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Q1

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Q1. What is the present value of an annuity consisting of payments of $300 every month for 6 years, with the first payment occurring immediately, if the interest rate is 7% p.a., compounding monthly?

Please answer the above question and provide your response in the space below.

Please note:  You do not need to show your working out.  Round your answer to two decimal places.

 

Q2. Provide three (3) possible reasons why the net operating cash flow will differ from the operating profit earned by a business.  Your answer must be written in your own words.

Please answer the above question and provide your response in the space below.  You are welcome to use bold, underline and/or italics to emphasize parts of your answer.

 

Q3. In your own words, explain how positive financing cash flows can create risks for a business.  Your answer must be written in your own words.

Please answer the above question and provide your response in the space below.  You are welcome to use bold, underline and/or italics to emphasize parts of your answer.

 

Q4. An investment you are considering offers an interest rate of 6%. pa that is compounded monthly.  What is the Effective Annual Rate for this investment?

Please answer the above question and provide your response in the space below.

Please note:  You do not need to show your working out.  Round your answer to two decimal places.

 

Q5. You are saving for an overseas holiday in two years, which will cost $15,000. How much do you need to deposit in an account paying an interest rate of 6% p.a., compounded monthly, in order to have enough money to pay for the holiday?

Please answer the above question and provide your response in the space below.

Please note:  You do not need to show your working out.  Round your answer to two decimal places.

 

Q6. Principal Computers Ltd is a major retail store operating in Camberwell, Melbourne.  The Managing Director of the firm recently purchased two ultramodern computers.  One of these computers was designated for resale in order to test the market appetite for the new device, whereas the other was assigned to office use.  In your own words, explain how the two computers would be classified in the firm’s Balance Sheet?

Please answer the above question and provide your response in the space below.  You are welcome to use bold, underline and/or italics to emphasize parts of your answer.

 

Q7. “Land is not ordinarily subject to depreciation adjustments because the value of land is continually increasing”.  Do you agree with this statement?  In your own words, explain why or why not.

Please answer the above question and provide your response in the space below.  You are welcome to use bold, underline and/or italics to emphasize parts of your answer.

 

Q8. Golddiggers Ltd specialise in selling custom made jewellery to wealthy customers.  Would you expect that they are more likely to use a perpetual or periodic inventory system?  In your own words, explain why.

Please answer the above question and provide your response in the space below.  You are welcome to use bold, underline and/or italics to emphasize parts of your answer.

Q1. Which of the following costs is most likely to be a fixed cost for an airline?

Select one:

a. Aviation fuel

b. Single malt whisky for first-class passengers

c. In-flight meals

d. Salary of CEO

 

Q2. Which of the following will result in an increase in the value of the equity of a firm?

Select one:

a. Depreciation

b. Asset revaluation

c. Receipt of cash from customer who previously purchased goods on credit

d. Taxation

e. Impairment

 

Q3. The capital structure of an organisation consists of three items: debt, preference shares and ordinary shares.  The before-tax cost of debt is 4.0%, the before-tax cost of preference shares is 7.2% and the before-tax cost of ordinary shares is 12.8%.  The proportion of debt in the capital structure is 15%, the proportion of preference shares is 21% and the proportion of ordinary shares is 64%.  The corporate tax rate is 30%.

Select one:

a. 9.80%

b. 7.21%

c. 9.67%

d. 10.12%

e. 10.30%

 

Q4.

 

 

 

Q5. Ultimate Adventures Pty Ltd provides luxury outback tours in far north Queensland (Australia).  During the financial year, they had an after-tax net profit of $5,000, interest expense of $2,000 and tax expense of $1,000.

Based on these figures, what is the company’s interest cover ratio?

Select one:

a. 2.50

b. 4.00

c. 2.00

d. 5.00

e. 1.00

 

Q6. You have received the electricity bill for your company on 31st March 2020.  The next bill is not due until 31st July.  Your financial year ends on the 30th June 2020.  How will you recognise the electricity expenses for April, May and June?

Select one:

a. It will be recognised as Cash Expenses

b. It will be recognised as Accrued Expenses

c. It can be recognised as a Note Payable

d. It will be recognised as Prepaid Expenses

 

Q7. Project X will increase the revenue of an organisation from $3,500,000 to $6,000,000.  Wages and salaries are always 50% of revenues.  Project X will also increase existing maintenance costs by $330,000.  Based on these figures, what are the incremental earnings (i.e. changes in revenues minus expenses) that will result from accepting this new project?

Select one:

a. $1,250,000

b. $1,700,000

c. $2,500,000

d. $880,000

e. $920,000

 

Q8. Charlie Ltd provides you with the following financial information: current share price = $27.00; net profit = $4,000; preference dividend = $1,000; ordinary dividend = $1,500; and issued ordinary shares = 1,000 shares.  Based on this financial information, what is the company’s earnings per share?

Select one:

a. $1.00

b. $1.50

c. $4.00

d. $3.00

e. $2.50

 

Q9.

 

 

 

Q10. A company purchased a new piece of machinery on 30 June 2019 for $96,000.  It is estimated that the machine will have a useful life of 6 years.  The machine will have no salvage value and will depreciated to a residual value of zero.  The company uses the accelerated depreciation method (reducing-balance method) at a rate of 30%.  What would be the amount of depreciation expense charged for the year ended 30 June 2021?

