(Papers) ACET Paper June 2015 "CT2 Finance and Financial Reporting"

(Papers) ACET Paper June 2015 "CT2 Finance and Financial Reporting"

Q.1 Which of the following forms of capital should prove the cheapest for a company to finance in the long term?

A. 11 % secured debentures maturing in 2012
B. 12.5% unsecured loan stock to be redeemed in 2008
C. 9 % cumulative convertible preference shares
D. Equity shares with a net dividend yield of 4 % pa

Q.2 A Limited Liability Partnership differs from a limited company in that:

A. it is not a separate legal entity
B. there must be one member with unlimited liability
C. it has no memorandum or articles of association
D. action cannot be taken against individual members for fraud and negligence

Q.3 Which of following is often used by the companies that are suffering from cashflow problems arising from late payment by customers?

A. Hire purchase
B. Bills of exchange
C. Invoice discounting
D. Trade credit

Q.4 Which of the following could result in a company obtaining a stock exchange listing:

I A right issue
II An offer for subscription
III A placing

A. II and III only
B. I and II
C. III only [2]
D. I only

Q.5 Which of the following statements are correct?

I Asset gearing may be defined as : Borrowing / Equity
II Capital gearing may be defined as : Borrowing / (Borrowing + Equity)
III Asset gearing and capital gearing are equivalent.

A. I is correct
B. III is correct
C. I & II are correct
D. All are correct

Q.6 While calculating “interest on borrowings” to be used in the formula for “income gearing ratio”, the borrowings will not include

A. long term loan taken from a FI
B. trade credit
C. overdraft
D. commercial paper

Q.7 If Asset cover ratio = 2, shareholders equity ratio = 3 and intangibles = 0, then which of the following is correct?

A. Asset gearing cannot be calculated based on the given information.
B. Asset gearing = 1/6
C. Asset gearing = 2/3
D. Shareholders equity = Total assets / 6

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