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Topical›Accounting 9706›Financial accounting (A Level)›Analysis and communication of accounting information›Paper 3

Analysis and communication of accounting information — Paper 3 · A Level Accounting 9706

3.5· 126 questions · 126 marks · 151 min · 2009–2015· Multiple choice

Every Cambridge A Level Accounting Paper 3 question on analysis and communication of accounting information, laid out as 33 A4 pages with the mark scheme below. Nothing is left out. Free to read, no account.

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Questions33 pages

Question 1: The table shows data for a company. Year 1 Year 2 $ 000 $ 000 stock 160 220 debtors 85 63 bank 33 212 creditors 72 87 Operating profit befo…Question 2: A company’s financial statements include the following. $ 000 $ 000 operating profit 78 interest paid 16 ordinary dividend paid 20 (36) ret…Question 3: The issued share capital of a company is: 200 000 5 % preference shares of $1.00 each fully paid. 800 000 ordinary shares of $2.00 each ful…Question 4: Which action would reduce a company’s gearing level? A issuing debentures B making a bonus issue of shares C making a rights issue of share…1 / 33
Question 5: Which characteristics would be present in a highly geared company? A a large, but temporary, bank overdraft B excessive levels of trade cre…Question 6: The table shows data for a company. Year 1 Year 2 $ 000 $ 000 stock 160 220 debtors 85 63 bank 33 212 creditors 72 87 Operating profit befo…Question 7: A company’s financial statements include the following. $ 000 $ 000 operating profit 78 interest paid 16 ordinary dividend paid 20 (36) ret…Question 8: The issued share capital of a company is: 200 000 5 % preference shares of $1.00 each fully paid. 800 000 ordinary shares of $2.00 each ful…2 / 33
Question 9: Which action would reduce a company’s gearing level? A issuing debentures B making a bonus issue of shares C making a rights issue of share…Question 10: Which characteristics would be present in a highly geared company? A a large, but temporary, bank overdraft B excessive levels of trade cre…Question 11: The financial statements of a company for the year to 30 June includes the following. Income (profit and loss) account $m operating profits…Question 12: A company has an issued share capital of 50 000 $1 ordinary shares. Profits for distribution average $20 000 per annum. The expected rate o…3 / 33
Question 13: The following investment information is available. $ earnings per share 0.35 dividend per share 0.21 market price per share 1.40 nominal va…Question 14: Which action will reduce the gearing of a company? A bonus issue of ordinary shares B issue of debentures C purchase of own ordinary shares…Question 15: A company calculated its gearing as loan capital plus bank and other borrowings as a percentage of total capital employed. The table shows …4 / 33
Question 16: The financial statements of a company for the year to 30 June includes the following. Income (profit and loss) account $m operating profits…Question 17: A company has an issued share capital of 50 000 $1 ordinary shares. Profits for distribution average $20 000 per annum. The expected rate o…Question 18: The following investment information is available. $ earnings per share 0.35 dividend per share 0.21 market price per share 1.40 nominal va…Question 19: Which action will reduce the gearing of a company? A bonus issue of ordinary shares B issue of debentures C purchase of own ordinary shares…5 / 33
Question 20: A company calculated its gearing as loan capital plus bank and other borrowings as a percentage of total capital employed. The table shows …Question 21: The financial statements of a company for the year to 30 June includes the following. Income (profit and loss) account $m operating profits…Question 22: A company has an issued share capital of 50 000 $1 ordinary shares. Profits for distribution average $20 000 per annum. The expected rate o…Question 23: Which action will reduce the gearing of a company? A bonus issue of ordinary shares B issue of debentures C purchase of own ordinary shares…6 / 33
Question 24: A company calculated its gearing as loan capital plus bank and other borrowings as a percentage of total capital employed. The table shows …Question 25: The capital structure of a company is given. $ 400 000 ordinary shares of $0.50 200 000 reserves 90 000 9 % debentures 2010 – 2012 50 000 T…7 / 33
Question 26: The capital structure of a company is given. $ 400 000 ordinary shares of $0.50 200 000 reserves 90 000 9 % debentures 2010 – 2012 50 000 T…Question 27: The capital structure of a company is given. $ 400 000 ordinary shares of $0.50 200 000 reserves 90 000 9 % debentures 2010 – 2012 50 000 T…Question 28: Why might a company repay part of its share capital? A Its cash reserves exceed its requirements for the foreseeable future. B Its sharehol…8 / 33
Question 29: Why would convertible loan stock be issued by a company? A to increase the equity of the company at the issue date B to increase gearing on…Question 30: A company has a return on capital employed of 20 % and an asset turnover of 2.5 times. What was the company’s net profit ratio? A 8 % B 16 …Question 31: The following is an extract from the statement of financial position of Zed Ltd. $ net assets 114 000 10 % debentures (2015) (20 000) 94 00…Question 32: A company has the following information. $ profit before tax 300 000 profit from operations 400 000 equity 1 200 000 non-current liabilitie…9 / 33
Question 33: The following are extracts from a company’s income statement. $ profit from operations 140 000 interest 40 000 profit before tax 100 000 ta…Question 34: The following is an extract from the statement of financial position of Zed Ltd. $ net assets 114 000 10 % debentures (2015) (20 000) 94 00…Question 35: A company has the following information. $ profit before tax 300 000 profit from operations 400 000 equity 1 200 000 non-current liabilitie…10 / 33
Question 36: The following is an extract from the statement of financial position of Zed Ltd. $ net assets 114 000 10 % debentures (2015) (20 000) 94 00…Question 37: A company has the following information. $ profit before tax 300 000 profit from operations 400 000 equity 1 200 000 non-current liabilitie…Question 38: Zachary plc has the following summary balance sheet at 31 Dec 2009. $ million ordinary shares of $1 each 50 retained earnings 70 net assets…11 / 33
Question 39: The following are extracts from a company’s income statement. $ profit from operations 140 000 interest 40 000 profit before tax 100 000 ta…Question 40: A balance sheet extract shows the following. $ ordinary shares of $1 each 1000 10 % convertible loan stock 400 retained earnings 140 (dr) n…Question 41: A company revalues its non-current assets upwards. Which of the following shows the effect of this? return on capital gearing employed A de…12 / 33
Question 42: PQR plc has the following accounting ratios for its financial years 2009 and 2010. 2009 (days) 2010 (days) trade receivables turnover 45 50…Question 43: A company makes annual profits of $10 million before interest payable of $2 million and ordinary dividends of $5 million. It has in issue 2…Question 44: A company’s statement of financial position shows the following information. $000 ordinary shares of $10 each 120 7 % non-redeemable prefer…Question 45: A company makes annual profits of $50 million, before paying interest of $10 million and ordinary dividends of $20 million. It has in issue…13 / 33
Question 46: The issued share capital of a company is as follows. 500 000 4 % non-redeemable preference shares of $1.00 each 1 400 000 ordinary shares o…Question 47: A company revalues its buildings upwards. What is the impact on the following ratios? return on capital gearing employed A decrease decreas…Question 48: Which effect will a bonus issue of shares have on a company’s gearing ratio and earnings per share? gearing earnings per share A no effect …Question 49: A balance sheet extract shows the following. $ ordinary shares of $1 each 1000 10 % convertible loan stock 400 retained earnings 140 (dr) n…14 / 33
Question 50: A company revalues its non-current assets upwards. Which of the following shows the effect of this? return on capital gearing employed A de…Question 51: PQR plc has the following accounting ratios for its financial years 2009 and 2010. 2009 (days) 2010 (days) trade receivables turnover 45 50…Question 52: A company makes annual profits of $10 million before interest payable of $2 million and ordinary dividends of $5 million. It has in issue 2…Question 53: A limited company purchases a partnership. It issues to the partners 10 % debentures and pays them cash in full settlement of the purchase …15 / 33
Question 54: The table shows the capital structure of a company. $ 100 000 ordinary shares of $1 each 100 000 10 % debentures 50 000 reserves 100 000 It…Question 55: Which two actions would both increase a company’s working capital cycle? 1 increase trade payables; reduce trade receivables 2 increase tra…Question 56: A company’s annual published accounts shows the following information. $ profit for the year attributed to equity holders 32 000 preference…Question 57: A company has provided the following information. dividends paid during the year – $4 per share dividends proposed at the year end – $2 per…16 / 33
Question 58: Which ratio can be calculated from the statement of financial position of a limited company? A the dividend yield per ordinary share B the …Question 59: Which transaction will reduce a company’s gearing? A an issue of bonus shares B an issue of new preference shares C obtaining a long term l…Question 60: How may a company improve its profit by window dressing? A applying an impairment test to goodwill B making a provision for obsolete stock …Question 61: Which item will increase a company’s earnings per share? A a correction of an under-valuation of closing inventory B an increase of redeema…Question 62: A company provided the following financial information for the year. $000 profit from operations 570 depreciation charge for the year 250 i…17 / 33
