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How To Talk Finance Getting To Grips With The Numbers In Business 1st Edition Ted Wainman - Solutions
Return on investment gives an indication of:(a) profitability compared to the cash flow (b) cash generated compared to the capital invested (c) profitability compared to the capital investment (d) cash generated compared to profitability
Capital is a combination of:(a) debt and working capital (b) equity and investment capital (c) debt, equity and working capital (d) debt and equity
The return on capital employed compares:(a) net profit with debt (b) net profit with equity (c) net profit with investment and working capital (d) net profit with debt, equity, investment and working capital
EBITDA stands for:(a) earnings between interest, taxation, depreciation and amortisation(b) excess before income, taxation, depreciation and amortisation (c) earnings before interest, taxation, depreciation and amortisation(d) earnings before income, taxation, depreciation and amortisation
Gross margin is:(a) sales expressed as a percentage of cost of sales (b) gross profit expressed as a percentage of sales (c) sales expressed as a percentage of gross profit (d) gross profit expressed as a percentage of cost of sales
As a company increases turnover, the gross margin is expected to:(a) increase (b) decrease (c) stay the same (d) impossible to say
Operating margin is:(a) administration costs expressed as a percentage of sales (b) operating profit expressed as a percentage of administration costs(c) sales expressed as a percentage of operating profit (d) operating profit expressed as a percentage of sales
As a company increases turnover, the operating margin is expected to:(a) increase (b) decrease (c) stay the same (d) impossible to say
Net profit is:(a) sales less all costs (b) sales less all costs and interest (c) sales less all costs and interest and tax (d) sales less all costs and interest and tax and dividends
Net margin is:(a) EBITDA expressed as a percentage of net profit (b) net profit expressed as a percentage of sales (c) dividends expressed as a percentage of net profit (d) sales expressed as a percentage of net profit
As a company increases turnover, the net margin is expected to:(a) increase (b) decrease (c) stay the same (d) impossible to say
Operational gearing is reflected in the relationship between:(a) sales and fixed costs (b) fixed costs and variable costs (c) variable costs and operating profit (d) operating profit and sales
A company with high operational gearing will have:(a) high variable costs and high fixed costs (b) high variable costs and low fixed costs (c) low variable costs and high fixed costs (d) low variable costs and low fixed costs
A company with low operational gearing will have:(a) high variable costs and high fixed costs (b) high variable costs and low fixed costs(c) low variable costs and high fixed costs (d) low variable costs and low fixed costs
We should only take on additional debt if:(a) interest rates are high (b) things are going badly (c) things are going well (d) things are going well and we can afford the interest payments
Financial gearing is:(a) debt expressed as a percentage of equity (b) debt expressed as a percentage of capital (c) capital expressed as a percentage of debt (d) capital expressed as a percentage of debt and equity
Financial gearing shows:(a) whether a company is insolvent (b) the proportion of funding coming from employees (c) the proportion of funding coming from the banks and loans (d) whether a company can meet its interest payments
The interest cover ratio shows:(a) how much interest a company pays compared to dividends (b) how much interest a company pays compared to net profit (c) how much interest a company pays compared to operating profit(d) how much interest a company pays compared to gross profit
The tax shield means that:(a) debt is more tax efficient than equity as a source of funding (b) equity is more tax efficient than debt as a source of funding (c) debt and equity are both as tax efficient as each other (d) companies are not obliged to pay interest if they do not want to
Leverage shows:(a) how equity multiplies the return on equity (b) how debt multiplies the return on equity (c) how equity multiplies the return on debt (d) how debt multiplies the return on debt
Working capital is:(a) fixed assets and current assets (b) current assets and current liabilities (c) current liabilities and non-current liabilities (d) non-current liabilities and non-current assets
Working capital is used to:(a) fund the long-term investment of the business (b) fund the repayment of debt (c) fund the day-to-day trading operations of the business (d) fund the payment of dividends
Stock turnover measures the number of days:(a) from buying an item of stock to selling it (b) from buying an item of stock to paying for it (c) from buying an item of stock to returning it (d) from buying an item of stock to receiving the invoice for it
Debtor turnover measures the number of days:(a) from selling an item of stock to invoicing for it(b) from selling an item of stock to having it returned (c) from selling an item of stock to receiving payment for it (d) from selling an item of stock to paying for it
Creditor turnover measures the number of days:(a) from buying an item of stock to selling it (b) from buying an item of stock to paying for it (c) from buying an item of stock to returning it (d) from buying an item of stock to receiving the invoice for it
Cost of sales reconciles:(a) goods purchased with goods on order (b) goods purchased with goods held in stock offsite (c) goods purchased with goods returned (d) goods purchased with goods sold
A company’s working capital requirement is the difference between:(a) when it sells a good and when it receives payment for that good(b) when it buys a good and when it sells a good (c) when it pays for a good and when it receives payment for that good(d) when it buys a good and when it pays for
The liquidity ratio compares:(a) current assets with current liabilities (b) current assets with non-current liabilities (c) non-current assets with current liabilities (d) non-current assets with non-current liabilities
The liquidity ratio:(a) must always be more than 1.0(b) must never be more than 1.0(c) shows whether a business is insolvent or not (d) indicates potential areas of concern for further investigation
