CERTIFIED ACCOUNTING TECHNICIAN Paper FFM Foundations in Financial Management EXAM KIT P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by Kaplan Publishing UK Unit The Business Centre Molly Millar’s Lane Wokingham Berkshire RG41 2QZ 978-1-78740-062-7 © Kaplan Financial Limited, 2017 Printed and bound in Great Britain The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties Please consult your appropriate professional adviser as necessary Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Kaplan Publishing Acknowledgements The past ACCA exam questions are the copyright of the Association of Chartered Certified Accountants The original answers to the questions from June 2006 onwards were produced by the examiners themselves and have been adapted by Kaplan Publishing We are grateful to the Chartered Institute of Management Accountants and the Institute of Chartered Accountants in England and Wales for permission to reproduce past exam questions The answers have been prepared by Kaplan Publishing P KA PL AN P U BLI SH IN G INTRODUCTION This new edition of the ACCA Foundation Exam Kit is packed with exam-type questions, to help you to prepare for your exam successfully • Questions are grouped by syllabus topics and provide extensive coverage of all syllabus areas • All questions are of exam standard and format – this enables you to master the exam techniques Past exam questions have been incorporated into the main body of questions within the kit and are grouped by syllabus area PAPER ENHANCEMENTS We have added the following enhancements to the answers in this exam kit: Key answer tips All answers include key answer tips to help your understanding of each question Tutorial note All answers include more tutorial notes to explain some of the technical points in more detail KA PL AN P U BLI SH IN G P P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T P KA PL AN P U BLI SH IN G CONTENTS Page Index to questions and answers P.7 Syllabus and revision guidance P.11 The exam P.19 Mathematical tables P.21 Section Multiple-choice questions Practice questions 43 Answers to multiple-choice questions 125 Answers to practice questions 145 2011 Specimen Paper questions 281 Answers to 2011 Specimen Paper questions 287 Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to mykaplanreporting@kaplan.com with full details Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions KA PL AN P U BLI SH IN G P P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T P KA PL AN P U BLI SH IN G INDEX TO QUESTIONS AND ANSWERS Page number Question Answer MULTIPLE-CHOICE QUESTIONS (MCQs) Cash receipts and payments Cash balances and working capital management Credit granting and debt collection Sources of finance Relevant costs Capital investments Legal issues June 2009 sample multiple-choice questions (published by ACCA) June 2009 Exam Paper multiple-choice questions December 2009 Exam Paper multiple-choice questions Selected June 2010 Exam Paper multiple-choice questions December 2010 Exam Paper multiple-choice questions June 2012 Pilot Paper multiple-choice questions 12 16 20 23 25 28 30 33 36 39 125 127 129 131 133 135 136 137 138 138 140 142 143 PRACTICE QUESTIONS Cash receipts and payments 10 11 12 13 14 15 Automotive Antipodean Enterprises Aida plc CF Budgeted cash flow Harrow Credit Treasury department Chocoholics Williams Cash management Bathroom company Cleanly Health Foods Company Porky’s Ltd Cool Ski Co 43 45 46 47 48 49 49 50 51 52 52 52 54 55 57 145 147 149 150 151 153 153 155 157 158 158 159 160 162 163 16 17 18 19 20 Alan Webb Print Co Rich Co Tastee Co (June 10 exam) Joe (June 2012 Pilot Paper) 58 59 61 62 64 166 167 169 170 173 KA PL AN P U BLI SH IN G P P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T Page number Question Answer Cash balances and working capital management 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Golf balls Victory (1) Victory (2) Bags PRT East Meets West Rant Pooch Shoes for You Camp Company All Weather Windows Co The Kitchen Co Brush Co Choc Co Expand Co (Dec 10 exam) I Co (June 2012 Pilot Paper) 65 65 66 66 67 68 69 70 71 72 73 74 75 76 77 78 174 176 177 178 181 184 185 186 187 188 189 191 192 194 195 197 78 79 79 80 81 82 82 83 83 83 84 85 86 87 87 88 89 89 90 91 199 200 202 204 205 206 207 208 210 211 212 214 215 216 218 219 220 221 222 223 Credit granting and debt collection 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 P Slowpayer (1) Slowpayer (2) Ontime plc Painter Books (2) Expander Credit control policy (1) Credit control policy (2) G AAD Lace Skint Duel