Question 63: A company is preparing its statement of cash flows. During the year, it sells a non-current asset for $1500. This results in a loss on disp…Question 64: Which of the following actions will improve a company’s liquidity? A making an issue of bonus shares B making a rights issue of shares C re…Question 65: The table shows the capital structure of a company. $ 100 000 ordinary shares of $1 each 100 000 10 % debentures 50 000 reserves 100 000 It…Question 66: The following information relates to the shares of a limited company. price earnings (P / E) ratio 14 $ earnings per share (EPS) 0.60 divid…18 / 33
Question 67: A company’s annual published accounts shows the following information. $ profit for the year attributed to equity holders 32 000 preference…Question 68: A company has provided the following information. dividends paid during the year – $4 per share dividends proposed at the year end – $2 per…Question 69: Which ratio can be calculated from the statement of financial position of a limited company? A the dividend yield per ordinary share B the …Question 70: Which transaction will reduce a company’s gearing? A an issue of bonus shares B an issue of new preference shares C obtaining a long term l…Question 71: Why would an investor use a price/earnings (P/E) ratio for a public limited company? A to assess the level of borrowing in a company B to a…19 / 33
Question 72: Extracts from a company’s accounts show the following information. $000 profit before tax 400 finance costs 200 ordinary share capital 1 60…Question 73: A company has 1 million ordinary shares in issue and the following reserves. $ share premium 40 000 revaluation reserve 20 000 general rese…Question 74: A company has a share price that gives a dividend yield of 4 %. Earnings per share are $0.32 and half the earnings are paid out as dividend…Question 75: A company’s trade receivables are $120 000 and the credit period is 30 days. The company’s budget for next year provides for an increase in…Question 76: A company has an issued share capital of 8 million shares at $0.50 par value. It pays a dividend of $1.6 million. The dividend yield is cur…20 / 33
Question 77: A company regularly pays a dividend. It has converted $50 m 10 % loan stock into ordinary shares. Which row describes the effect of the con…Question 78: An extract from the final accounts of a company shows: $000 $000 profit from operations 200 interest payable 40 profit before tax 160 taxat…Question 79: Extracts from a company’s statement of financial position are as follows. $ non-current liabilities 50 000 ordinary shares ($1 each) 100 00…21 / 33
Question 80: A company converts some debentures into shares on 1 January 2012. What is the impact on the following ratios in the 2012 financial statemen…Question 81: A company has a Price Earnings ratio of 15. This is 20% less than the average for this type of business. Its earnings per share are $0.20. …Question 82: The financial statements of limited companies must disclose changes in the methods of providing for depreciation of non-current assets. Why…Question 83: Information from a company’s financial records reveals the following information. profit from operations $100 000 interest cover 10 times d…Question 84: Which expense is not deducted before arriving at operating profit? A auditor’s fee B debenture interest C directors’ remuneration D distrib…22 / 33
Question 85: The working capital cycle of a business was 100 days in 2012 and 130 days in 2013. Which statement explains the change? A Cash and cash equ…Question 86: The following information has been obtained for a company. $ declared dividend per share 0.05 market price per share 4.00 nominal value of …Question 87: A company has a high liquidity ratio. What will reduce liquidity? A converting loan stock into shares B doubling the annual rates of deprec…Question 88: The following information is available for a company for the year ended 31 December. $ profit from operations 134 000 finance costs 16 000 …23 / 33
Question 89: A limited company has the following capital at 31 December. $000 ordinary shares of $1 each fully paid 5000 7.5% preference shares of $1 ea…Question 90: The following information relates to a company. per share $ dividends paid during the year 3 dividends proposed at the year end 1 market pr…Question 91: Which transaction will increase a company’s working capital? A The bank overdraft is increased. B There is a bonus share issue. C There is …Question 92: Which action will increase company profits in the short term? A accepting deposits for customers’ orders B decreasing rates of depreciation…24 / 33
Question 93: A company issues a debenture. Which row shows the impact of this on the company’s financial statements? return on capital gearing working c…Question 94: What will not appear in a statement of cash flows? A changes in inventory levels B interest payable C issue of bonus shares D purchase of p…Question 95: An ordinary share in a company has a nominal value of $0.50. The latest financial statements show earnings per share of $0.10 and a price-e…Question 96: The directors of a company want to reduce the company’s gearing ratio. They can take the following actions. 1 make a rights issue of ordina…Question 97: A business experienced the following events during the year. 1 an increased level of bad debts written off 2 an increase in the bank overdr…25 / 33
Question 98: A company makes a rights issue of 10 000 ordinary shares of $1 each at a premium of $0.50. The issue is fully subscribed. What is the effec…Question 99: How can a company increase its liquidity? A by making a bonus issue B by making a rights issue C by transfers from the general reserve D by…Question 100: The statement of financial position of a company is as follows. $ non-current assets 85 000 bank 14 000 other net current assets 24 000 8% …26 / 33
Question 101: The financial statements of a company show the following. $m non-current assets 210 non-current liabilities 15 ordinary share capital 100 p…Question 102: The following information is taken from the financial statements of a company. $ profit attributable to equity holders 2 000 000 ordinary s…Question 103: Which shareholder ratio calculates the expected return on investment? A dividend cover B dividend yield C earnings per share D price earnin…Question 104: The following information is available. dividend yield 4% dividend for the year $10 000 dividend cover four times What is the price earning…27 / 33
Question 105: A company provides the following information. $ profit from operations 400 000 profit before tax 300 000 equity 1 200 000 non-current liabi…Question 106: The statement of financial position of a limited company showed the following. $000 total assets 3700 current liabilities (900) non-current…Question 107: A company has 500 000 ordinary shares in issue and the following reserves. $ share premium 20 000 revaluation reserve 50 000 general reserv…Question 108: Which shareholder ratio calculates the expected return on investment? A dividend cover B dividend yield C earnings per share D price earnin…28 / 33
Question 109: The following information is available. dividend yield 4% dividend for the year $10 000 dividend cover four times What is the price earning…Question 110: A company provides the following information. $ profit from operations 400 000 profit before tax 300 000 equity 1 200 000 non-current liabi…Question 111: The statement of financial position of a limited company showed the following. $000 total assets 3700 current liabilities (900) non-current…Question 112: A company has 500 000 ordinary shares in issue and the following reserves. $ share premium 20 000 revaluation reserve 50 000 general reserv…29 / 33
Question 113: The issued share capital of a company is as follows. 400 000 4% redeemable preference shares of $1.00 each 1 600 000 ordinary shares of $0.…Question 114: The following investment information is available. $ earnings per share 0.35 dividend per share 0.21 market price per share 1.40 nominal va…Question 115: Which transaction would not affect the gearing ratio? A bonus issue of ordinary shares B issue of preference shares C redemption of ordinar…Question 116: A company had the following capital employed. $ $0.50 ordinary shares 5 000 000 10% $1 preference shares 1 000 000 total capital employed 6…30 / 33
Question 117: The following information is available for a limited company. ordinary shares of $0.50 each $100 000 dividend yield 10% 4% preference share…Question 118: When calculating earnings per share, what is the meaning of ‘earnings’? A profit attributable to equity holders B profit attributable to or…Question 119: The following information is available for a limited company. $000 profit from operations 510 profit for the year 210 dividend paid 150 tra…Question 120: The following information is available for a limited company. ordinary shares of $0.50 each 200 000 market price per share $2.50 dividend y…31 / 33
Question 121: A company has a profit from operations of $326 000 after taking into account the following information. $ depreciation 24 000 goodwill impa…Question 122: Which statement about debentures and preference shares is correct? A Both debentures and preference shares increase the gearing ratio. B Bo…Question 123: The following financial information is available for a limited company. $000 ordinary shares of $1 each 400 share premium 200 general reser…Question 124: A limited company provides the following information. $000 profit from operations 4800 finance charges (400) tax (1100) profit for the year…32 / 33
Question 125: A company provided the following information. $ profit from operations 450 000 debenture interest (55 000) 395 000 transfer to general rese…Question 126: The following information is available for a limited company at the end of its financial year. ordinary shares of $0.50 each $100 000 price…33 / 33

