Self-Test Questions


1	According to the lastminute.com income statement, profit before tax for the financial year ending 30 September 2000 was approximately:
		A)	(£15.8m)
		B)	(£25.8m)
		C)	(£35.8m)
		D)	None of the above


2	Which of the following reasons best explains lastminute.com's £3.8m interest income?
		A)	Sales commissions
		B)	Interest from £103.7m cash and deposits
		C)	Income from marketable securities
		D)	None of the above


3	According to the QXL ricard's income statement, what was the major cause of the loss of £77.9m for the financial year ending 30 September 2000?
		A)	Sales, general & administration overheads
		B)	Cost of goods sold
		C)	Dividends
		D)	None of the above


4	According to the QXL ricard's financial statements what was the major reason for the increase of cash and deposits from £4.3m to £103.7m for the financial year ending 30 September 2000?
		A)	Long term bank loan
		B)	Bank overdraft
		C)	Issue of ordinary shares
		D)	None of the above


5	Which of the following statements best explains why annual accounts pose important problems for valuation purposes?
		A)	Creative accounting and changing accounting methods
		B)	The time it takes to produce the accounts
		C)	The role of dividends
		D)	None of the above


6	According to the financial statements for the financial year ending 30 September 2000, which of the following statements can be best used to describe both lastminute.com and QXL ricard?
		A)	Positive cashflow from core activities
		B)	Rapid growth in excess of 100%
		C)	Highly geared (leveraged)
		D)	None of the above


7	Which one of the following statements is false?
		A)	The weighted average cost of capital is independent of capital structure
		B)	The price earnings ratio is a valuation ratio of current share price to earnings per share
		C)	The cost of capital depends upon ordinary shares, preference shares, bonds and retained earnings
		D)	None of the above


8	Gordon's Growth model can be summarized as:
		A)	Dividend yield less the expected growth rate in dividends
		B)	Dividend yield plus the actual growth rate in dividends
		C)	Dividend yield plus the expected growth rate in dividends
		D)	None of the above


9	Criticisms of the adjusted accounting value method include:
		A)	It is based on the replacement cost of assets
		B)	It is based on the purchase cost of assets
		C)	It is based on the marginal cost of assets
		D)	None of the above


10	The stock market valuation method suffers from weaknesses such as:
		A)	Too hard to calculate
		B)	The method is based on the accounting model rather than on cash flow
		C)	Being based on time value of money concepts
		D)	None of the above


11	Social reality can be explained by:
		A)	How a group of people receives social issues and how the group's perceptions drives insight
		B)	How a group of people receives reality and how facts affect insight
		C)	How a group of people receives reality and how the group's perceptions influence insight
		D)	None of the above


12	What does a high P/E ratio signify?
		A)	An organisation with unclear prospects
		B)	An organisation with good prospects
		C)	An organisation with a good historical record
		D)	None of the above

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