Chapter 7: The Business's Finance Function .: Internal Reporting To Operational Managers
Chapter 7: The Business's Finance Function .: Internal Reporting To Operational Managers
Chapter 7: The Business's Finance Function .: Internal Reporting To Operational Managers
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1 Collinson plc is a medium-sized group operating at four locations in the
UK. It operates a centralised finance function and is concerned that the
function as a whole is not performing well. Centralisation of this
finance function is least likely to be effective in:
A external reporting to shareholders
B recording financial transactions
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:
A financial reporting section
B management accounting section
C corporate governance
D information systems
A Low costs will always be a CSF; high sales revenue will always be
a CSF.
B Low costs will always be a CSF; high sales revenue will not
always be a CSF.
C Low costs will not always be a CSF; high sales revenue will
always be a CSF.
D Low costs 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:
A the amount of resources used for the tasks that have been achieved
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 1, 2 and 3
Chapter 8: Business finance
C Factoring
D Commercial mortgage
2 A consultant has made the following statements concerning each
possible relationship between a bank and its customer.
Statement (1) In the fiduciary relationship the bank is expected to
act with good faith towards the customer.
Statement (2) In the mortgagor/mortgagee relationship the bank
asks the customer to secure a loan with a charge over the customer's
liabilities.
Statement (3) In the bailor/bailee relationship the bank accepts the customer's
property for storage and undertakes to take reasonable care to safeguard
it against loss or damage.
Identify which of the statements about these relationships are true.
A Immediate finance
B Short-term finance
C Medium-term finance
D Long-term finance
13 Which of the following is the source of finance which a company can
draw on most easily in practice?
A Cash generated from retained earnings
B New share issues
C Rights issues
D Bank borrowings
14 All of the following statements about leases are correct, except one.
Which is the exception?
A The lease period can be less than the useful life of the asset.
B Lessees may be liable to pay interest on the lease.
C The lessee owns the asset outright from the time of purchase.
D Lessors may be responsible for repairs and maintenance on the asset
being leased
15 Which of the following statements about venture capital is most valid?
22 Financial instruments with maturities of less than one year are traded in
the:
A equity market
B capital market
C money market
D fixed-income market
23 A consultant has stated that a 30-year Treasury bond issued in the last year
can be sold in four different categories of market.
1 The money market
2 The capital market
3 The primary market
4 The secondary market
Which of these markets are available for the sale?
A 1 and 3 only
B 1 and 4 only
C 2 and 3 only
D 2 and 4 only
24 Sunita Ltd has the choice of two investments carrying similar levels of risk.
One is short-term and the other is a long-term bond. Sunita Ltd should
expect the interest on the longer term bond to be:
A normally higher
B lower
C normally the same
D impossible to tell
25 Which part of the Bank of England is responsible for the stability and
resilience of the UK's financial system as a whole?
A Financial Conduct Authority
B Monetary Policy Committee
C Financial Policy Committee
D Prudential Regulation Authority
26 Adventurous plc has recently sent goods to its first non-UK customer
but has taken out insurance because it is worried about the possibility of
payment default. What type of risk does such a non-payment represent?
A Physical risk
B Credit risk
C Trade risk
D Liquidity risk
5 The agency problem is behind the need for sound corporate governance.
The 'principal' in this agency relationship is:
A customers as a body
B shareholders as a body
C managers as a body
D directors as a body
6 A consultant has made the following statements, which he maintains are
drawn from the definition of corporate governance in the OECD's
Principles of Corporate Governance.
Statement (1) Corporate governance comprises the practices and
procedures for ensuring that a company is run in such a way that it
achieves its objectives.
Statement (2) Corporate governance is a set of relationships
between a company's management, its board, its shareholders and other
stakeholders.
Identify whether each statement matches the definition.
A Statement (1) matches; Statement (2) does not match
B Statement (1) does not match; Statement (2) does not match
C Statement (1) matches; Statement (2) matches
D Statement (1) does not match; Statement (2) matches
7 Different corporate governance systems reflect different ways in which
companies are managed and controlled by different board structures.
The following statements have been made about the structure of a board
of directors.
Statement (1) In the UK and Germany there is a unitary board
system.
Statement (2) A two-tier system comprises a management board
and a supervisory board. Identify whether each statement is true or false.
A Unitary board
B Supervisory board
C Non-executive board
D Executive board
17 The national culture in the country of Erewhon is characterised by a
high ‘power distance’ score, and an acceptance that power is distributed
unequally, and concentrated in the hands of a small number of key
individuals.
