Author: stuart001uk2014

Stafford Roofing has cash flow problems. It needs to pay its employees their wages but is waiting for £24 300 from customers.

Which one of the following options is the most suitable source of finance to overcome this problem? 

Select ONE answer:

1. Leasing
2. Overdraft
3. Debenture
4. Bank loan

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 – leasing is a long-term agreement to use expensive capital equipment and is not suitable for short term cash flow problems. 
2. Correct – an overdraft is a short term, prior arrangement for a bank customer to be able to withdraw an agreed amount of money that is not in their current account. The overdraft arrangement means the wages can be paid before the money owed goes into the bank account. When customers pay their bills, the overdraft can be paid off and interest is only paid on the balance that is outstanding.
3. Not correct – debentures are large long-term loans raised by public limited companies for major capital projects, which is not relevant to Stafford Roofing for paying its employees.
4. Not correct – a bank loan would mean making a monthly repayment with interest over a longer period than Stafford Roofing need the money for. 

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

Stafford Holdings plc is one of the world’s biggest public limited companies.

Which one of the following is an advantage of being a public limited company for Stafford Holdings?

Select ONE answer:

1. need close supervisionIt publishes its annual accounts
2. It can control who buys its shares
3. Its shareholders have unlimited liability
4. It can raise funds through the stock exchange

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 – Theory Y managers assume that employees like to lead rather Not correct – has to publish its full accounts meaning its competitors can gain information that will help them to plan competitive strategies.
2. Not correct – since the shares can be bought and then sold on by any member of the general public through a stock exchange.  Stafford Holdings has no control over who owns it shares which could be bought in large quantities by rivals planning a takeover. 
3. Not correct – shareholders can only be held liable up to the value of the shares they have bought and paid for, their liability is limited. 
4. Correct – a public limited company as a company that sells it shares to members of the general public/ & the shares are traded on the stock exchange.  Stafford Holdings has greater access to potential investors in order to raise funds.  This means it can raise higher amounts of capital than other business structures.

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