Fuel Fibre Clean Noise Jay Waste Co Light Co Curtain Co D Co (June 2012 Pilot Paper) KA PL AN P U BLI SH IN G IN DE X TO Q UE S T ION S A N D A N S WE R S Page number Question Answer Sources of finance 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 Bugs Loan Inc DEB plc Hobble plc DF Clean Lens Gym Jam AIM Financial matters Financial analysts Zimmer plc Banks and money markets Slim Jim Co Long term finance Bake Co (Dec 10 exam) Financial Intermediation (June 2012 Pilot Paper ) L Co (June 2012 Pilot Paper – amended) 91 92 92 94 94 95 96 96 97 97 97 98 98 98 99 99 99 224 225 226 227 229 231 232 233 234 235 238 240 242 244 246 248 249 100 101 102 250 251 252 103 104 105 107 107 108 110 111 113 114 115 117 118 120 121 122 124 124 253 255 256 258 259 260 261 263 264 265 266 269 270 272 273 276 278 279 Relevant costs 74 75 76 Publishing company ZCC John Robertson Capital investments 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 Soke plc Law plc Jairzinho plc Computer update Rainbow Paradise Taxi Silly Filly Weavers Nippers Go Green Alan Webb Wicker Co Painless Co King Edward’s Hospital (June 10 exam) Mr Food (Dec 10 exam) Hockey Club (June 2012 Pilot Paper) Capital budgeting KA PL AN P U BLI SH IN G P P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T P 10 KA PL AN P U BLI SH IN G MU L TIP LE -C HO ICE Q UES TI ON S : S E CT I ON 38 NG plc is owed $4,000 by a customer who refuses to pay, despite NG having secured a County Court Judgement against them NG has gone back to the Court and a court bailiff has been given authority to take goods from the customer’s home or business What is this arrangement known as? 39 A A warrant of execution B An attachment of earnings order (1 mark) BK Inc is unable to meet all of its outstanding liabilities and debts and has negotiated revised payments and terms with each of its major creditors What is this arrangement known as? 40 A An administration order B A company voluntary arrangement (CVA) (1 mark) Some organisations use the ‘3Cs’ as a starting point to assess a potential client’s credit worthiness Which of the following is NOT one of the 3Cs in this context? 41 A Credit history B Capacity (1 mark) Alpha Limited has sold goods on credit to Beta Limited The following information is available (i) Aged receivable analysis (ii) Copies of outstanding invoices (iii) Copies of contractual documents (iv) Copies of trade references (v) Copies of bank references Which of the above documents will be needed to aid the collection of the outstanding amounts owed by Beta Limited? 42 43 A All items B (i), (ii) and (iii) only C (i), (iv) and (v) only D (iv) and (v) only (2 marks) Invoice discounting is a method where: A Discounts are given for early payment of invoices B A finance house lends money against invoices issued (1 mark) Credit insurance allows a company to claim for: A Amounts owed by a customer who has defaulted on payment B Amounts owed to a bank on a mortgage KA PL AN P U BLI SH IN G (1 mark) 11 P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T 44 45 Organisations often use debt collection agencies because: A Debt collection agencies have a right to seize goods from customer B Debt collection agencies get results because customers take more notice and are more likely to pay (1 mark) Which of the following is NOT a suitable external source of information that can be used to monitor the status of a debtor? A Credit reference B Bank reference C Press reports D Aged debt analysis (2 marks) SOURCES OF FINANCE 46 The following statements have been made about the benefits of debt finance compared to equity finance: Statement 1: Interest payments on debt attract tax relief Statement 2: Control of the company is diluted Which of the above statements is true? 47 A Both of them B Statement only C Statement only D Neither of them (2 marks) The following statements have been made about inflation: Statement 1: Inflation leads to a distribution of income and wealth Statement 2: If a country has a higher rate of inflation than its partners, its imports become relatively more expensive and its exports become relatively cheaper Which of the above statements is true? 12 A Both of them B Statement only C Statement only D Neither of them (2 marks) KA PL AN P U BLI SH IN G MU L TIP LE -C HO ICE Q UES TI ON S : S E CT I ON 48 GYH plc has just taken out a loan that involves repaying some of the capital during the life of the loan with the bulk of the capital being repaid on maturity What type of repayment pattern is being described here? 49 50 A Bullet B Balloon C