Accounting Multiple Choice Question – 23 June 2023

The table shows the capital structure of Alex plc is as follows:

• ordinary shares of £1 each – £100k
• share premium account – £200k
• retained profits – £300k
• 15% Debenture Loan (issued 5 years ago) – £400k
• Total Share and Debt Capital – £1M

Operating profits average £260k per annum.

What is the return on shareholders’ funds of Alex plc’s shareholders?

Select ONE answer:

1. 26.0%
2. 33.3%
3. 43.3%
4. 66.7%

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 – £260k – (£400k * 15%) = = > £200k / £0.6M = 33.33%, ROCE would be £260k / £1M = = > 26%
3. Not correct
4. Not correct

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