This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 2
Notcorrect
Correct –> A strategic alliance = No separate legal identity + A limited liability partnership = Separate legal identity + A registered company = Separate legal identity
Alex plc is a large group listed in the UK, with a head office in London and strategic business units (SBUs) spread across the world.
Only overall strategy, research and development and consolidated financial reporting is done in London.
All SBUs manage their own marketing and operations, and report directly to the regional centres across the world for all other forms of functional support.
Alex Insurance is an SBU operating in France and reporting to the Alex Northern European regional centre, based in Belgium.
Alex Insurance is engaged in providing home and car insurance direct to French consumers.
Which of the following areas of functional support would be provided to Alex Insurance by the Alex Northern European regional centre?
Select ONE answer:
Sales management
Financial reporting for the London Stock Exchange
Periodic management accounts
Research and development
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
Not correct
Not correct
Correct –> Periodic management accounts would be provided by the Regional Office as they are neither marketing/operations, nor are they related to strategic direction, R&D or consolidated financial reporting.
Alex Ltd and Lucy Ltd have recently agreed ot co-operate to exploit the possibilities that both companies have in a particular overseas market, France.
No separate company has been established for this purpose as the companies’ chief executives, who have known each other for many years, have agreed matters informally over a handshake and nice meal.
This arrangement is an example of a ….?
Select ONE answer:
Licencing agreement
Joint venture between two separate limited liability companies
Strategic alliance
Group structure
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
Not correct
Not correct
Correct –> A strategic alliance (3) is an informal or weak contractual agreement between companies. A licensing agreement (1) would be more formal in nature (based on a legally binding contract to ensure adherence to agreements), whilst a joint venture (2) would nearly always involve the formation of a separate company, with the investing companies taking a financial stake as shareholders and with management being provided as agreed. A group structure (4) would imply the establishment of a new company that would be controlled by one of the two companies.
AMW is a partnership in which the profits are shared between, A M and W in the ratio 3:2:1.
The partners wish to incorporate by issuing shares in a new company to the partners and the new company is to take over the assets and liabilities of the partnership.
There will be no cash movements between the business and the partners, or between the partners.
No loan accounts will be created between the business and its shareholders or directors.
Which of the following statements must be true?
Select ONE answer:
Shares will be issued in the ratio 3:2:1 to A M and W
Shares will be issued to match the partners’ capital
Creditors of the business will be in a stronger position after incorporation
Dividends will be paid in the ratio 3:2:1 to A M and W
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
Notcorrect
Correct –> Partners’ capital represents partners’ stakes, or ownership, of a business. So do shares. in the absence of cash changing hands, the shares must therefore match the partners’ capital amounts, which are unlikely to be in the profit-sharing ratio 3:2:1
Alex is a sole trader who currently employs one person.
His business, Stafford Research, performs analysis for marketing and market research companies.
The workload is increasing rapidly, and Alex has realised that he now needs to employ three additional people.
This will mean that new office premises have to be found and new furniture and equipment purchased.
The business operates in a highly competitive sector within the Staffordshire business community.
Identify which TWO of the following factors are disadvantages of his current business structure of being a sole trader in this context:
A A floating charge cannot be uses to secure borrowing B The Business’s liability is unlimited C Alex’s liability is unlimited D Financial statements do not have to be filed at Companies House E The stringent legal rules that apply to the business’s constitution and the way it operates.
Select ONE answer:
AB
AC
AD
AE
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
Notcorrect
Correct –> A floating charge (which gives lenders security for their loan) cannot be created over the business of a sole trader (A), but it can be over the assets of a limited company. This could hinder his ability to raise finance. Currently, Angela has unlimited liability (C) and with the increasing financial commitments of the business it might be better for him personally to seek limited liability, though the business will still have unlimited liability for its own debts (B) – as a sole trader, the business’s liability is not distinct from his own.
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