Mortgage-style (amortising) D Irredeemable (2 marks) Which of the following are ALL money market instruments? A Bills, certificates of deposit and deposits B Cheques, certificates of deposit, deposits C Cash, cheques and bills D Bills, certificates of deposit and cash (2 marks) Which of the following, if either, is an assumption on which Baumol’s model of cash management is based? Assumption 1: Amounts of cash required in future periods cannot be predicted with certainty Assumption 2: The opportunity cost of holding cash is known and it does not change over a period of time 51 A NEITHER Assumption NOR Assumption B Assumption ONLY C Assumption ONLY D BOTH Assumption and Assumption (2 marks) 'A Central Bank acts as lender of the last resort.' Is this statement true or false? 52 A True B False (1 mark) 'An unconditional order in writing to pay the addressee a specified sum of money either on demand or at a future date' What does the above definition describe? A Bill of Exchange B Loan stock KA PL AN P U BLI SH IN G (1 mark) 13 P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T 53 Which of the following statements are true/false? Statement 1: The security of local authority bonds is always considered to be as good as that of central government bonds Statement 2: A bond always offers a fixed rate of interest 54 Statement Statement A False False B False True C True False D True True (2 marks) ADY Inc is looking to invest surplus funds so that the deposit can be withdrawn on demand at any time without penalty What type of deposit is most suitable here? 55 A Sight deposit B Time deposit C Certificate of deposit D Repo (2 marks) A bank is offering 6% interest on a deposit account Inflation is currently 3% What is the real rate of return on the account? 56 A 9% B 6% C 3% D 2.91% (2 marks) The CAMPARI framework is often used when assessing a lending decision What does the C stand for in the CAMPARI mnemonic? 14 A Capability B Character (1 mark) KA PL AN P U BLI SH IN G MU L TIP LE -C HO ICE Q UES TI ON S : S E CT I ON 57 MM Inc has decided to issue new shares to existing shareholders instead of a normal cash dividend What type of share issue is being described here? 58 A Rights issue B Bonus issue C Scrip dividend D Share split (2 marks) UNQ Ltd is a small unquoted company looking to raise further equity finance Which of the following sources of finance is LEAST suitable? 59 A Rights issue B Business Angel C Venture Capital D Public Issue (2 marks) Thunder plc has million £0.50 par value shares in issue Its gross profit was £1.5 million last year and its profit after tax was £0.8 million What is Thunder plc’s earnings per share? 60 A £1.50 B £0.80 C £0.75 D £0.40 (2 marks) Which of the following is NOT a source of government funds for small and medium sized businesses? A Regional selective assistance B Enterprise grant C Business angel investment D Regional innovation grant KA PL AN P U BLI SH IN G (2 marks) 15 P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T RELEVANT COSTS 61 A company is considering undertaking a contract for a new client The contract requires 100kg of material A It has 200kg in inventory, which it bought last year at a cost of $10 per kg The current resale value is $8, although to replace the material today would cost $15 per kg There is no other use for the material, except as a substitute for material B, which costs $14 per kg What is the relevant price per kg of material A? 62 A $10 B $14 C $8 D $15 (2 marks) A farmer grows carrots, which he currently digs up and sells in 10kg sacks, without washing the carrots or preparing them in any other way He is considering whether to trim them, wash them and package them up in 1kg cartons instead of continuing to sell them in sacks Which of the following are relevant to his decision? 63 (i) The cost of growing the carrots (ii) The sales value of the unprepared sacks of carrots (iii) The costs of trimming and washing the carrots (iv) The sales value of the new trimmed cartons of carrots A All of them B (i), (iii) and (iv) only C (ii), (iii) and (iv) only D (iii) and (iv) only (2 marks) A contract is under consideration that requires 400 labour hours to complete There are 150 hours of spare labour capacity The remaining hours for the contract can be found either by weekend overtime working paid at double the normal rate of pay or by diverting labour from the manufacture of product QZ If the contract is undertaken and labour is diverted, then sales of product QZ will be lost Product QZ takes three labour hours per unit to manufacture and makes a contribution of $12 per unit The normal rate of pay for labour is $9 per hour What is the total relevant cost of labour for the contract? 