A liquidity ratio of 8.0 is:(a) very desirable – the company is very liquid (b) very undesirable – the company is insolvent (c) indicates potential inefficient allocation of capital (d) indicates highly efficient allocation of capital
The acid test is the same as the liquidity ratio but without stock because:(a) stock is the most difficult to turn into cash quickly (b) stock costs extra to store (c) stock can be sold quickly in a sale (d) stock may become obsolete
A lot of cash held on the balance sheet may indicate:(a) an insolvent company (b) inefficient allocation of capital (c) a company struggling to make payments to suppliers (d) a company has just made a significant dividend payment
Costs can be categorised into two different types:(a) current and non-current (b) fixed and variable(c) opex and capex (d) direct and indirect
Direct costs are ones that:(a) can be allocated specifically to a product or service (b) are always variable (c) are always fixed (d) must be capitalised
Indirect costs are ones that(a) are allocated internally (b) vary based on the level of activity (c) cannot be specifically allocated to a product or service (d) cannot be capitalised
Costs can be said to behave in one of three ways:(a) up, down or stay the same (b) fixed, variable or semi variable (or stepped) (c) current, non-current and long-term (d) opex, capex and depreciation
A fixed cost is one that:(a) will jump, given a specific level of activity (b) always changes with the level of activity (c) has a fixed and a variable element (d) never changes with the level of activity
A variable cost is one that:(a) will jump, given a specific level of activity (b) always changes with the level of activity (c) has a fixed and a variable element (d) never changes with the level of activity
A semi variable cost is one that:(a) will jump, given a specific level of activity (b) always changes with the level of activity (c) has a fixed and a variable element (d) never changes with the level of activity
A stepped cost is one that:(a) will jump, given a specific level of activity (b) always changes with the level of activity (c) has a fixed and a variable element (d) never changes with the level of activity
Costs can be treated financially in one of two ways:(a) opex and capex (b) fixed and variable (c) current and non-current (d) profit and loss
Opex is:(a) expenditure on special operations (b) expenditure on the day-to-day running of the business (c) expenditure on assets that will be used for more than one year (d) expenditure that must be capitalised
Capex is:(a) expenditure on special operations (b) expenditure on the day-to-day running of the business (c) expenditure on assets that will be used for more than one year (d) expenditure that appears in the P&L account
Capitalising a cost:(a) will have no impact on profit (b) will have a deferred impact on profit via depreciation (c) will appear in the P&L account (d) is illegal under IFRS
A finance lease is the same as:(a) buying an asset on credit (b) renting an asset (c) borrowing an asset (d) selling an asset
An operating lease is the same as:(a) buying an asset on credit (b) renting an asset (c) borrowing an asset (d) selling an asset
The aim of depreciation is to:(a) reduce the value of an asset (b) reflect the market value of an asset in the balance sheet (c) reduce profits (d) match the cost of an asset to its useful economic life
Amortisation is:(a) allowed only under IFRS (b) the depreciation of intangible assets (c) the depreciation of tangible assets (d) determined by the auditors
The two methods of depreciation are:(a) straight line and impairment (b) impairment and reducing balance(c) straight line and reducing balance (d) variable and reducing balance
NBV stands for:(a) net book value (b) near book value (c) net balance value (d) near balance value
An impairment is:(a) an asset (b) a depreciation method (c) the write down in the value of an asset (d) a long-term liability
An accrual is where:(a) you have paid for a service, but not yet received that service (b) you have provided a service, but not yet been paid (c) you have received a service, but not yet paid (d) you have been paid, but have not yet provided the service
A prepayment is where:(a) you have paid for a service, but not yet received that service (b) you have provided a service, but not yet been paid (c) you have received a service, but not yet paid (d) you have been paid, but have not yet provided the service
Deferred income is where:(a) you have paid for a service, but not yet received that service (b) you have provided a service, but not yet been paid (c) you have received a service, but not yet paid (d) you have been paid, but have not yet provided the service
Accrued income is where:(a) you have paid for a service, but not yet received that service (b) you have provided a service, but not yet been paid (c) you have received a service, but not yet paid (d) you have been paid, but have not yet provided the service
Accruals, prepayments, accrued and deferred income are all accounting adjustments that are designed to:(a) keep the finance team busy (b) adjust profit for movements in cash (c) reverse capex decisions (d) recognise costs and income in the periods in which they occur
When considering margin and mark up:(a) margin is always higher (b) mark up is always higher (c) they are both always the same (d) there is no relationship between the two
Absorption costing involves:(a) a lot of complicated calculations (b) allocating costs to other departments (c) allocating costs to the units of output (d) allocating costs to overheads
Breakeven analysis determines:(a) the level of production required to cover fixed costs (b) the level of production required to cover fixed and variable costs(c) the level of production required to cover absorbed costs (d) the level of production required to cover sunk costs
A marginal cost is:(a) always very small (b) the average cost per unit of output (c) the total cost of all units of output (d) the cost of an additional unit of output
A sunk cost is:(a) a big cost that could sink the business (b) a high-risk cost (c) one that has already been incurred (d) a future cost
A provision is:(a) accounting for a future expected loss (b) accounting for a future expected profit (c) accounting for a past loss (d) accounting for a past profit
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