By contrast, the country of Wenland has a lower ‘power distance’ score,
and people strive to get power distributed more evenly.
Based on the ‘power distance’ scores of the two countries, identify if
each of the following statements is likely to be true or false.
The corporate governance code in Erewhon prohibits the role of CEO and
chair being combined, but the code in Wenland permits this.
The corporate governance code in Wenland requires a higher proportion of
independent NEDs on the board than the code in Erewhon does.
A Statement 1 = True; Statement 2 = True
B Statement 1 = True; Statement 2 = False
C Statement 1 = False; Statement 2 = True
D Statement 1 = False; Statement 2 = False
18 Which of the following statements about whistle-blowing is/are true?
1 Whistle-blowing involves the disclosure by an employee of illegal or
unethical behaviour in the workplace.
2 Employees should always report concerns about unethical behaviour to
their line manager in the first instance.
A Neither of them
B 1 only
C only
D Both of them
19 Which three of the following are core aspects of South Africa’s King
Report?
A Operations
B Procurement
C Human Resources
D Marketing
Chapter 13: The economic environment of business and finance
6 The cross elasticity of demand between the Terra product and the Nova
product is zero. The two products are:
A complements
B substitutes
C veblen goods
D unrelated
7 The UK government has recently imposed a maximum price on Pratex
which is set at a lower level than its equilibrium price. In future,
therefore, it can be expected that there will be:
A excess supply of the product
B excess demand for the product
C no effect on supply but an increase in demand
D no effect on demand but a decrease in supply
8 An analyst with Lanes plc has drawn a supply curve for one of the
company's major products, the Ledo. The curve is a vertical straight
line. This indicates that supply of the Ledo is:
A perfectly inelastic
B of unitary elasticity
C perfectly elastic
D one
9 There has been a significant rise in factor costs for the Tempo product
during recent months. It can be expected that there will be:
A a contraction in demand and supply
B Ban expansion in demand and supply
C a contraction in demand and an expansion in supply
14 The minimum price for a good is set by the government above the
current free market equilibrium price. What will be the effect (if any) on
demand for and supply of the good in the short term?
A Demand for the good will fall; supply of the good will rise
B Demand for the good will rise; supply of the good will fall
C Both demand for and supply of the good will rise
A Demand
B Enterprise
C Supply
D Innovation
A 1 only
B and 2 only
C and 3 only
D 1, 2 and 3
A income tax
B corporation tax
C import duties
D social security payments
A Negative
B Indeterminate
C Zero
D Positive
1. The agency problem underlies the need for sound corporate governance.
In this context, the "agents" are the company's:
A. Customers
B. Shareholders
C. Directors
D. Auditors
A. Governance
B. Management
C. Marketing
D. Financing
D. Empire building
5. Which of the following is NOT a good practice in corporate governance?
A. accountability.
C. good information.
A. Corporate structure.
B. Board structure.
C. Management structure.
D. Governance structure.
A. Management ethics.
B. Interest of managers.
C. Management accountability.
D. Management Openness.
D. Banks have close relationships with the businesses they lend to.
A. A balance between economic and social goals and between individual and
communal goals.
13. The presence of the management board and the supervisory board is:
14. Corporate governance of a company in which the CEO, CFO, and Chief
Accountant are siblings faces the problem of:
C. Lack of supervision.
16. Which of the following factor is NOT included in the national influences
of the macro environment?
B. Government policies.
C. Globalization of markets.
D. Inflation.
A. Public borrowing
B. Public spending
D. Taxation.
18. Anu manufactures pieces of classic furniture. Anu predicts that "If
people's income rises next year, then the demand for my furniture will
increase".
19. Price elasticity of demand would be positive for the goods termed as:
A. Normal.
B. Inferior.
C Veblen.
D. Necessities.
20. The recession phase of the business cycle is normally accompanied by:
23. The price of a product is $2.5 per unit, on average 40,000 units of the
product are sold each month. At a price of $3 per unit, on average 50,000
units per month are sold. The price elasticity of demand (PED) for the
product and type of this product are:
A. A rise in the fare of trains will lead to a rise in demand for airlines.
B. A rise in the fare of airlines will lead to a rise in demand for airlines.
C. A fall in the fare of trains will lead to a rise in demand for airlines.
D. A fall in the fare of airlines will lead to a fall in demand for airlines.
25. Which of the following is associated with a low level of saving in the
national economy?
26. Which of the following are NOT associated with conditions of perfect
competition?
