Tag: Professional Accountant

Alex Ltd has recently automated production of its famous Staffordshire Oatcakes and this has led to some redundancies amongst employees that are paid on an hourly basis (ie variable labour).

The company borrowed heavily to finance the purchase of the machinery needed.

The effects of these changes on the company’s financial risk are that?

Select ONE answer:

1. Both changes (machinery and borrowing) increase the company’s financial risk
2. Automation increases financial risk, borrowing decreases it
3. Automation decreases financial risk, borrowing increases it
4. Both changes decrease financial risk

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 == > Both changes (machinery and borrowing) increase Alex Ltd’s liquidity risk, a type of financial risk, as they increase the amounts (fixed overheads and interest) that must be paid however much revenue is achieved. They both mean that Alex Ltd is more exposed if there is a downturn in demand for its products.
2. Not correct
3. Not correct
4. Not correct

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For many years, Alex plc’s main source of revenue was the sale of floppy storage disks for computers.

This source of revenue fell sharply after the introduction of digital hard storage disks for computers.

In relation to the success of hard disk storage, Alex pic was the victim of?

Select ONE answer:

1. Operational risk
2. Financial risk
3. Business risk
4. Market risk

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 == > The nature of the computer storage business changed through new technology bringing innovations. Alex Ltd’s main business radically fell because of this – it suffered product risk, a form of business risk
4. Not correct

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Process risk, people risk, and event risk are all forms of?

Select ONE answer:

1. Operational risk
2. Financial risk
3. Business risk
4. Strategy risk

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 == > These risks are to do with the operations of the business – a process going wrong, a valued employee leaving, a regulation being broken.
2. Not correct
3. Not correct
4. Not correct

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

Alex Ltd is renewing its buildings and contents insurance policy covering its eight Staffordshire factories.

In terms of risk management, this is an example of?

Select ONE answer:

1. Risk avoidance
2. Risk reduction
3. Risk transfer
4. Risk retention

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 == > Insurance transfers risk. In return for an insurance premium, the insurance company agrees to take on an agreed proportion of the financial burden of a risk for Alex Ltd.
4. Not correct

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

An organisation responds to an identified risk by restructuring.

Which category of control has it used?

Select ONE answer:

1. Physical controls
2. System controls
3. Management controls
4. Financial controls

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 == > Management controls include all aspects of management that ensure the business is properly planned, controlled and led, including the organisation’s structure.
4. Not correct

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