Bob, Michael, and Simon are proposing to set up a limited company with a share capital of £180 000. They will be the only shareholders and originally planned to invest in the share capital using Ratio 1 below. However, circumstances have changed and they have to use Ratio 2.
What difference will it make to Bob’s investment when Ratio 2 is chosen?
Select ONE answer:
- Invests £21 000 less
- Invests £21 000 more
- Invests £24 000 less
- Invests £24 000 more
- Invests £30 000 more
Explain your answer
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This is multiple choice question is suitable for Accounting KS5 classes.
The answer is 3 – In Ratio 1 the £180,000 is divided by 5 shares (1+2+2) which makes Bob’s investment = £36,000. In Ratio 2 the £180,000 is divided by 15 (2+9+4) which makes Bob’s investment now = £12,000 which means he will invest £24,000 less.
This work is licensed under a Creative Commons Attribution 4.0 International License.
The Multiple Choice Questions Blog 