Explore BrainMass

Key Financial Management Concepts

1. A company has two items in stock which require to be repaired before sale Cost Selling price Repair costs
item1 5260 7600 880
item2 2360 2450 190

What is the total stock value of these items?

A$6550 B$7520 C$7620 D$8980

2. The following information is given for a business at 31 December 2004.
current ratio 3.6:1
average stock $12,000
debtors $4,000
creditors $5,000

What was the value of stock at 1 January 2004?

A. $9400 B$10,000 C$12000 $14,000

3. A particular costs is classified as semi-variable

Which effect will a 20 % reduction in activity have on the unit cost ?
A. decrease by 20 %
B. decrease by less than 20 %
C. increase by 20%
D. increase by less than 20 %

4. The following information relates to a product.

Fixed costs 72000
desired Profit 30 000
selling price per unit 10
variable cost per unit 4

How many units must be produced and sold to cover fixed costs and make the desired profit?
A. 12 000 units
B. 17 000 units
C. 18 000 units.
D. 25 500 units.

5. The following information applies to product X Ltd.

Output(units) Sales ($ 000) Profits($000)
750 750 100
1000 1000 250

What is the contribution to sales ratio?

A. 25% B.40% C.60% D.87%

6. Fixed asset data for a company is as follows:

Net book value at 1 January 2004 2200000
Profit on sale of fixed assets 100000
depreciation of fixed assets in 2004 500000
proceeds from sale of fixed assets 800000
net book value at 31 December 2004 2300000

What was the cash outflow on fixed assets addition for 2005?

A$600,000 B$900000 C$1300000 D$1500000

7. A company issues 3000 new ordinary shares of $1.00 at a premium of $0.50 to finance the redemption of 3750 preference shares at a premium of $0.20.The preference shares were originally issued at a premium of $0.10.

What will be the increase in the share premium account?

A.$750 B$1125 C$1500 $1,875

8. The following data relates to a company

Issued ordinary shares 1000000
Nominal value per share $1.00
Market value per share $2.30
Net profit after taxation $200,000
Retained earnings % of net profit after tax 50

What is the net dividend yield?

A4.35% B8.7% C10% D20%

9 A company calculates its gearing by comparing its net bank borrowings to ordinary shareholders funds

Extracts from the financial statements are:
Share capital ( all ordinary $0.50 Shares ) 120
share Premium Account 100
Profit and Loss Account 160

Long Term Bank Loan 150
Bank overdraft 35
Cash at Bank 15

What is the earning ratio?

A 44.7 B52.6% C 60.7% D 71.4%

10. The total monthly production cost of a process was $78200.Finished process output amounted to 8000 completed units.There were also 2000 units of work in progress 60% complete. There were no opening stocks or normal waste.

What was the cost per equivalent unit?

A $7.82 B$8.50 C$8.89 D$9.78


Solution Summary

This explains the key financial concepts such as gearing ratio, stock value, unit cost, cash outflow, net dividend yield and cost per equivalent unit.