extracted from the records of XYZ Ltd at 31 December 2001;and is to be;used;for Questions 3 and 4.;?000;Sales;2500;Cost;of sales 1200;Stock;at 31 December 2001 350;Stock;at 1 January 2001 300;Debtors;340;Creditors;400;3.The debtors collection period in days was?;(a);43.;(b);45.;(c);50.;(d);58.;4.The rate of stock turnover was?;(a);3.5 times.;(b);3.7 times.;(c);6.3 times.;(d);7.7 times.;5.For a limited company, return on capital;employed is most likely to be calculated by using which of;the;following methods?;(a);Net profit as a percentage of the average of the opening and closing;borrowings.;(b);Net profit as a percentage of the average of the opening and closing capital.;(c);Net profit as a percentage of the average of the opening and closing total;assets.;(d);Net profit as a percentage of the average of the opening and closing fixed;assets.;6.The following balances were extracted from;the records of XYZ Ltd;2001 2002;?000 ?000;Sales;3000 4000;Gross;profit 600 720;Gross;profit percentage 20% 18%;Which;of the following is the most likely reason for the fall in the gross profit;percentage despite;the;increase in sales in 2002?;(a);An increase in selling prices.;(b);A decrease in the costs of purchasing raw materials for the business.;(c);Offering higher discounts to customers to secure extra sales.;(d);An increase in wages and salaries.;Chapter;10;Disclosure;of information;1.A limited company is under a legal duty to;disclose information to parties external to the company.;To;which of the following groups does this requirement mainly apply?;(a);Banks.;(b);Customers.;(c);Shareholders.;(d);Suppliers.;2.Which of the following best describes the;measures which have been taken to stop the practice;known;as ?creative accounting??;(a);Creative accounting has been made a criminal offence.;(b);The Companies Act forbids directors from engaging in creative accounting.;(c);The Stock Exchange conditions of listing prohibit the practice.;(d);The regulatory system has been altered and accounting standards have been;changed to discourage;the;practice.;3.Directors of a limited company are under;an obligation to?;(a);Send financial statements to employees.;(b);Send summary financial statements to all shareholders.;(c);File copies of the financial statements with the registrar of companies.;(d);Produce financial statements which are correct in all respects.;Accounting for Non-Accounting Students, 5th edition,Lecturer?s;Guide. ? Pearson Education Limited 2001113;Chapter;11;The;annual report;1.Which of the following statements;regarding the Chairman?s report in an annual report is correct?;(a);The report is required by the Companies Act.;(b);The report is subject to an audit by the external auditors of the company.;(c);Accounting standards define the format of the Chairman?s report.;(d);There are no controls over the format or content of the Chairman?s report and;it is not subject to;statutory;audit.;2.Which of the following items is unlikely;to be found in the directors? report for a limited company?;(a);A description of the accounting policies of the company.;(b);Details of corporate donations to charities.;(c);Details of corporate donations to political parties.;(d);Details of the company?s health and safety policy.;3.An audit of most limited company financial;statements is required because;(a);The Cadbury Report into corporate governance recommended that one should be;undertaken.;(b);The shareholders of a company usually request one.;(c);It is required by the Companies Act.;(d);Banks or other lenders usually request one to be carried out.;4.B Ltd is a subsidiary of A plc if?;(a);A owns all of the shares in B.;(b);A is in a position to exercise ?dominant influence? over the financial and;operating policies of B.;(c);A owns the assets of B.;(d);A has given a substantial loan to B secured on B?s assets by a debenture.;5.A group of companies must prepare;consolidated accounts when which of the following situations;exists?;(a);A parent company has one or more subsidiary companies.;(b);When a parent company has overseas subsidiaries.;(c);When a parent company trades from the same address as its subsidiaries.;(d);When a company has a participating interest in another associated company.;6.When a company?s financial statements have;been audited, an audit report will be prepared. If this;is;unqualified the auditors will report that the financial statements;(a);Are certified correct.;(b);Contain no material errors.;(c);Comply with the Companies Act.;(d);Present a true and fair view and comply with the Companies Act.
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