Mark scheme126 answers

Answers below. Sit the paper first if you are practising.

Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 3

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

1B1
2D1
3B1
4C1
5D1
6B1
7D1
8B1
9C1
10D1
11B1
12D1
13A1
14D1
15A1
16B1
17D1
18A1
19D1
20A1
21B1
22D1
23D1
24A1
25D1
26D1
27D1
28A1
29D1
30A1
31D1
32B1
33D1
34D1
35B1
36D1
37B1
38C1
39D1
40B1
41A1
42B1
43B1
44B1
45C1
46A1
47A1
48D1
49B1
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Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 3

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

50A1
51B1
52B1
53B1
54C1
55C1
56B1
57D1
58D1
59D1
60D1
61A1
62D1
63D1
64B1
65C1
66C1
67B1
68D1
69D1
70D1
71D1
72D1
73B1
74B1
75C1
76C1
77C1
78C1
79C1
80B1
81C1
82B1
83C1
84B1
85B1
86A1
87D1
88B1
89B1
90D1
91C1
92B1
93B1
94C1
95B1
96D1
97D1
98A1
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Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 3

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

99B1
100C1
101B1
102D1
103B1
104B1
105B1
106B1
107B1
108B1
109B1
110B1
111B1
112B1
113A1
114A1
115A1
116A1
117A1
118A1
119B1
120D1
121B1
122A1
123C1
124A1
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126A1
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Questions as text

Q1 · The table shows data for a company 9706/31 Oct/Nov 2009

2 The table shows data for a company. Year 1 Year 2 $ 000 $ 000 stock 160 220 debtors 85 63 bank 33 212 creditors 72 87 Operating profit before interest and depreciation was $240 000. Depreciation charges for the year amounted to $42 000. What was the net cash flow from operating activities in Year 2? A $179 000 B $217 000 C $259 000 D $263 000

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2009

Q2 · A company’s financial statements include the following 9706/31 Oct/Nov 2009

12 A company’s financial statements include the following. $ 000 $ 000 operating profit 78 interest paid 16 ordinary dividend paid 20 (36) retained profit for the year 42 transfer to general reserve (15) retained profit at beginning of year 30 retained profit at end of year 57 What is the dividend cover for the ordinary shares? A 2.1 times B 2.35 times C 2.85 times D 3.1 times

1 marks

Answer: D

This question in 9706/31 Oct/Nov 2009

Q3 · The issued share capital of a company is: 200 000 5 % preference shares of $1.00 each… 9706/31 Oct/Nov 2009

14 The issued share capital of a company is: 200 000 5 % preference shares of $1.00 each fully paid. 800 000 ordinary shares of $2.00 each fully paid. The company’s net profit is $160 000. An appropriate level of dividend cover for the ordinary shares is 1.5 times. What will be the dividend per ordinary share? A $0.063 B $0.125 C $0.134 D $0.250

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2009

Q4 · Which action would reduce a company’s gearing level? 9706/31 Oct/Nov 2009

15 Which action would reduce a company’s gearing level? A issuing debentures B making a bonus issue of shares C making a rights issue of shares D taking out an unsecured long term loan

1 marks

Answer: C

This question in 9706/31 Oct/Nov 2009

Q5 · Which characteristics would be present in a highly geared company? 9706/31 Oct/Nov 2009

16 Which characteristics would be present in a highly geared company? A a large, but temporary, bank overdraft B excessive levels of trade creditors in its balance sheet C significant levels of dividend payments in a period D significant levels of loan interest payments charged against its profits

1 marks

Answer: D

This question in 9706/31 Oct/Nov 2009

Q6 · The table shows data for a company 9706/32 Oct/Nov 2009

1 The table shows data for a company. Year 1 Year 2 $ 000 $ 000 stock 160 220 debtors 85 63 bank 33 212 creditors 72 87 Operating profit before interest and depreciation was $240 000. Depreciation charges for the year amounted to $42 000. What was the net cash flow from operating activities in Year 2? A $179 000 B $217 000 C $259 000 D $263 000

1 marks

Answer: B

This question in 9706/32 Oct/Nov 2009

Q7 · A company’s financial statements include the following 9706/32 Oct/Nov 2009

11 A company’s financial statements include the following. $ 000 $ 000 operating profit 78 interest paid 16 ordinary dividend paid 20 (36) retained profit for the year 42 transfer to general reserve (15) retained profit at beginning of year 30 retained profit at end of year 57 What is the dividend cover for the ordinary shares? A 2.1 times B 2.35 times C 2.85 times D 3.1 times

1 marks

Answer: D

This question in 9706/32 Oct/Nov 2009

Q8 · The issued share capital of a company is: 200 000 5 % preference shares of $1.00 each… 9706/32 Oct/Nov 2009

13 The issued share capital of a company is: 200 000 5 % preference shares of $1.00 each fully paid. 800 000 ordinary shares of $2.00 each fully paid. The company’s net profit is $160 000. An appropriate level of dividend cover for the ordinary shares is 1.5 times. What will be the dividend per ordinary share? A $0.063 B $0.125 C $0.134 D $0.250

1 marks

Answer: B

This question in 9706/32 Oct/Nov 2009

Q9 · Which action would reduce a company’s gearing level? 9706/32 Oct/Nov 2009

14 Which action would reduce a company’s gearing level? A issuing debentures B making a bonus issue of shares C making a rights issue of shares D taking out an unsecured long term loan

1 marks

Answer: C

This question in 9706/32 Oct/Nov 2009

Q10 · Which characteristics would be present in a highly geared company? 9706/32 Oct/Nov 2009

15 Which characteristics would be present in a highly geared company? A a large, but temporary, bank overdraft B excessive levels of trade creditors in its balance sheet C significant levels of dividend payments in a period D significant levels of loan interest payments charged against its profits

1 marks

Answer: D

This question in 9706/32 Oct/Nov 2009

Q11 · The financial statements of a company for the year to 30 June includes the following 9706/31 May/June 2010

11 The financial statements of a company for the year to 30 June includes the following. Income (profit and loss) account $m operating profits 109 interest payable 14 profit before tax 95 taxation 25 profit after tax 70 dividends paid 38 retained profit for year 32 Balance sheet $m ordinary shares ($0.50 each) in issue 150 income statement (profit and loss account) 160 shareholders funds 310 What are the earnings per share for the year? A 22.6 cents B 23.3 cents C 31.7 cents D 46.7 cents

1 marks

Answer: B

This question in 9706/31 May/June 2010

Q12 · A company has an issued share capital of 50 000 $1 ordinary shares 9706/31 May/June 2010

12 A company has an issued share capital of 50 000 $1 ordinary shares. Profits for distribution average $20 000 per annum. The expected rate of return on shares in similar companies is 25 %. What are the 50 000 shares worth? A $32 500 B $50 000 C $62 500 D $80 000

1 marks

Answer: D

This question in 9706/31 May/June 2010

Q13 · The following investment information is available 9706/31 May/June 2010

13 The following investment information is available. $ earnings per share 0.35 dividend per share 0.21 market price per share 1.40 nominal value per share 1.00 What is the percentage return to an investor who buys a share? A 15 % B 21 % C 25 % D 35 %

1 marks

Answer: A

This question in 9706/31 May/June 2010

Q14 · Which action will reduce the gearing of a company? 9706/31 May/June 2010

14 Which action will reduce the gearing of a company? A bonus issue of ordinary shares B issue of debentures C purchase of own ordinary shares D rights issue of ordinary shares

1 marks

Answer: D

This question in 9706/31 May/June 2010

Q15 · A company calculated its gearing as loan capital plus bank and other borrowings as a… 9706/31 May/June 2010

16 A company calculated its gearing as loan capital plus bank and other borrowings as a percentage of total capital employed. The table shows an extract from the company’s balance sheet. $ m ordinary shares (at $1 nominal value) 29 reserves 43 debentures 48 bank overdraft (long term) 20 What is the gearing ratio? A 48.6 % B 51.4 % C 94.4 % D 105.9 %

1 marks

Answer: A

This question in 9706/31 May/June 2010

Q16 · The financial statements of a company for the year to 30 June includes the following 9706/32 May/June 2010

11 The financial statements of a company for the year to 30 June includes the following. Income (profit and loss) account $m operating profits 109 interest payable 14 profit before tax 95 taxation 25 profit after tax 70 dividends paid 38 retained profit for year 32 Balance sheet $m ordinary shares ($0.50 each) in issue 150 income statement (profit and loss account) 160 shareholders funds 310 What are the earnings per share for the year? A 22.6 cents B 23.3 cents C 31.7 cents D 46.7 cents

1 marks

Answer: B

This question in 9706/32 May/June 2010

Q17 · A company has an issued share capital of 50 000 $1 ordinary shares 9706/32 May/June 2010

12 A company has an issued share capital of 50 000 $1 ordinary shares. Profits for distribution average $20 000 per annum. The expected rate of return on shares in similar companies is 25 %. What are the 50 000 shares worth? A $32 500 B $50 000 C $62 500 D $80 000

1 marks

Answer: D

This question in 9706/32 May/June 2010

Q18 · The following investment information is available 9706/32 May/June 2010

13 The following investment information is available. $ earnings per share 0.35 dividend per share 0.21 market price per share 1.40 nominal value per share 1.00 What is the percentage return to an investor who buys a share? A 15 % B 21 % C 25 % D 35 %

1 marks

Answer: A

This question in 9706/32 May/June 2010

Q19 · Which action will reduce the gearing of a company? 9706/32 May/June 2010

14 Which action will reduce the gearing of a company? A bonus issue of ordinary shares B issue of debentures C purchase of own ordinary shares D rights issue of ordinary shares

