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What does the accruals/matching concept state?

That costs should be allocated to the periods where revenues are generated. Depreciation involves allocating the costs of a fixed asset over its useful economic life.


If a company makes a provision for the first time against the estimated amount of doubtful debt, this will:

Reduce reported profits for the year.
The increase in the provision will represent the full amount of the charge for the year. Effectively we are recognising the cost by putting the provision in the account.


Accruals and deferred income would be found in which category in a company's accounts?

Current liabilities. Accruals are liabilities owed for services used during the chargeable accounting period, but not yet paid for.


Which of the reserves can be used to make a bonus issue (issuance of free shares to existing shareholders)?

All reserves within shareholders' funds can be used for a bonus/capitilisation issue.


Where would prepayments be found in a set of accounts?

Current assets. Prepayments will occur if a company has paid for a service, but not yet had the benefit during the accounting period. The service is owed to the company and therefore shown as a current asset.


From a cash flow perspective, what is the significance of an increasing inventory?

It suggests the company is spending cash on increasing current assets, as a result cash position ↓


From a cash flow perspective, what is the significance of accounts receivable decreasing?

The company is receiving cash from debtors, cash position ↑


From a cash flow perspective, what is the significance of accounts payable increasing?

The company is not paying their debtors, cash position ↑


From a cash flow perspective, what is the significance of depreciation being charged on assets?

The company is not spending any money on depreciation, it is an accounting entry only, cash position ↑


What are the scales (possible range) for R-squared and the correlation coefficient in regression analysis?

R-Squared: 0 to 1
Correlation Coefficient: -1 to +1


How is the Nikkei 250 weighted?

It is equally weighted (not by market cap). Each of the 250 companies each contribute an equal share towards the index value.


Where does the Nikkei 250 trade and where do Nikkei 250 futures trade?

Nikkei 250 trades in Tokyo, and its futures trade in Osaka and Singapore


What are the maturity categories used to divide UK government bonds for index definition?

Up to 5 years,
5 to 10 years,
5 to 15 years,
10 to 15 years,
Over 15 Years


What does Autocorrelation suggest?

That returns from one period are in some way connected to those of another


What does mean if something is statistically significant?

If an observed value is noticeably different from expectations.


What is working capital equal to?

Net current assets (current assets-current liabilities)


What is interest cover?

EBIT / interest expense


How are preference share dividends classed?

Franked investment income


Why are UK Treasury Bills issued at a discount?

They pay no interest


The Bank of England conducts its interest rate policy through what:

Its repo operations (gilt repos)


Why invest in Commercial Paper?

It is a short-term instrument issued at a discount to par value. The investor will therefore experience a capital gain when held to maturity.


What is the minimum block size for Treasury Bills?



If interest rates fall, what would happen to the price and yield of a floating rate note?

Price would remain the same and yield would fall.


What has lower risk: senior unsecured debt or subordinated debt (debt paid after all other corporate debts)?

Senior Unsecured Debt


What is a droplock FRN?

Once the interest hits a specified minimum, the on locks into that rate for its remaining life


How many shares does each equity option contract consist of?



How is coffee classed (as a commodity)?

As a soft

Softs: foodstuffs


How often do commercial leases have rent reviews?

Every 5 years


What is an intitial margin?

A refundable good faith deposit based on the worst probable one day's loss. It is calculated as a net figure by ICE Clear Europe.


Where are covered warrants traded?

On the LSE and settlement is carried out through CREST.