Select one:

a. $19,200

b. $15,680

c. $22,720

d. $28,800

e. $20,160

 

Q11. A preference share pays a constant dividend of $2.50 and is currently priced at $22.00.  The corporate tax rate is 30%.  What is the before-tax cost of preference shares?

Select one:

a. 12.82%

b. 7.95%

c. 8.80%

d. 3.40%

e. 11.36%

 

Q12. Your employer manufactures commercial aeroplanes.  On 30 December 2020, your boss calls you into a meeting and informs you that they believe sales will be up 30% in 2021 due to the lifting of travel restrictions relating to COVID-19.  Your boss asks you to develop a budget for 2021 to ensure that your firm has enough capacity to make the additional aeroplanes.  What kind of budgeting does your firm use?

Select one:

a. Top-down, rolling budgeting

b. Bottom-up, periodic budgeting

c. Top-down, periodic budgeting

d. Bottom-up, rolling budgeting

 

Q13. A boutique vineyard operating in South Australia had a long-term debt of $2,000,000.  After discussions with their lender, it was agreed that the lender would receive $2,000,000 of ordinary shares to extinguish the long-term debt.  How would this transaction impact on the Statement of Cash Flows?

Select one:

a. No impact on the Statement of Cash Flows

b. Decrease cash by $2,000,000

c. Increase cash flow by $2,000,000 for investing activities

d. Increase cash by $2,000,000

e. Increase cash flow by $2,000,000 for financing activities

 

Q14. You have been provided with a list of budgets that could be used by a firm (see below).  Assuming the firm was a manufacturing firm, which of the following would not likely be a budget used by this kind of firm?

Select one:

a. Direct Labour Budget

b. Raw Materials Inventories Budget

c. Accounts Receivable Budget

d. Net Profit Budget

 

Q15. Which of the following is not an example of cash flow from financing activities?

Select one:

a. Receipt of dividends

b. Proceeds from issuing shares

c. Payment of dividends

d. Cash paid to repurchase the firm's shares

 

Q16. Which of the following is most likely to be a variable cost for a pizza shop?

Select one:

a. Ingredients for pizza toppings

b. Public liability insurance

c. Rent

d. Computer for processing customer orders

 

Q17. An organisation provides you a number of items from their Profit and Loss Statement:

Income tax = $2,500,400

Operating expenses = $6,005,200

COGS = $17,850,720

Interest Expense = $1,706,000

Sales = $36,000,000

Based on the above figures, what is the firm’s EBIT?

Select one:

a. $28,119,800

b. $10,800,000

c. $18,149,280

d. $12,144,080

e. $7,937,680

 

Q18.

 

 

 

Q19. You have recently inherited $50,000 and decide that you would like to put these funds into a term deposit.  Your local bank offers various investment options, which are identified below.  Which of these options offers you the highest annual interest?

Select one:

a. 4.3% compounded daily

b. 4.5% compounded monthly

c. 4.8% compounded annually

d. 4.4% compounded semi-annually

 

Q20. You are provided with the following accounts from a Balance Sheet.

 

Equity = $7,200

Accounts receivable = $1,300

Accounts payable = $450

Inventory = $2,400

Bank loan = $520

Assuming that cash at bank is the only figure missing from the above list of accounts, what is the balance of the cash at bank account?

Select one:

a. $2,530

b. $2,730

c. $4,470

d. $3,200

 

Q21. Compared to simple interest, the compound effect on interest means that for a given future value…

Select one:

a. the present value is the same

b. the present value is higher

c. none of the options provided

d. the present value is lower

 

Q22. You are tasked with preparing a Profit and Loss Statement for your organisation.  Which of the following best represents the correct order for items appearing in this statement?

Select one:

a. Revenue, Operating profit, Cost of sales, Tax expense, Gross profit

b. Revenue, Cost of sales, Operating profit, Tax expense, Gross profit

c. Revenue, Cost of sales, Gross profit, Tax expense, Operating profit

d. Revenue, Gross profit, Cost of sales, Tax expense, Operating profit

e. Revenue, Cost of sales, Gross profit, Operating profit, Tax expense

 

Q23. A toy store in Melbourne informs you that their opening inventory balance for the period was $75,000, Cost of Sales during the year was $240,000 and its ending inventory balance for the period was $90,000.  What is the value of purchases during the period?

Select one:

a. $15,000

b. $225,000

c. $240,000

d. $255,000

e. $90,000

 

Q24. You are interested in buying shares in Telstra Ltd and locate the following information concerning the company on the Internet:

Bid = $39.22

Offer = $39.24

High = $39.70

Low = $39.23

Last Trade = $39.20

If you would like to buy Telstra Ltd shares, at what price can you buy them?

Select one:

a. $39.22

b. $39.20

c. $39.70

d. $39.23

e. $39.24

 

Q25. There are many advantages associated with a shorter inventory turnover period.  Which of the following is not one?

Select one:

a. It reduces the cost of inventory as management can purchase in bulk

b. It reduces the amount of funds tied up in inventory, so these can be used elsewhere in the business

c. It reduces the likelihood that inventory will become obsolescent

d. It reduces the physical space needed to store inventory