Component of the working capital cycle
Which one of the following is not a component of the working capital cycle?
(a) Share capital
(b) Trade receivables
(c) Inventory
(d) Trade payables
29 Which of the following pairs both result in a positive cash flow?
(a) Decrease in inventory and decrease in trade payables
(b) Increase in inventory and increase in trade payables
(c) Increase in trade payables and increase in trade receivables
(d) Decrease in inventory and decrease in trade receivables
30 If a company shows revenue £60,000 and gross profit £12,000, which of the following calculations are correct?
(a) Mark-up 20%, gross margin 25%
(b) Mark-up 400%, gross margin 5%
(c) Mark-up 33%, gross margin 50%
(d) Mark-up 25%, gross margin 20%
31 Which one of the following statements is always true?
(a) The directors of a company own the company
(b) The auditors of a company produce the financial statements
(c) The company’s reserves are represented by bank balances
(d) The shareholders of a company own the company
32 If a company has much more borrowed capital than equity capital, which of the following statements is always true?
(a) If interest rates rise, the company will have to close
(b) The company will expand faster than a company with no borrowings
(c) The company is said to be highly geared
(d) The company is said to be low geared
33 If the directors of a plc need to raise money for the company, which of the following
would not achieve that effect?
(a) A bonus issue of shares
(b) A rights issue of shares
(c) A new issue of shares to the general public
(d) Selling a bond
34 A company has net current assets of £20,000, including inventory valued at £22,000.
The total of current assets is £60,000 and the current ratio is 1.5:1. What is the acid
test ratio?
(a) 2:1
(b) 0.95:1
(c) 0.5:1
(d) 2.7:1
35 A limited company with a share capital of 500,000 ordinary shares of £1 each makes
a rights issue on a ‘3 for 2’ basis at £3 each. What effect will this have on the total
equity after all the rights have been paid for by shareholders?
(a) Share capital £1,750,000, share premium £1,750,000
(b) Share capital £1,000,000, share premium £750,000
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