1 marks

Answer: D

This question in 9706/32 May/June 2010

Q20 · A company calculated its gearing as loan capital plus bank and other borrowings as a… 9706/32 May/June 2010

16 A company calculated its gearing as loan capital plus bank and other borrowings as a percentage of total capital employed. The table shows an extract from the company’s balance sheet. $ m ordinary shares (at $1 nominal value) 29 reserves 43 debentures 48 bank overdraft (long term) 20 What is the gearing ratio? A 48.6 % B 51.4 % C 94.4 % D 105.9 %

1 marks

Answer: A

This question in 9706/32 May/June 2010

Q21 · The financial statements of a company for the year to 30 June includes the following 9706/33 May/June 2010

10 The financial statements of a company for the year to 30 June includes the following. Income (profit and loss) account $m operating profits 109 interest payable 14 profit before tax 95 taxation 25 profit after tax 70 dividends paid 38 retained profit for year 32 Balance sheet $m ordinary shares ($0.50 each) in issue 150 income statement (profit and loss account) 160 shareholders funds 310 What are the earnings per share for the year? A 22.6 cents B 23.3 cents C 31.7 cents D 46.7 cents

1 marks

Answer: B

This question in 9706/33 May/June 2010

Q22 · A company has an issued share capital of 50 000 $1 ordinary shares 9706/33 May/June 2010

11 A company has an issued share capital of 50 000 $1 ordinary shares. Profits for distribution average $20 000 per annum. The expected rate of return on shares in similar companies is 25 %. What are the 50 000 shares worth? A $32 500 B $50 000 C $62 500 D $80 000

1 marks

Answer: D

This question in 9706/33 May/June 2010

Q23 · Which action will reduce the gearing of a company? 9706/33 May/June 2010

13 Which action will reduce the gearing of a company? A bonus issue of ordinary shares B issue of debentures C purchase of own ordinary shares D rights issue of ordinary shares

1 marks

Answer: D

This question in 9706/33 May/June 2010

Q24 · A company calculated its gearing as loan capital plus bank and other borrowings as a… 9706/33 May/June 2010

15 A company calculated its gearing as loan capital plus bank and other borrowings as a percentage of total capital employed. The table shows an extract from the company’s balance sheet. $ m ordinary shares (at $1 nominal value) 29 reserves 43 debentures 48 bank overdraft (long term) 20 What is the gearing ratio? A 48.6 % B 51.4 % C 94.4 % D 105.9 %

1 marks

Answer: A

This question in 9706/33 May/June 2010

Q25 · The capital structure of a company is given 9706/31 Oct/Nov 2010

17 The capital structure of a company is given. $ 400 000 ordinary shares of $0.50 200 000 reserves 90 000 9 % debentures 2010 – 2012 50 000 The company issues $30 000 10 % debenture stock 2015 – 2017 at par and makes a rights issue of 1 ordinary share for every four held at $0.60. It also raises an unsecured loan of $50 000. How will these transactions affect the balance sheet? gearing reserves A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: D

This question in 9706/31 Oct/Nov 2010

Q26 · The capital structure of a company is given 9706/32 Oct/Nov 2010

17 The capital structure of a company is given. $ 400 000 ordinary shares of $0.50 200 000 reserves 90 000 9 % debentures 2010 – 2012 50 000 The company issues $30 000 10 % debenture stock 2015 – 2017 at par and makes a rights issue of 1 ordinary share for every four held at $0.60. It also raises an unsecured loan of $50 000. How will these transactions affect the balance sheet? gearing reserves A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: D

This question in 9706/32 Oct/Nov 2010

Q27 · The capital structure of a company is given 9706/33 Oct/Nov 2010

16 The capital structure of a company is given. $ 400 000 ordinary shares of $0.50 200 000 reserves 90 000 9 % debentures 2010 – 2012 50 000 The company issues $30 000 10 % debenture stock 2015 – 2017 at par and makes a rights issue of 1 ordinary share for every four held at $0.60. It also raises an unsecured loan of $50 000. How will these transactions affect the balance sheet? gearing reserves A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: D

This question in 9706/33 Oct/Nov 2010

Q28 · Why might a company repay part of its share capital? 9706/31 May/June 2011

2 Why might a company repay part of its share capital? A Its cash reserves exceed its requirements for the foreseeable future. B Its shareholders need the cash. C Its shares are valued below their nominal value on the open market. D It wishes to decrease its gearing.

1 marks

Answer: A

This question in 9706/31 May/June 2011

Q29 · Why would convertible loan stock be issued by a company? 9706/31 May/June 2011

5 Why would convertible loan stock be issued by a company? A to increase the equity of the company at the issue date B to increase gearing on conversion C to increase the market value of the company’s equity at the issue date D to obtain low-cost finance when equity market conditions are unfavourable

1 marks

Answer: D

This question in 9706/31 May/June 2011

Q30 · A company has a return on capital employed of 20 % and an asset turnover of 2.5 times 9706/31 May/June 2011

13 A company has a return on capital employed of 20 % and an asset turnover of 2.5 times. What was the company’s net profit ratio? A 8 % B 16 % C 20 % D 50 %

1 marks

Answer: A

This question in 9706/31 May/June 2011

Q31 · The following is an extract from the statement of financial position of Zed Ltd 9706/31 May/June 2011

14 The following is an extract from the statement of financial position of Zed Ltd. $ net assets 114 000 10 % debentures (2015) (20 000) 94 000 ordinary shares 60 000 reserves 34 000 94 000 The profit from operations before interest and taxation for the year is $37 000 and taxation payable amounts to $9000. What is the interest cover? A 11.6 B 13.0 C 17.5 D 18.5

1 marks

Answer: D

This question in 9706/31 May/June 2011

Q32 · A company has the following information 9706/31 May/June 2011

16 A company has the following information. $ profit before tax 300 000 profit from operations 400 000 equity 1 200 000 non-current liabilities 800 000 What is the company’s return on total capital employed? A 15 % B 20 % C 25 % D 33.3 %

1 marks

Answer: B

This question in 9706/31 May/June 2011

Q33 · The following are extracts from a company’s income statement 9706/31 May/June 2011

18 The following are extracts from a company’s income statement. $ profit from operations 140 000 interest 40 000 profit before tax 100 000 tax 20 000 profit attributable to equity holders 80 000 What is the company’s interest cover? A 1.0 times B 2.0 times C 2.5 times D 3.5 times

1 marks

Answer: D

This question in 9706/31 May/June 2011

Q34 · The following is an extract from the statement of financial position of Zed Ltd 9706/32 May/June 2011

13 The following is an extract from the statement of financial position of Zed Ltd. $ net assets 114 000 10 % debentures (2015) (20 000) 94 000 ordinary shares 60 000 reserves 34 000 94 000 The profit from operations before interest and taxation for the year is $37 000 and taxation payable amounts to $9000. What is the interest cover? A 11.6 B 13.0 C 17.5 D 18.5

1 marks

Answer: D

This question in 9706/32 May/June 2011

Q35 · A company has the following information 9706/32 May/June 2011

15 A company has the following information. $ profit before tax 300 000 profit from operations 400 000 equity 1 200 000 non-current liabilities 800 000 What is the company’s return on total capital employed? A 15 % B 20 % C 25 % D 33.3 %

1 marks

Answer: B

This question in 9706/32 May/June 2011

Q36 · The following is an extract from the statement of financial position of Zed Ltd 9706/33 May/June 2011

13 The following is an extract from the statement of financial position of Zed Ltd. $ net assets 114 000 10 % debentures (2015) (20 000) 94 000 ordinary shares 60 000 reserves 34 000 94 000 The profit from operations before interest and taxation for the year is $37 000 and taxation payable amounts to $9000. What is the interest cover? A 11.6 B 13.0 C 17.5 D 18.5

1 marks

Answer: D

This question in 9706/33 May/June 2011

Q37 · A company has the following information 9706/33 May/June 2011

15 A company has the following information. $ profit before tax 300 000 profit from operations 400 000 equity 1 200 000 non-current liabilities 800 000 What is the company’s return on total capital employed? A 15 % B 20 % C 25 % D 33.3 %

1 marks

Answer: B

This question in 9706/33 May/June 2011

Q38 · Zachary plc has the following summary balance sheet at 31 Dec 2009 9706/33 May/June 2011

16 Zachary plc has the following summary balance sheet at 31 Dec 2009. $ million ordinary shares of $1 each 50 retained earnings 70 net assets 120 Zachary plc made a bonus issue (1 for 2) of ordinary shares on 1 January 2010 and a rights issue (1 for 5) of ordinary shares on 31 December 2010 at $2 per share. The share issue was fully subscribed. Retained earnings were $12 million for 2010. What were the net assets at 31 December 2010? A $112 million B $150 million C $162 million D $187 million

1 marks

Answer: C

This question in 9706/33 May/June 2011

Q39 · The following are extracts from a company’s income statement 9706/33 May/June 2011

