CHAP 7

Collinson plc is a medium-sized group operating at four location in the UK. It operates a
centralized finance function and is concerned that the function as a whole is not performing
well. Centralization of this finance function is least likely to be effective in:*
1/1
a. External reporting to shareholders
b. Recording financial transaction
c. Managing cash
d. Internal reporting to operational managers
2- Maureen is employed in the finance function of Gralam plc. Her duties are to ensure
that the company always has sufficient funds available to meet both its short-term and long-
term financial requirements. It is clear that Maureen is employed by Gralam plc in its:*
1/1
a. Financial reporting section
b. Management accounting section
c. Treasury management section
d. Transaction processing section
3. Regarding the finance function, preparing internal reporting for planning and control to
those charged with management and governance is the main task of:*
1/1
Management accounting.
Recording financial transactions.
Financial reporting.
Treasury management.
4- Harold is an accountant with Farmworth plc. He was asked to join a project team
examining the company’s compliance with both IFRS and ISAB standards. It appears,
therefore, that Harold has been recruited into this project team to exploit his expertise in:*
1/1
a. Financial reporting
b. Performance measurement
c. Corporate governance
d. Information system
5- Novel plc is establishing its accounting and finance function. The company has been
told there are two purposes of published, audited financial statements. These are to help users
assess how effectively managers are running a business, and to make judgements about the
likely levels of risk and return in the future. Which of the following user groups of Novel
plc’s published, audited financial statements is most likely to use accounting information for
these purposes?*
1/1
a. Community representatives
b. Employees
c. Shareholders
d. Managers
6- When a company’s finance function prepares financial statements in accordance with
legal rules and accounting standards, it is engaged in the support activity of:*
1/1
a. Record-keeping and stewardship
b. Planning and control
c. External reporting
d. Internal reporting
7- Mainstream Ltd’s finance director is establishing an effective system in the finance
function for producing management accounting reports. Which issue should be the finance
director’s primary consideration?*
1/1
a. The information needs of the company's manager
b. The need for effective internal control mechanism
c. The need for cost-effectiveness
d. The need for effective information security
8- Tram plc’s finance function must provide information to management on the
company’s balanced scorecard. This role is undertaken as part of Tram plc’s:*
1/1
a. Statutory audit requirement
b. Financial reporting function
c. Treasury management process
d. Performance measurement system
9- “Effectiveness”, “Economy”, and “efficiency” are often mentioned with reference to
resource use. Match these terms with the definition below: (1) A reduction or containment of
costs; (2) Achieving maximum output at minimum cost; (3) The measure of achievement by
reference to objectives*
1/1
a. 1 = effectiveness; 2 = economy; 3 = efficiency
b. 1 = economy; 2 = efficiency; 3 = effectiveness
c.1 = efficiency; 2 = effectiveness; 3 = economy
d.1 = economy; 2 = effectiveness; 3 = efficiency
10- Which statement about critical success factor (CSFs) for a business is true?*
1/1
a. Low cost will always be a CSF; high sales revenue will always be a CSF
b. Low cost will always be a CSF; high sales revenue will not always be a CSF
c. Low cost will always not be a CSF; high sales revenue will always be a CSF
d. Low cost will not always be a CSF; high sales revenue will not always be a CSF
11- Three basic approaches to performance measures are measures of economy, efficiency
and effectiveness. Economy is measured by:*
1/1
a. The amount of resources used for the tasks that have been achieved
b. The success in achieving goals and targets
c. Team member satisfaction and the motivational climate
d. The success of the team or work group in controlling its costs
12- A consultant has made two statements about the primary focus of the users of financial
statements of an entity. Statement (1) – The primary focus of suppliers is on the entity’s risk
and return; Statement (2) – The primary focus of shareholders is on the entity’s solvency.
Identify whether each statement is true or false.*
1/1
a. Statement (1) true; Statement (2) false
b. Statement (1) false; Statement (2) false
c. Statement (1) true; Statement (2) true
d. Statement (1) false; Statement (2) true
13- Tom works in the finance function of Bateman Ltd., which trades with many
companies around the world. His duties involve managing the company’s foreign exchange
requirements. From this it can be seen that Tom is employed by Bateman Ltd in its finance
function’s:*
1/1
a. Financial reporting section
b. Management accounting section
c. Treasury management section
d. Financial transaction recording system
14- Chinward Ltd manufactures garden furniture from recycled wood and wishes to apply
the sustainability reporting standard issued by the Global Reporting Initiative (GRI) in its
sustainability reporting.
Statement (1): Under the environmental section of the report, the company should identify the
total weight of wood used in the manufacture of its products in the financial period.
Statement (2): Under the social section of the report, the company should identify the number
of new workers employed in the financial period by age, gender and region. Identify whether
each statement is true or false.
