Month: February 2021

A company manufactures and sells widgets. The directors want to increase profitability and are considering buying in the widgets instead of manufacturing them. 

The company should buy the widgets from an outside supplier if the price is?

Select ONE answer:

1. less than the marginal cost of production.
2. more than the marginal cost of production but less than the marginal cost of sales.
3. more than the marginal cost of sales but less than the total cost.
4. more than the total cost but less than the selling price.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company has authorised capital of 500 000 £0.25 ordinary shares. It has issued 400 000 £0.25 ordinary shares, at a price of £0.60 a share. The market price of the shares is now £0.75 each.

The directors now wish to make a dividend payment which would give the shareholders a dividend yield of 5%. 

How much cash would the company need to distribute as dividend? 

Select ONE answer:

1. £5,000
2. £6,250
3. £12,000
4. £15,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – (£15,000 / 400,000) / £0.75 = 5%

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company makes annual profits of £10 million before interest payable of £2 million and ordinary dividends of £5 million.

It has in issue 20 million shares of £0.20 each, currently valued on the Stock Exchange at £5.00 each.

What is the company’s Price/Earnings (P/E) ratio? 

Select ONE answer:

1. 10
2. 12.5
3. 20
4. 33.3 

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – £10M – £2M = £8M / 20M shares = £0.4 EPS ==> £5.00 / £0.40 = 12.5 P/E
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company’s published Profit and Loss Account gives the following information:

• operating profit  —  £4,000M
• interest expense  —  £200M
• taxation  —  £1,150M
• ordinary dividends  —  £1,200M

What is the profit figure to be used in the calculation of earnings per ordinary share?

Select ONE answer:

1. £1,150 million
2. £2,350 million
3. £2,650 million
4. £3,800 million 

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – £4,000M – £200M – £1,150M
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

The following data is available for XYZ plc.

• issued ordinary shares  — 1,000,000
• nominal value per share  —  £1.00
• market value per share  — £2.30
• net profit after taxation  —  £200,000
• retained earnings % of net profit after tax  —  50%

What is the net dividend yield?

Select ONE answer:

1. 4.35%
2. 8.70%
3. 10.0%
4. 20.0%

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – 50% of £200,000 = £100,000k or £0.10 per share / £2.30 = 4.35%
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.