17 The following are extracts from a company’s income statement. $ profit from operations 140 000 interest 40 000 profit before tax 100 000 tax 20 000 profit attributable to equity holders 80 000 What is the company’s interest cover? A 1.0 times B 2.0 times C 2.5 times D 3.5 times

1 marks

Answer: D

This question in 9706/33 May/June 2011

Q40 · A balance sheet extract shows the following 9706/31 Oct/Nov 2011

4 A balance sheet extract shows the following. $ ordinary shares of $1 each 1000 10 % convertible loan stock 400 retained earnings 140 (dr) net assets 1800 net liabilities 540 All the loan stock is to be converted to ordinary shares in the proportion of $1 loan stock to one new ordinary share. After the conversion, what will be the net asset value per share? A $0.80 B $0.90 C $1.00 D $1.29

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2011

Q41 · A company revalues its non-current assets upwards 9706/31 Oct/Nov 2011

11 A company revalues its non-current assets upwards. Which of the following shows the effect of this? return on capital gearing employed A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: A

This question in 9706/31 Oct/Nov 2011

Q42 · PQR plc has the following accounting ratios for its financial years 2009 and 2010 9706/31 Oct/Nov 2011

12 PQR plc has the following accounting ratios for its financial years 2009 and 2010. 2009 (days) 2010 (days) trade receivables turnover 45 50 trade payables turnover 35 40 inventory turnover 60 70 What was the change in the working capital cycle for 2010 compared to 2009? A no change B 10 days increase C 20 days increase D 40 days increase

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2011

Q43 · A company makes annual profits of $10 million before interest payable of $2 million and… 9706/31 Oct/Nov 2011

13 A company makes annual profits of $10 million before interest payable of $2 million and ordinary dividends of $5 million. It has in issue 20 million shares of $0.20 each, currently valued on the stock exchange at $5 each. What is the company’s price/earnings (P/E) ratio? A 10 B 12.5 C 25 D 33.3

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2011

Q44 · A company’s statement of financial position shows the following information 9706/32 Oct/Nov 2011

12 A company’s statement of financial position shows the following information. $000 ordinary shares of $10 each 120 7 % non-redeemable preference shares of $1 each 80 share premium account 50 general reserve 70 retained earnings 210 530 What is the book value of one ordinary share? A $27.50 B $37.50 C $44.20 D $53.00

1 marks

Answer: B

This question in 9706/32 Oct/Nov 2011

Q45 · A company makes annual profits of $50 million, before paying interest of $10 million and… 9706/32 Oct/Nov 2011

13 A company makes annual profits of $50 million, before paying interest of $10 million and ordinary dividends of $20 million. It has in issue 80 million ordinary shares of $0.50 each, with a current market value of $7 each. What is the price-earnings ratio? A 7 B 11.2 C 14 D 28

1 marks

Answer: C

This question in 9706/32 Oct/Nov 2011

Q46 · The issued share capital of a company is as follows 9706/32 Oct/Nov 2011

14 The issued share capital of a company is as follows. 500 000 4 % non-redeemable preference shares of $1.00 each 1 400 000 ordinary shares of $ 0.50 each The company’s profit after interest and tax is $314 000. An appropriate dividend cover for the ordinary shares is 2.0 times. What is the dividend per ordinary share? A $0.105 B $0.112 C $0.210 D $0.224

1 marks

Answer: A

This question in 9706/32 Oct/Nov 2011

Q47 · A company revalues its buildings upwards 9706/32 Oct/Nov 2011

17 A company revalues its buildings upwards. What is the impact on the following ratios? return on capital gearing employed A decrease decrease B decrease no effect C increase decrease D no effect increase

1 marks

Answer: A

This question in 9706/32 Oct/Nov 2011

Q48 · Which effect will a bonus issue of shares have on a company’s gearing ratio and earnings… 9706/32 Oct/Nov 2011

18 Which effect will a bonus issue of shares have on a company’s gearing ratio and earnings per share? gearing earnings per share A no effect increase B increase decrease C decrease increase D no effect decrease

1 marks

Answer: D

This question in 9706/32 Oct/Nov 2011

Q49 · A balance sheet extract shows the following 9706/33 Oct/Nov 2011

3 A balance sheet extract shows the following. $ ordinary shares of $1 each 1000 10 % convertible loan stock 400 retained earnings 140 (dr) net assets 1800 net liabilities 540 All the loan stock is to be converted to ordinary shares in the proportion of $1 loan stock to one new ordinary share. After the conversion, what will be the net asset value per share? A $0.80 B $0.90 C $1.00 D $1.29

1 marks

Answer: B

This question in 9706/33 Oct/Nov 2011

Q50 · A company revalues its non-current assets upwards 9706/33 Oct/Nov 2011

10 A company revalues its non-current assets upwards. Which of the following shows the effect of this? return on capital gearing employed A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: A

This question in 9706/33 Oct/Nov 2011

Q51 · PQR plc has the following accounting ratios for its financial years 2009 and 2010 9706/33 Oct/Nov 2011

11 PQR plc has the following accounting ratios for its financial years 2009 and 2010. 2009 (days) 2010 (days) trade receivables turnover 45 50 trade payables turnover 35 40 inventory turnover 60 70 What was the change in the working capital cycle for 2010 compared to 2009? A no change B 10 days increase C 20 days increase D 40 days increase

1 marks

Answer: B

This question in 9706/33 Oct/Nov 2011

Q52 · A company makes annual profits of $10 million before interest payable of $2 million and… 9706/33 Oct/Nov 2011

12 A company makes annual profits of $10 million before interest payable of $2 million and ordinary dividends of $5 million. It has in issue 20 million shares of $0.20 each, currently valued on the stock exchange at $5 each. What is the company’s price/earnings (P/E) ratio? A 10 B 12.5 C 25 D 33.3

1 marks

Answer: B

This question in 9706/33 Oct/Nov 2011

Q53 · A limited company purchases a partnership 9706/31 May/June 2012

8 A limited company purchases a partnership. It issues to the partners 10 % debentures and pays them cash in full settlement of the purchase price. Which of the following statements is correct? A The company's gearing is reduced. B The company intended to expand its business. C The company's reserves are reduced. D The partners now own some of the equity in the company.

1 marks

Answer: B

This question in 9706/31 May/June 2012

Q54 · The table shows the capital structure of a company 9706/31 May/June 2012

10 The table shows the capital structure of a company. $ 100 000 ordinary shares of $1 each 100 000 10 % debentures 50 000 reserves 100 000 It increases the debentures by $50 000 and makes a bonus issue of one share for every two held. It then makes a rights issue of a further 100 000 shares at $1 each. How will these transactions affect the statement of financial position? gearing reserves bank A decrease decrease decrease B increase decrease decrease C increase decrease increase D decrease increase increase

1 marks

Answer: C

This question in 9706/31 May/June 2012

Q55 · Which two actions would both increase a company’s working capital cycle? 9706/31 May/June 2012

17 Which two actions would both increase a company’s working capital cycle? 1 increase trade payables; reduce trade receivables 2 increase trade receivables; reduce trade payables 3 reduce inventory; increase trade payables 4 reduce trade payables; increase inventory A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

1 marks

Answer: C

This question in 9706/31 May/June 2012

Q56 · A company’s annual published accounts shows the following information 9706/31 May/June 2012

18 A company’s annual published accounts shows the following information. $ profit for the year attributed to equity holders 32 000 preference dividends paid during the year 4 000 ordinary dividends paid and proposed for the year 20 000 retained earnings brought forward 68 000 What is the dividend cover for the ordinary shares? A 3.8 times B 1.6 times C 1.4 times D 0.4 times

1 marks

Answer: B

This question in 9706/31 May/June 2012

Q57 · A company has provided the following information 9706/31 May/June 2012

19 A company has provided the following information. dividends paid during the year – $4 per share dividends proposed at the year end – $2 per share market price per share – $50 nominal value per share – $80 What is the company’s dividend yield? A 5.0 % B 7.5 % C 8.0 % D 12.0 %

1 marks

Answer: D

This question in 9706/31 May/June 2012

Q58 · Which ratio can be calculated from the statement of financial position of a limited… 9706/31 May/June 2012

20 Which ratio can be calculated from the statement of financial position of a limited company? A the dividend yield per ordinary share B the earnings per ordinary share C the market value of an ordinary share D the net asset value per ordinary share

1 marks

Answer: D

This question in 9706/31 May/June 2012

Q59 · Which transaction will reduce a company’s gearing? 9706/31 May/June 2012

21 Which transaction will reduce a company’s gearing? A an issue of bonus shares B an issue of new preference shares C obtaining a long term loan D redeeming debentures

1 marks

Answer: D

This question in 9706/31 May/June 2012

Q60 · How may a company improve its profit by window dressing? 9706/32 May/June 2012

9 How may a company improve its profit by window dressing? A applying an impairment test to goodwill B making a provision for obsolete stock C increasing the bad debts provision D reducing the rates of depreciation

