BMAN10621B - Fundamentals of Financial Reporting Exam with Questions Solved 100% Correct (Verified Answers)
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Course
BMAN10621B
Institution
BMAN10621B
What are expenses? - Costs incurred in the process of generating revenue
What is the difference between capital and revenue expenditure? - Capital expenditure provides
benefits for more than one year, while revenue expenditure is for current year only
What is the purpose of the Income Statement?...
BMAN10621B - Fundamentals of
Financial Reporting Exam with
Questions Solved 100% Correct
(Verified Answers)
What are expenses? - ✔✔Costs incurred in the process of generating revenue
What is the difference between capital and revenue expenditure? - ✔✔Capital expenditure provides
benefits for more than one year, while revenue expenditure is for current year only
What is the purpose of the Income Statement? - ✔✔Measures financial performance (wealth) of
a company over an accounting period
What is the Matching Convention? - ✔✔Expenses incurred during the year must be from
the revenues generated during the same year (i.e. from the same period)
What is the market value of a company? - ✔✔Share price on stock exchange * number of
shares issued
What is the book value of a company? - ✔✔The equity (assets - liabilities) or net assets of a company
Why is the market value usually greater than book value? - ✔✔Market value are based on
future expectations, include intangible good & goodwill, book value only considers the past
Why do cash and profit commonly differ? - ✔✔Accruals concept:
Why is cash important to a business? - ✔✔Counterparties may only accept cash, re-pay short
term obligations, taking advantage of business opportunities
Why are cash flow statements important? - ✔✔They provide information on liquidity, viability
and adaptability of a business
What does the Cash Flow statement show? - ✔✔The movement of cash from operating, investing
and financing activities in a business over a financial period. Helps understand source/use of cash and
changes in cash.
What type of financial analysis are shareholders interested in? - ✔✔Profitability, investment
and gearing rations
What type of financial analysis are long-term lenders interested in? - ✔✔Profitability, gearing ratios
What type of financial analysis are short-term lenders interested in? - ✔✔Liquidity ratios
What are ratios usually compared to? - ✔✔Past accounting periods, other (similar
businesses), planned performance
Equation for return on ordinary shareholders' funds (ROSF)? - ✔✔(Profit after tax / Equity) * 100
Equation for return on capital employed (ROCE)? - ✔✔(Operating profit / (Equity + LR liabilities))
* 100
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