Day: October 21, 2022

Below shows information from the Balance Sheets of two companies, X and Y.

• Ordinary Shares – Company X – £800k & Company Y – £900k
• 10% Debentures – Company X – £600k & Company Y – £150k
• Profit and Loss Account – Company X – £300k & Company Y – £650k

Which providers of finance would experience the greatest degree of risk in times of falling profits?

Select ONE answer:

1. debenture holders of company X
2. debenture holders of company Y
3. ordinary shareholders of company X
4. ordinary shareholders of company Y

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. Not correct

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