1 marks

Answer: D

This question in 9706/32 May/June 2012

Q61 · Which item will increase a company’s earnings per share? 9706/32 May/June 2012

10 Which item will increase a company’s earnings per share? A a correction of an under-valuation of closing inventory B an increase of redeemable debentures C an issue of bonus shares D a surplus arising on the revaluation of assets

1 marks

Answer: A

This question in 9706/32 May/June 2012

Q62 · A company provided the following financial information for the year 9706/32 May/June 2012

11 A company provided the following financial information for the year. $000 profit from operations 570 depreciation charge for the year 250 increase in working capital for the year 60 purchase of non-current assets during the year 125 repayment of a debenture during the year 30 What was the increase in cash and cash equivalents for the year? A $225 000 B $355 000 C $475 000 D $605 000

1 marks

Answer: D

This question in 9706/32 May/June 2012

Q63 · A company is preparing its statement of cash flows 9706/32 May/June 2012

12 A company is preparing its statement of cash flows. During the year, it sells a non-current asset for $1500. This results in a loss on disposal of $1000. What is the effect of this on the statement of cash flows? cash from cash from operating activities investing activities A decreases by $1000 decreases by $1500 B no effect increases by $1500 C increases by $1000 no effect D increases by $1000 increases by $1500

1 marks

Answer: D

This question in 9706/32 May/June 2012

Q64 · Which of the following actions will improve a company’s liquidity? 9706/33 May/June 2012

8 Which of the following actions will improve a company’s liquidity? A making an issue of bonus shares B making a rights issue of shares C reducing the provision for doubtful debts D reducing the rate of depreciation on non current assets

1 marks

Answer: B

This question in 9706/33 May/June 2012

Q65 · The table shows the capital structure of a company 9706/33 May/June 2012

9 The table shows the capital structure of a company. $ 100 000 ordinary shares of $1 each 100 000 10 % debentures 50 000 reserves 100 000 It increases the debentures by $50 000 and makes a bonus issue of one share for every two held. It then makes a rights issue of a further 100 000 shares at $1 each. How will these transactions affect the statement of financial position? gearing reserves bank A decrease decrease decrease B increase decrease decrease C increase decrease increase D decrease increase increase

1 marks

Answer: C

This question in 9706/33 May/June 2012

Q66 · The following information relates to the shares of a limited company 9706/33 May/June 2012

15 The following information relates to the shares of a limited company. price earnings (P / E) ratio 14 $ earnings per share (EPS) 0.60 dividend per share 0.40 What is the market price of an ordinary share? A $2.80 B $5.60 C $8.40 D $14.00

1 marks

Answer: C

This question in 9706/33 May/June 2012

Q67 · A company’s annual published accounts shows the following information 9706/33 May/June 2012

17 A company’s annual published accounts shows the following information. $ profit for the year attributed to equity holders 32 000 preference dividends paid during the year 4 000 ordinary dividends paid and proposed for the year 20 000 retained earnings brought forward 68 000 What is the dividend cover for the ordinary shares? A 3.8 times B 1.6 times C 1.4 times D 0.4 times

1 marks

Answer: B

This question in 9706/33 May/June 2012

Q68 · A company has provided the following information 9706/33 May/June 2012

18 A company has provided the following information. dividends paid during the year – $4 per share dividends proposed at the year end – $2 per share market price per share – $50 nominal value per share – $80 What is the company’s dividend yield? A 5.0 % B 7.5 % C 8.0 % D 12.0 %

1 marks

Answer: D

This question in 9706/33 May/June 2012

Q69 · Which ratio can be calculated from the statement of financial position of a limited… 9706/33 May/June 2012

19 Which ratio can be calculated from the statement of financial position of a limited company? A the dividend yield per ordinary share B the earnings per ordinary share C the market value of an ordinary share D the net asset value per ordinary share

1 marks

Answer: D

This question in 9706/33 May/June 2012

Q70 · Which transaction will reduce a company’s gearing? 9706/33 May/June 2012

20 Which transaction will reduce a company’s gearing? A an issue of bonus shares B an issue of new preference shares C obtaining a long term loan D redeeming debentures

1 marks

Answer: D

This question in 9706/33 May/June 2012

Q71 · Why would an investor use a price/earnings (P/E) ratio for a public limited company? 9706/31 Oct/Nov 2012

17 Why would an investor use a price/earnings (P/E) ratio for a public limited company? A to assess the level of borrowing in a company B to assess the liquidity of the company C to calculate earnings per share for the company D to compare its performance against other similar companies

1 marks

Answer: D

This question in 9706/31 Oct/Nov 2012

Q72 · Extracts from a company’s accounts show the following information 9706/31 Oct/Nov 2012

18 Extracts from a company’s accounts show the following information. $000 profit before tax 400 finance costs 200 ordinary share capital 1 600 long-term loan 400 bank overdraft 500 What is the company’s return on capital employed? A 16 % B 20 % C 24 % D 30 %

1 marks

Answer: D

This question in 9706/31 Oct/Nov 2012

Q73 · A company has 1 million ordinary shares in issue and the following reserves 9706/31 Oct/Nov 2012

19 A company has 1 million ordinary shares in issue and the following reserves. $ share premium 40 000 revaluation reserve 20 000 general reserve 80 000 retained earnings 30 000 What is the maximum dividend per share? A $0.03 B $0.11 C $0.13 D $0.17

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2012

Q74 · A company has a share price that gives a dividend yield of 4 % 9706/32 Oct/Nov 2012

16 A company has a share price that gives a dividend yield of 4 %. Earnings per share are $0.32 and half the earnings are paid out as dividends. What is the share price? A $2.00 B $4.00 C $6.00 D $8.00

1 marks

Answer: B

This question in 9706/32 Oct/Nov 2012

Q75 · A company’s trade receivables are $120 000 and the credit period is 30 days 9706/32 Oct/Nov 2012

17 A company’s trade receivables are $120 000 and the credit period is 30 days. The company’s budget for next year provides for an increase in trade receivables of 25 % and the credit period given will increase to 60 days. What will be the budgeted trade receivable total at the end of next year? A $150 000 B $240 000 C $300 000 D $480 000

1 marks

Answer: C

This question in 9706/32 Oct/Nov 2012

Q76 · A company has an issued share capital of 8 million shares at $0.50 par value 9706/32 Oct/Nov 2012

18 A company has an issued share capital of 8 million shares at $0.50 par value. It pays a dividend of $1.6 million. The dividend yield is currently 12.5 %. What is the current market price of each share? A $0.50 B $0.80 C $1.60 D $3.20

1 marks

Answer: C

This question in 9706/32 Oct/Nov 2012

Q77 · A company regularly pays a dividend 9706/33 Oct/Nov 2012

4 A company regularly pays a dividend. It has converted $50 m 10 % loan stock into ordinary shares. Which row describes the effect of the conversion on its financial statements? dividend interest gearing A decrease increase decrease B decrease increase increase C increase decrease decrease D increase decrease increase

1 marks

Answer: C

This question in 9706/33 Oct/Nov 2012

Q78 · An extract from the final accounts of a company shows: $000 $000 profit from operations… 9706/33 Oct/Nov 2012

16 An extract from the final accounts of a company shows: $000 $000 profit from operations 200 interest payable 40 profit before tax 160 taxation 35 profit attributable to equity holders 125 dividends paid - preference shares 25 - ordinary shares 50 75 retained earnings 50 What are the interest cover and the dividend cover? interest cover dividend cover A 4 2 B 4 2.5 C 5 2 D 5 2.5

1 marks

Answer: C

This question in 9706/33 Oct/Nov 2012

Q79 · Extracts from a company’s statement of financial position are as follows 9706/31 May/June 2013

12 Extracts from a company’s statement of financial position are as follows. $ non-current liabilities 50 000 ordinary shares ($1 each) 100 000 redeemable preference shares 25 000 retained earnings 200 000 What is the gearing ratio? A 14% B 17% C 20% D 21%

1 marks

Answer: C

This question in 9706/31 May/June 2013

Q80 · A company converts some debentures into shares on 1 January 2012 9706/31 May/June 2013

13 A company converts some debentures into shares on 1 January 2012. What is the impact on the following ratios in the 2012 financial statements? gearing interest cover A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: B

This question in 9706/31 May/June 2013

Q81 · A company has a Price Earnings ratio of 15 9706/31 May/June 2013

15 A company has a Price Earnings ratio of 15. This is 20% less than the average for this type of business. Its earnings per share are $0.20. What is the company’s share price? A $0.60 B $2.40 C $3.00 D $3.60

1 marks

Answer: C

This question in 9706/31 May/June 2013

Q82 · The financial statements of limited companies must disclose changes in the methods of… 9706/32 May/June 2013

9 The financial statements of limited companies must disclose changes in the methods of providing for depreciation of non-current assets. Why is this important to the users of corporate reports? A It allows the market value of assets to be shown. B It enables comparison with previous years. C It helps to assess company liquidity. D It helps to assess future dividends.

