From exam

Question 1

If a company buys a piece of equipment on credit, what is the immediate impact on:
- Profit
- Cash flows

Answer 1

No impact on either.

Question 2

A company pays an equity dividend of £12,000. How is this reflected in financial statements at the end of the year?

Answer 2

• Decrease retained earnings by £12,000
• Decrease cash and cash equivalents by £12,000

Question 3

What is included in the value of inventory when accounting for its initial cost?

Answer 3

• Delivery costs
• Labour costs converting raw materials into final product
• Import taxes

Question 4

Trade receivables =

Answer 4

The amounts billed to customers for goods/services provided on credit.
- Classed as current assets

Question 5

Effects of accounting for taxation on financial statements when the payment is made after the year-end date

Answer 5

• Increase income tax expense (P+L)
• Increase income tax payable (FP)

Question 6

Capital employed =

Answer 6

Equity + non-current liabilities

Question 7

Return On Capital Employed =

Answer 7

Operating profit / capital employed x100 %

Question 8

Operating profit margin =

Answer 8

Operating profit / revenue x100 %

Question 9

Trade receivables days =

Answer 9

Trade receivables / revenue x 365

Question 10

Dividend yield =

Answer 10

Dividend per ordinary share / market price per ordinary share x100 %