*
1/1
a. Statement (1) true, Statement (2) false
b. Statement (1) true, Statement (2) true
c. Statement (1) false, Statement (2) false
d. Statement (1) false, Statement (2) true
15- Historically, the role of the finance function at Delbin plc has been viewed primarily in
terms of reporting and control. However, the senior management team at Delbin plc are keen
on for the finance function to have more role as a business partner. In which of the following
should members of the finance function expect to become increasingly involved as a result of
the business partnering role?
1-formulating strategies; 2- commercial decision making and negotiations; 3-provision of
accurate accounting information.
*
1/1
a. (1) and (2) only
b. (1) and (3) only
c. (2) and (3) only
d. (1),(2), and (3)
16- Mai is employed in the finance function. Her duties are to ensure that her company always
has sufficient funds available to meet its financial requirements. Mai is in her company’s: *
1/1
Management accounting.
Recording financial transactions.
Financial reporting section.
Treasury management section.
17- Regarding the finance function, preparing financial statements for external users is the
main task of:*
1/1
Management accounting.
Recording financial transactions.
Financial reporting.
Treasury management.
18- Regarding the finance function, managing cash budgets, working capital, investments,
and raising long-term finance are the main tasks of:*
1/1
Management accounting.
Recording financial transactions.
Financial reporting.
Treasury management.
19- Regarding types of performance measures, the quantity of product produced in relation
to the resources put in is included in:*
1/1
Profitability measures.
Productivity measures.
Liquidity measures.
Solvency measures.
20- Regarding types of performance measures, “net margin of 10% on revenue of
$100,000” is included in:*
1/1
Profitability measures.
Productivity measures.
Liquidity measures.
Solvency measures.
21- When a company’s finance function prepares financial statements in accordance with
legal rules and accounting standards, it is engaged in the support activity of: *
1/1
Stewardship.
Planning and control.
External reporting.
Internal reporting.
22- TR plc’s finance function must provide information to management on the company’s
balanced scorecard. This role is undertaken as part of TR plc’s:*
1/1
Statutory audit requirement.
Financial reporting function.
Treasury management process.
Performance measurement system.
23- In the balanced scorecard, measures of profit margins and return on capital would be
included in:*
1/1
Financial perspectives measures.
Customer perspectives measures.
Internal business process perspectives measures.
Innovation and learning perspectives measures.
24- Regarding the measure of resource use, which of the following is the definition of
“Economy”:*
0/1
A reduction or containment of costs.
Achieving maximum output at minimum cost.
The measure of achievement by reference to objectives.
The level of performance for the business to outperform rivals.
25- Regarding the measure of resource use, which of the following is the definition of
“Efficiency”:*
1/1
A reduction of containment of costs.
Achieving maximum output at minimum cost.
The measure of achievement by reference to objectives.
The level of performance for the business to outperform rivals.
26- Regarding the measure of resource use, which of the following is the definition of
“Effectiveness”:*
1/1
A reduction of containment of costs.
Achieving maximum output at minimum cost.
The measure of achievement by reference to objectives.
The level of performance for the business to outperform rivals.
27- Which of the following characteristics belongs to management accounting information?
*
1/1
It is governed by legal regulation.
It is primarily used by shareholders.
It is likely to include a cash flow forecast.
It is likely to include a statement of cash flows.
28- When the finance function works alongside other business functions rather than being a
separate function of their own, it means:*
1/1
Financial innovation.
Business partnering.
Business analysis.
Financial reporting.
29- Management of working capital is the function of which section?*
1/1
Financial reporting.
Treasury management.
Management accounting.
Recording financial transactions.
30- Managers use performance measurement for:*
1/1
Making investment decisions on buying a stock.
Expanding loans for a company.
Controlling and planning.
Making investment decisions on selling a stock.
31- Managing the company’s foreign exchange requirements belongs to which of the
following section in the finance function?*
1/1
Financial reporting section.
Management accounting section.
Treasury management section.
Financial transaction recording section.
32- Thu works in the finance function of AB Ltd. Her duties involve maintaining the
sales ledger and providing information to the credit control department. Thu is employed by
AB Ltd in its finance function’s:*
1/1
Management accounting section.
Financial transactions recording section.
Financial reporting section.
Treasury management section.

CHAP 8
1. Regarding the business’s need for finance, funds for paying wages and day-to-day
expenses are to fulfill:*
1/1
Immediate needs.
Short-term needs.
Medium-term needs.
Long-term needs.
2. Regarding the business’s need for finance, funds for non-current assets, such as
machinery, vehicles, and buildings, are to fulfill:
*
1/1
Immediate needs.
Short-term needs.
Medium-term needs.
Long-term needs.
3. In relation to a listed company that is raising new finance, an offer for the sale of
stocks is a form of:
*
1/1
Public offering.
Factoring.
Borrowing.
Retained earnings.
4. Which of the following is NOT the source of equity finance?
*
1/1
Retained earnings.
Preference shares.
Overdraft.
New issues of shares.
5. Which of the following is a source of debt finance?*
1/1
Leasing.
Rights issues of shares.
Retained earnings.
Preference shares.
6. A bank undertakes to store and take reasonable care of a customer’s property and
to re-deliver it to the customer when required. In regards to the bank and customer
relationship, in which capacity is the bank acting:*
1/1
Mortgagor.