1 marks

Answer: B

This question in 9706/32 May/June 2013

Q83 · Information from a company’s financial records reveals the following information 9706/32 May/June 2013

15 Information from a company’s financial records reveals the following information. profit from operations $100 000 interest cover 10 times dividend per share $0.10 ordinary shares of $1 each 200 000 What are the company’s earnings per share? A $0.35 B $0.40 C $0.45 D $0.50

1 marks

Answer: C

This question in 9706/32 May/June 2013

Q84 · Which expense is not deducted before arriving at operating profit? 9706/33 May/June 2013

12 Which expense is not deducted before arriving at operating profit? A auditor’s fee B debenture interest C directors’ remuneration D distribution costs

1 marks

Answer: B

This question in 9706/33 May/June 2013

Q85 · The working capital cycle of a business was 100 days in 2012 and 130 days in 2013 9706/33 May/June 2013

13 The working capital cycle of a business was 100 days in 2012 and 130 days in 2013. Which statement explains the change? A Cash and cash equivalents have increased during 2013. B Inventory increased during 2013. C The company increased the period taken to pay its suppliers in 2013. D Trade receivables decreased during 2013.

1 marks

Answer: B

This question in 9706/33 May/June 2013

Q86 · The following information has been obtained for a company 9706/33 May/June 2013

14 The following information has been obtained for a company. $ declared dividend per share 0.05 market price per share 4.00 nominal value of shares 0.50 What is the dividend yield? A 1.25% B 2.50% C 5.00% D 10.00%

1 marks

Answer: A

This question in 9706/33 May/June 2013

Q87 · A company has a high liquidity ratio 9706/33 May/June 2013

15 A company has a high liquidity ratio. What will reduce liquidity? A converting loan stock into shares B doubling the annual rates of depreciation C making a bonus issue to existing shareholders D replacing machinery earlier than planned

1 marks

Answer: D

This question in 9706/33 May/June 2013

Q88 · The following information is available for a company for the year ended 31 December 9706/33 May/June 2013

16 The following information is available for a company for the year ended 31 December. $ profit from operations 134 000 finance costs 16 000 profit before tax 118 000 taxation 36 000 retained profit for the year 82 000 Issued ordinary share capital 500 000 shares of $0.50 each. What is the earnings per share for the year ended 31 December? A $0.117 B $0.164 C $0.169 D $0.236

1 marks

Answer: B

This question in 9706/33 May/June 2013

Q89 · A limited company has the following capital at 31 December 9706/31 Oct/Nov 2013

13 A limited company has the following capital at 31 December. $000 ordinary shares of $1 each fully paid 5000 7.5% preference shares of $1 each fully paid 200 The market price of the company’s ordinary shares at 31 December is $1.45. Other financial information is as follows. $000 $000 profit after tax 470 preference dividend 15 ordinary dividend 52 67 retained profit for the year 403 What is the price earnings (P / E) ratio at 31 December? A 15.4 B 15.9 C 16.6 D 18.0

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2013

Q90 · The following information relates to a company 9706/31 Oct/Nov 2013

14 The following information relates to a company. per share $ dividends paid during the year 3 dividends proposed at the year end 1 market price 50 nominal price 100 What is the company’s dividend yield? A 3.0% B 4.0% C 6.0% D 8.0%

1 marks

Answer: D

This question in 9706/31 Oct/Nov 2013

Q91 · Which transaction will increase a company’s working capital? 9706/31 Oct/Nov 2013

15 Which transaction will increase a company’s working capital? A The bank overdraft is increased. B There is a bonus share issue. C There is a rights issue. D There is a transfer to the general reserves.

1 marks

Answer: C

This question in 9706/31 Oct/Nov 2013

Q92 · Which action will increase company profits in the short term? 9706/31 Oct/Nov 2013

16 Which action will increase company profits in the short term? A accepting deposits for customers’ orders B decreasing rates of depreciation C increasing the value of opening inventory D writing down the value of closing inventory

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2013

Q93 · A company issues a debenture 9706/31 Oct/Nov 2013

18 A company issues a debenture. Which row shows the impact of this on the company’s financial statements? return on capital gearing working capital employed A decrease decrease no effect B increase decrease increase C increase no effect increase D no effect decrease decrease

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2013

Q94 · What will not appear in a statement of cash flows? 9706/32 Oct/Nov 2013

1 What will not appear in a statement of cash flows? A changes in inventory levels B interest payable C issue of bonus shares D purchase of plant and machinery

1 marks

Answer: C

This question in 9706/32 Oct/Nov 2013

Q95 · An ordinary share in a company has a nominal value of $0.50 9706/32 Oct/Nov 2013

11 An ordinary share in a company has a nominal value of $0.50. The latest financial statements show earnings per share of $0.10 and a price-earnings ratio of 15. What is the market value of an ordinary share? A $0.50 B $1.50 C $2.00 D $2.50

1 marks

Answer: B

This question in 9706/32 Oct/Nov 2013

Q96 · The directors of a company want to reduce the company’s gearing ratio 9706/32 Oct/Nov 2013

12 The directors of a company want to reduce the company’s gearing ratio. They can take the following actions. 1 make a rights issue of ordinary shares 2 make a bonus issue of five new shares for every six currently held 3 transfer $90 000 to the general reserve 4 repay a debenture of $600 000 Which combination of measures will reduce the company’s gearing ratio? A 1, 2 and 3 B 1 and 2 only C 1, 3 and 4 D 1 and 4 only

1 marks

Answer: D

This question in 9706/32 Oct/Nov 2013

Q97 · A business experienced the following events during the year 9706/32 Oct/Nov 2013

13 A business experienced the following events during the year. 1 an increased level of bad debts written off 2 an increase in the bank overdraft 3 an increase in inventory levels 4 trade payables were paid more quickly Which combination of events would cause cash flow from operating activities to fall? A 1, 2, 3 and 4 B 1, 3 and 4 only C 2, 3 and 4 only D 3 and 4 only

1 marks

Answer: D

This question in 9706/32 Oct/Nov 2013

Q98 · A company makes a rights issue of 10 000 ordinary shares of $1 each at a premium of $0.50 9706/32 Oct/Nov 2013

14 A company makes a rights issue of 10 000 ordinary shares of $1 each at a premium of $0.50. The issue is fully subscribed. What is the effect of this transaction on the following ratios? return on gearing capital employed A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: A

This question in 9706/32 Oct/Nov 2013

Q99 · How can a company increase its liquidity? 9706/33 Oct/Nov 2013

5 How can a company increase its liquidity? A by making a bonus issue B by making a rights issue C by transfers from the general reserve D by transfers from the share premium account

1 marks

Answer: B

This question in 9706/33 Oct/Nov 2013

Q100 · The statement of financial position of a company is as follows 9706/33 Oct/Nov 2013

6 The statement of financial position of a company is as follows. $ non-current assets 85 000 bank 14 000 other net current assets 24 000 8% debentures (4 000) 119 000 ordinary share capital 100 000 share premium 2 000 retained earnings 17 000 119 000 The 8% debentures are redeemed at a premium of 20%. What is the total equity balance after the redemption? A $114 200 B $115 000 C $118 200 D $119 000

1 marks

Answer: C

This question in 9706/33 Oct/Nov 2013

Q101 · The financial statements of a company show the following 9706/33 Oct/Nov 2013

14 The financial statements of a company show the following. $m non-current assets 210 non-current liabilities 15 ordinary share capital 100 preference share capital 25 reserves 45 What is the gearing ratio? A 10.52% B 21.62% C 27.58% D 28.57%

1 marks

Answer: B

This question in 9706/33 Oct/Nov 2013

Q102 · The following information is taken from the financial statements of a company 9706/33 Oct/Nov 2013

15 The following information is taken from the financial statements of a company. $ profit attributable to equity holders 2 000 000 ordinary share dividend paid 200 000 non-redeemable preference share dividend paid 100 000 10% non-redeemable preference share capital 1 000 000 ordinary shares of $1 each 5 000 000 What are the earnings per share for the year to the nearest cent? A $0.28 B $0.32 C $0.34 D $0.38

1 marks

Answer: D

This question in 9706/33 Oct/Nov 2013

Q103 · Which shareholder ratio calculates the expected return on investment? 9706/31 May/June 2014

15 Which shareholder ratio calculates the expected return on investment? A dividend cover B dividend yield C earnings per share D price earnings

1 marks

Answer: B

This question in 9706/31 May/June 2014

Q104 · The following information is available 9706/31 May/June 2014

16 The following information is available. dividend yield 4% dividend for the year $10 000 dividend cover four times What is the price earnings ratio? A 4 B 6.25 C 10 D 25

