Tag: Financial Accounting

A big airline, Alex Planes plc has been drawing up a mission statement.

Which THRE of the following items would you expect to see in it?

A We will double profits in three years

B We will encourage meritocracy in the workplace

C We intend to be the best airline in the world

D We aim to give excellent customer service

E We intend to take over Lufthansa

F We intend to have a 30% market share on the London to New York route

Select ONE answer:

1. A, B and C
2. A, C and D
3. B, C and D
4. B, D and E

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 –>  A mission statement should answer the following fundamental questions: What is our business? What is our value to the customer? What do we want our business to become? What should our business be? (A) and (F) are numerical targets and more likely to be secondary objectives; (E) is a detailed tactic.
4. Not correct

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For Alex Ltd, which of the following would be classified as secondary objectives?

Select ONE answer:

1. The business’s mission statement
2. The business’s market share target for next year
3. The business’s financial objective of shareholder wealth maximisation
4. The business’s vision

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. Notcorrect
2. Correct  –>  The mission statement and vision are general expressions of the business’s basic function and planned future status respectively, whilst shareholder wealth maximisation would rank as the primary objective of any organisation classified as a business.
3. Not correct
4. Not correct

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

To establish whether a particular organisation should be classified as a business or not, it would be necessary to understand the nature of its…?

Select ONE answer:

1. Primary objective
2. Mission
3. Vision
4. Secondary objective

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 –> Organisations whose primary objective is to make profits for their owners, are classified as businesses.
2. Not correct
3. Not correct
4. Not correct

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

In the opinion of a group of major shareholders, during the past five years the directors of Alex plc have run the company in a way that has been designed solely to increase the prestige in the business community.

According to William Baumol this characteristic of the company is most likely to be evident in the directors’ aim to:

Select ONE answer:

1. Maximise wealth
2. Maximise sales revenue
3. Minimise costs
4. Minimise social impact

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. Notcorrect
2. Correct  –>  William Baumol argued that businesses act to maximise sales revenue whenever managers are rewarded or revered for the size of the organisation for which they work rather than its profitability or relative performance.
3. Not correct
4. Not correct

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

Maximising the wealth of its shareholders is the stated goal of Alex plc.

The objectives have been expressed as a hierarchy of primary and secondary objectives.

Identify which of the following is most likely to be the primary business objective.

Select ONE answer:

1. To increase the annual profit after tax by %125 in the next 10 years
2. To introduce an average of two new products each year for the next six years
3. To double the share price within the next 10 years
4. To become the market leader in four market segments whithin the next 10 years

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 – To double the share price within the next 10 years is most likely to be the primary business objective. The other three options would be typical secondary objectives for Alex plc in pursuit of the primary objective.
4. Not correct

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