Question

1. An improvement in the interest cover ratio may be best explained by:

a. Reduced debt and/or reduced interest rates and/or increased profits

b. Reduced debt alone

c. Reduced interest rates alone

d. Reduced debt and/or reduced interest rates

2. Value-based management emphasizes shareholder value, because this is the?

a. Function of accounting processes

b. Required under Corporations legislation

c. Primary goal of every business

d. Necessary for economic growth

3. Depreciation is added back to net profit in a Statement of Cash Flows because it is:

a. Not included in net profit

b. A non-cash expense

c. An investing activity

d. A non-current asset

4. In recording business transactions using the double entry method, which of the following statements is true?

a. Either or both the accounts may increase or decrease

b. One account must increase and the other account must decrease

c. Both entries must decrease accounts

d. Both entries must increase accounts

5.Shareholders in a company have the right to?

a. Receive an Annual Report and attend an Annual General Meeting

b. Visit the company top observe its practices

c. Participate in the management of the company

d. Obtain additional information to that shown in the annual financial statements

Answer 1

1. An improvement in the interest cover ratio may be best explained by:

a. Reduced debt and/or reduced interest rates and/or increased profits.

As the formula for Interest Coverage Ratio = EBIT/Interest Expenses, we can improve Interest Coverage Ratio by reducing debt and/or reducing interest rates and/or increasing profits.

2. Value-based management emphasizes shareholder value, because this is the

c. Primary goal of every business

As the primary goal of every business is the maximization of shareholders value the value based management emphasis on this.

3.Depreciation is added back to net profit in a Statement of Cash Flows because it is:

b. A non-cash expense

Depreciation is a non cash expense, that is why it is added back to the statement of cash flow.

4. In recording business transactions using the double entry method, which of the following statements is true?

a. Either or both the accounts may increase or decrease

Under double entry method, any entry can make Either or both the accounts increase or decrease.

5. Shareholders in a company have the right to

a. Receive an Annual Report and attend an Annual General Meeting

Shareholders has the right to Receive an Annual Report and attend an Annual General Meeting of the company.