C. Differentiated products.
A. A specific item.
C. Worldwide.
30. Which of the following factor is NOT referred to in the four factors of
production in the: gross domestic product?
A. Land.
B. Government
C. Labour
D. Entrepreneurship
1. The agency problem underlies the need for sound corporate governance.
In this context, the "principal" in this agency relationship is:
A. customers.
B. shareholders.
C. managers.
D. directors.
A. Corporate governance.
B. Sustainability.
C. Agents.
D. Internal controls.
A. Customer perspective.
B. Stakeholder perspective.
C. Stewardship perspective.
D. Public policy perspective.
D. Brief shareholders more fully about LK ple's incentive scheme for managers
A. Management ethics.
B. Interest of managers
D. Management Accountability
11.
12. Corporate values and culture are critical to good corporate governance
because:
A. Directors.
B. Internal audits.
C. External audits.
D. Employees.
C. Lack of supervision.
16. In terms of the economic environment, the business cycle is part of:
A. Price
B. Cost of production
C. Income levels.
D. Fashion
18. When the demand for a good rises as incomes rise but then falls back as
incomes pass a certain point, the good is termed?
A. giffen
B. normal
C. inferior
D. veblen
19. Which of the following are NOT associated with conditions of perfect
competition?
C. Differentiated products.
23.
24. When the government imposes a maximum price on a market, when will
supply be reduced?
A. Always.
D. Never.
A. A rise in the fare of trains will lead to a rise in demand for airlines.
B. A rise in the fare of airlines will lead to a rise in demand for airlines.
C. A fall in the fare of trains will lead to a rise in demand for airlines.
D. A fall in the fare of airlines will lead to a fall in demand for airlines.
26. The price of a product is $2.5 per unit, on average 40,000 units of the
product are sold each month. At a price of $3 per unit, on average 50,000
units per month are sold. The price elasticity of demand (PED) for the
product and type of this product are:
27. The recession phase of the business cycle is normally accompanied by:
29. Price elasticity of demand would be positive for the goods termed as:
A. Normal.
B. Inferior.
C. Giffen.
D. Necessities.
A. Public borrowing.
B. Public spending.
D. Taxation.
TEST 2
1. The agency problem underlies the need for sound corporate governance.
In this context, the "agents" are the company's:
A. Customers.
B. Shareholders.
C. Directors.
D. Auditors.
A. Governance.
B. Management.
C. Marketing.
D. Financing.
D. Empire building
A. accountability.
C. good information.
A. Corporate structure.
B. Board structure.
C. Management structure.
D. Governance structure.
A. Management ethics.
B. Interest of managers.
C. Management accountability.
D. Management Openness.
D. Banks have close relationships with the businesses they lend to.
A. A balance between economic and social goals and between individual and
communal goals.
C. Directors act in the best interest of the company when acting as "stewards" of
the company's resources.
13. The presence of the management board and the supervisory board is:
14. Corporate governance of a company in which the CEO, CFO, and Chief
Accountant are siblings faces the problem of:
C. Lack of supervision.
16. Which of the following factor is NOT included in the national influences
of the macro environment?
B. Government policies.
C. Globalization of markets.
D. Inflation
A. Public borrowing.
B. Public spending.
D. Taxation.
18. Anu manufactures pieces of classic furniture. Anu predicts that "If
people's income rises next year, then the demand for my furniture will
increase". The accuracy of Anu's prediction depends on whether the pieces
of furniture he produces:
19. Price elasticity of demand would be positive for the goods termed as:
A. Normal.
B. Inferior.
C. Veblen.
D. Necessities.
20. The recession phase of the business cycle is normally accompanied by:
23. The price of a product is $2.5 per unit, on average 40,000 units of the
product are sold each onth. At a price of $3 per unit, on average 50,000
units per month are sold. The price elasticity of demand (PED) for the
product and type of this product are:
A. A rise in the fare of trains will lead to a rise in demand for airlines.
B. A rise in the fare of airlines will lead to a rise in demand for airlines.
C. A fall in the fare of trains will lead to a rise in demand for airlines.
D. A fall in the fare of airlines will lead to a fall in demand for airlines.
25. Which of the following is associated with a low level of saving in the
national economy? A. A low level of income.
26. Which of the following are NOT associated with conditions of perfect
competition?
C. Differentiated products.
28. A shift of the demand curve to the right could be caused by which of the
following conditions:
A. A specific item.
C. Worldwide.
30. Which of the following factor is NOT referred to in the four factors of
production in the gross domestic product?
A. Land.
B. Government.
C. Labour.
D. Entrepreneurship.