The Multiple Choice Questions Blog

Which ‘window dressing’ technique (if permitted) could be used to improve a company’s earnings per share figure?

Select ONE answer:

1. overstating the value of buildings by excessive revaluations
2. incorrectly classifying short term loans as long term loans
3. showing ‘cash equivalents’ as ‘cash’
4. failing to account for a material bad debt provision

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

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A company acquires the net assets of a business for which it issues £400,000 of ordinary shares.

The business acquired has an overdraft of £100,000 but no long term debt.

What is the impact on the gearing and the net cash position of the company?

Select ONE answer:

1. Gearing – Decreases / Net Cash – Increases
2. Gearing – Decreases / Net Cash – Decreases
3. Gearing – Increases / Net Cash – Increases
4. Gearing – Increases / Net Cash – Decreases

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
3. Not correct
4. Not correct

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

Which event reduces the interest cover?

Select ONE answer:

1. a decrease in dividend
2. a decrease in interest rates
3. an increase in dividend
4. an increase in interest rates

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

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

The following information relates to a company.

• profit after tax £240,000
• dividend cover – 3 times
• number of ordinary shares of £1 – 250,000
• market price of one ordinary share – £4

What is the dividend yield?

Select ONE answer:

1. 8%
2. 24%
3. 26%
4. 32%

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 – £240,000 / 3 = £80,000 / 250,000 = = > Dividend per share = £0.32 = = > / £4 = 8%
2. Not correct
3. Not correct
4. Not correct

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

The following data is available for a company:

• £1 ordinary shares – 100M
• £1 preference shares – 50M
• net profit (before dividends) – £55M
• ordinary dividend – £15M
• preference dividend – £5M

The market price of one ordinary share is £10.

What is the price / earnings (P/E) ratio?

Select ONE answer:

1. 18.2
2. 20
3. 25
4. 28.6

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 = = > EPS is £55M – £5M = £50M / 100M = 50p per share = = > £10 / £0.5 = 20 PE
3. Not correct
4. Not correct

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