Bailee.
Mortgagee.
Bailor.
7. Which of the following statements concerning preference shares is correct?*
1/1
Preference shares carry the same voting rights as ordinary shares.
Preference shares carry the right to a fixed rate of dividend each year.
The payment of a preference share dividend is guaranteed each year.
Preference shares are always a type of debt capital.
8. Which of the following financial instruments are available from commercial banks?*
1/1
Gilts.
Commercial paper.
Certificates of deposit.
Treasury bills.
9. Regarding financing exports and trading risks, the possibility of payment default by
the customer is:*
1/1
Physical risk.
Credit risk.
Trade risk.
Liquidity risk.
11. Which of the following is an example of an institutional investor?*
1/1
The Bank of England.
The Financial Reporting Council.
The Financial Conduct Authority.
A unit trust.
12. A market where new securities are bought and sold for the first time is known as:*
1/1
A futures market.
A secondary capital market.
A primary capital market.
A money market.
13. To pay for an increase in inventory and receivables, a firm needs:*
1/1
Short-term finance.
Medium-term finance.
Long-term finance.
Permanent finance.
14. Capital is made up of current assets minus current liabilities is called:*
1/1
Working capital.
Working assets.
Current assets.
Physical assets.
15. Using a higher percentage of short-term finance can:*
1/1
Reduce the cost of capital but higher interest rate risk.
Increase the cost of capital but higher interest rate risk.
Reduce the cost of capital but lower interest rate risk.
Increase the cost of capital but lower interest rate risk.
16. A firm has $100 million in current liabilities and $80 million in current assets. The
current ratio of the firm is:*
1/1
0.8
1.0
1.25
1.5
17. In an average matching business, permanent current assets are financed by:*
1/1
Short-term trade credit.
Short-term debt.
Overdrafts.
Long-term debt.
18. If a company identifies a short-term surplus of cash, it should:*
1/1
Distribute to customers.
Buy a vacation for managers.
Invest in various financial products in the money markets.
Pay for fixed asset acquisition.
20. Which of the following statements is most likely TRUE about a bank:*
1/1
A manufacturing unit.
A commercial company.
A financial intermediary.
A public organization.
21. Carrying out monetary and ensuring financial stability is the role of:*
1/1
Commercial banks.
Retail banks.
Unit trusts.
Central banks.
22. When a bank borrows the customer’s deposits and undertakes to repay them,
this refers to which of the contractual relationship between a bank and a customer?*
1/1
Bailor and bailee.
Principal and agent.
Receivable and payable.
Mortgagor and mortgagee.
23. When a bank accepts the customer’s property for storage in its safe deposit, this
refers to which of the contractual relationship between a bank and a customer?*
1/1
Bailor and bailee.
Principal and agent.
Receive and payable.
Mortgagor and mortgagee.
24. LIBOR stands for:*
1/1
Lending Internal Business of Railway.
London Inter-Bank Offered Rate.
Loan Interest Bidding Over Rate.
Lending Interest Board Offered Range.
25. Which of the following is internal and the most important source of equity
finance?*
1/1
New share issuance.
Right issues.
Retained Earnings.
Convertible bonds.
26. Which of the following is external and the least important source of equity
finance?*
1/1
New share issuance.
Right issues.
Retained Earnings.
Convertible bonds.
27. A company issues a bond with a par value of $1,000 and a fixed coupon rate of
5% per annum, paying interest annually. The interest payment for bondholders is:*
1/1
$1,000
$500
$50
$0
28. In the banking system, secondary banks are also known as:*
1/1
Clearing banks.
Commercial banks.
Retail banks.
Merchant banks.
29. A problem of going public is:*
1/1
Possibility of being taken over.
Concentration of control.
Minimization of the costs of control and reporting systems.
Access to large sources of finance.
30. Debt capital in the form of securities issued by companies, the government
and local authorities is:*
1/1
Bank Overdraft.
Common shares.
Factoring.
Loan stock.
31. Financial instruments issued by large companies, which can be held to
maturity or sold to a third party before maturity, are:*
1/1
Treasury bills.
Certificate of Deposit.
Bonds.
Commercial paper.
32. Which of the following statements correctly describes the coupon rate of a
debt instrument?*
1/1
It is the interest charge payable on the debt instrument.
It is the amount repayable at the end of the term of the debt instrument.
It is the credit risk of the debt instrument.
It is the amount payable on the debt instrument in excess of the Bank of England’s base rate.
33. A family-owned removal company has liquidity problems and needs an injection of
funds. From the following list identify which would be classified as a source of short-term
finance for this company?*
1/1
Share capital.
Bank loan.
Factoring.
Commercial mortgage.
34. ABC plc has recently sent goods to its first non-UK customer but has taken out
insurance because it is worried about the possibility of a payment default. What type of
risk does such a non-payment represent?*
1/1
Physical risk.
Credit risk.
Trade risk.
Liquidity risk.