1 marks

Answer: B

This question in 9706/31 May/June 2014

Q105 · A company provides the following information 9706/31 May/June 2014

17 A company provides the following information. $ profit from operations 400 000 profit before tax 300 000 equity 1 200 000 non-current liabilities 800 000 What is the company’s return on capital employed? A 15% B 20% C 25% D 33.3%

1 marks

Answer: B

This question in 9706/31 May/June 2014

Q106 · The statement of financial position of a limited company showed the following 9706/31 May/June 2014

18 The statement of financial position of a limited company showed the following. $000 total assets 3700 current liabilities (900) non-current liabilities (1200) 1600 ordinary share capital 500 preference share capital 300 retained earnings 800 1600 What is the gearing ratio of the company? A 42.9% B 53.6% C 64.9% D 75%

1 marks

Answer: B

This question in 9706/31 May/June 2014

Q107 · A company has 500 000 ordinary shares in issue and the following reserves 9706/31 May/June 2014

19 A company has 500 000 ordinary shares in issue and the following reserves. $ share premium 20 000 revaluation reserve 50 000 general reserve 80 000 retained earnings 40 000 What is the maximum dividend per share that could be paid? A $0.08 B $0.24 C $0.34 D $0.38

1 marks

Answer: B

This question in 9706/31 May/June 2014

Q108 · Which shareholder ratio calculates the expected return on investment? 9706/32 May/June 2014

15 Which shareholder ratio calculates the expected return on investment? A dividend cover B dividend yield C earnings per share D price earnings

1 marks

Answer: B

This question in 9706/32 May/June 2014

Q109 · The following information is available 9706/32 May/June 2014

16 The following information is available. dividend yield 4% dividend for the year $10 000 dividend cover four times What is the price earnings ratio? A 4 B 6.25 C 10 D 25

1 marks

Answer: B

This question in 9706/32 May/June 2014

Q110 · A company provides the following information 9706/32 May/June 2014

17 A company provides the following information. $ profit from operations 400 000 profit before tax 300 000 equity 1 200 000 non-current liabilities 800 000 What is the company’s return on capital employed? A 15% B 20% C 25% D 33.3%

1 marks

Answer: B

This question in 9706/32 May/June 2014

Q111 · The statement of financial position of a limited company showed the following 9706/32 May/June 2014

18 The statement of financial position of a limited company showed the following. $000 total assets 3700 current liabilities (900) non-current liabilities (1200) 1600 ordinary share capital 500 preference share capital 300 retained earnings 800 1600 What is the gearing ratio of the company? A 42.9% B 53.6% C 64.9% D 75%

1 marks

Answer: B

This question in 9706/32 May/June 2014

Q112 · A company has 500 000 ordinary shares in issue and the following reserves 9706/32 May/June 2014

19 A company has 500 000 ordinary shares in issue and the following reserves. $ share premium 20 000 revaluation reserve 50 000 general reserve 80 000 retained earnings 40 000 What is the maximum dividend per share that could be paid? A $0.08 B $0.24 C $0.34 D $0.38

1 marks

Answer: B

This question in 9706/32 May/June 2014

Q113 · The issued share capital of a company is as follows 9706/33 May/June 2014

15 The issued share capital of a company is as follows. 400 000 4% redeemable preference shares of $1.00 each 1 600 000 ordinary shares of $0.50 each The company’s profit from operations is $128 000. An appropriate dividend cover from the ordinary share is 2.0 times. What will be the dividend per ordinary share? A $0.035 B $0.040 C $0.070 D $0.080

1 marks

Answer: A

This question in 9706/33 May/June 2014

Q114 · The following investment information is available 9706/33 May/June 2014

16 The following investment information is available. $ earnings per share 0.35 dividend per share 0.21 market price per share 1.40 nominal value per share 1.00 What is the percentage return to an investor who buys a share? A 15% B 21% C 25% D 35%

1 marks

Answer: A

This question in 9706/33 May/June 2014

Q115 · Which transaction would not affect the gearing ratio? 9706/33 May/June 2014

17 Which transaction would not affect the gearing ratio? A bonus issue of ordinary shares B issue of preference shares C redemption of ordinary shares at a premium D repayment of a debenture loan

1 marks

Answer: A

This question in 9706/33 May/June 2014

Q116 · A company had the following capital employed 9706/33 May/June 2014

18 A company had the following capital employed. $ $0.50 ordinary shares 5 000 000 10% $1 preference shares 1 000 000 total capital employed 6 000 000 The profit from operations for the year was $800 000. What was the earnings per share? A $0.07 B $0.08 C $0.09 D $0.12

1 marks

Answer: A

This question in 9706/33 May/June 2014

Q117 · The following information is available for a limited company 9706/31 Oct/Nov 2015

8 The following information is available for a limited company. ordinary shares of $0.50 each $100 000 dividend yield 10% 4% preference shares of $1 each $100 000 10% debentures $50 000 profit from operations $80 000 The company paid the maximum dividend per share possible from its profit for the year. What was the market price of one share? A $3.55 B $3.75 C $4.00 D $7.10

1 marks

Answer: A

This question in 9706/31 Oct/Nov 2015

Q118 · When calculating earnings per share, what is the meaning of ‘earnings’? 9706/31 Oct/Nov 2015

15 When calculating earnings per share, what is the meaning of ‘earnings’? A profit attributable to equity holders B profit attributable to ordinary and preference shares C profit attributable to ordinary shares, preference shares and debentures D profit attributable to ordinary shares, preference shares, debentures and bank loan

1 marks

Answer: A

This question in 9706/31 Oct/Nov 2015

Q119 · The following information is available for a limited company 9706/31 Oct/Nov 2015

16 The following information is available for a limited company. $000 profit from operations 510 profit for the year 210 dividend paid 150 transfer to general reserve 80 What was the dividend cover? A 0.87 times B 1.4 times C 4.27 times D 4.8 times

1 marks

Answer: B

This question in 9706/31 Oct/Nov 2015

Q120 · The following information is available for a limited company 9706/31 Oct/Nov 2015

17 The following information is available for a limited company. ordinary shares of $0.50 each 200 000 market price per share $2.50 dividend yield 10% 6% preference shares of $1 each 100 000 10% debentures $40 000 The company paid the maximum dividend possible from its profit for the year. What was the profit from operations? A $50 000 B $54 000 C $56 000 D $60 000

1 marks

Answer: D

This question in 9706/31 Oct/Nov 2015

Q121 · A company has a profit from operations of $326 000 after taking into account the… 9706/32 Oct/Nov 2015

5 A company has a profit from operations of $326 000 after taking into account the following information. $ depreciation 24 000 goodwill impairment 11 000 increase in inventory 18 000 What is the net cash flow from operating activities? A $321 000 B $343 000 C $357 000 D $361 000

1 marks

Answer: B

This question in 9706/32 Oct/Nov 2015

Q122 · Which statement about debentures and preference shares is correct? 9706/32 Oct/Nov 2015

9 Which statement about debentures and preference shares is correct? A Both debentures and preference shares increase the gearing ratio. B Both debenture holders and preference shareholders can vote at the annual general meeting. C Capital employed includes preference shares but not debentures. D When the company ceases to trade, preference shareholders are repaid before debenture holders.

1 marks

Answer: A

This question in 9706/32 Oct/Nov 2015

Q123 · The following financial information is available for a limited company 9706/32 Oct/Nov 2015

10 The following financial information is available for a limited company. $000 ordinary shares of $1 each 400 share premium 200 general reserve 80 retained earnings 120 long-term loan 100 What is the book value of one ordinary share? A $1.50 B $1.75 C $2.00 D $2.25

1 marks

Answer: C

This question in 9706/32 Oct/Nov 2015

Q124 · A limited company provides the following information 9706/32 Oct/Nov 2015

14 A limited company provides the following information. $000 profit from operations 4800 finance charges (400) tax (1100) profit for the year 3300 The company has 6 000 000 $1 ordinary shares in issue. What are the earnings per share? A $0.55 B $0.617 C $0.733 D $0.80

1 marks

Answer: A

This question in 9706/32 Oct/Nov 2015

Q125 · A company provided the following information 9706/32 Oct/Nov 2015

15 A company provided the following information. $ profit from operations 450 000 debenture interest (55 000) 395 000 transfer to general reserve (75 000) preference dividend (15 000) ordinary dividend paid (125 000) What is the dividend cover? A 2.82 times B 3.04 times C 3.21 times D 3.60 times

1 marks

Answer: B

This question in 9706/32 Oct/Nov 2015

Q126 · The following information is available for a limited company at the end of its financial… 9706/32 Oct/Nov 2015

16 The following information is available for a limited company at the end of its financial year. ordinary shares of $0.50 each $100 000 price earnings ratio 10 market price per share $4 After transferring $50 000 to a general reserve, the directors paid 50% of the remaining profit for the year as dividends. What was the dividend per share? A $0.075 B $0.15 C $0.20 D $0.40

1 marks

Answer: A

This question in 9706/32 Oct/Nov 2015