16 A $3,250 B $3,600 C $4,500 D $4,600 (2 marks) KA PL AN P U BLI SH IN G MU L TIP LE -C HO ICE Q UES TI ON S : S E CT I ON 64 A company purchased a machine four years ago at a cost of $25,000 It is to be depreciated on a straight line basis over five years It is no longer used on normal production work and has a scrap value of $2,000 A one-off contract is being considered which would make use of this machine for six months The contract would require adjustments to be made to the machine costing $800 At the end of the contract it is estimated that the scrap value would be $1,500 What is the relevant cost of the machine to the contract? 65 A $1,300 B $3,300 C $4,300 D $23,500 (2 marks) A company has an asset that originally cost $58,000, but would now cost just $37,000 to replace The asset could be sold for scrap to earn $11,000 Alternatively, it could be used in a small project that would earn net income of $17,500 The asset has no other use What is the relevant value of the asset? 66 A $6,500 B $11,000 C $17,500 D $37,000 (2 marks) A company has just secured a new contract that requires 500 hours of labour There are 400 hours of spare labour capacity The remaining hours could be worked as overtime at time-and-a-half or labour could be diverted from the production of product X Product X currently earns a contribution of $4 in two labour hours and direct labour is currently paid at a rate of $12 per normal hour What is the relevant cost of labour for the contract? A $200 B $1,200 C $1,400 D $1,800 KA PL AN P U BLI SH IN G (3 marks) 17 P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T 67 A company is evaluating a project that requires two types of material (T and V) Data relating to the material requirements are as follows: Material type T V Quantity needed for project kg 500 400 Quantity currently in inventory kg 100 200 Original cost of quantity in inventory $/kg 40 55 Current purchase price $/kg 45 52 Current resale price $/kg 44 40 Material T is regularly used by the company in normal production Material V is no longer in use by the company and has no alternative use within the business What is the total relevant cost of materials for the project? 68 A $40,400 B $40,900 C $43,400 D $43,900 (2 marks) A company is evaluating a project that requires 4,000 kg of a material that is used regularly in normal production 2,500 kg of the material, purchased last month at a total cost of $20,000, are in inventory Since last month the price of the material has increased by 2.5 per cent What is the total relevant cost of the material for the project? 69 A $12,300 B $20,500 C $32,300 D $32,800 (2 marks) A contract is under consideration that requires 800 labour hours to complete There are 450 hours of spare labour capacity for which the workers are still being paid the normal rate of pay The remaining hours required for the contract can be found either by overtime working paid at 50% above the normal rate of pay or by diverting labour from the manufacture of product OT If the contract is undertaken and labour is diverted, then sales of product OT will be lost Product OT takes seven labour hours per unit to manufacture and makes a contribution of $14 per unit The normal rate of pay for labour is $8 per hour What is the total relevant labour cost to the contract? 18 A $3,500 B $4,200 C $4,500 D $4,900 (2 marks) KA PL AN P U BLI SH IN G MU L TIP LE -C HO ICE Q UES TI ON S : S E CT I ON 70 All of a company’s skilled labour, which is paid $8 per hour, is fully employed manufacturing a product to which the following data refer: $ per unit Selling price Less variable costs: Skilled labour Others Contribution $ per unit 60 20 15 ––– (35) ––– 25 ––– The company is evaluating a contract that requires 90 skilled labour hours to complete No other supplies of skilled labour are available What is the total relevant skilled labour cost of the contract? 71 A $720 B $900 C $1,620 D $2,160 (3 marks) A company requires 600 kg of raw material Z for a contract it is evaluating It has 400 kg of material Z in inventory that was purchased last month Since then the purchase price of material Z has risen by 8% to $27 per kg Raw material Z is used regularly by the company in normal production What is the total relevant cost of raw material Z to the contract? 72 A $15,336 B $15,400 C $16,200 D $17,496 (2 marks) Equipment owned by a company has a net book value of $1,800 and has been idle for some months It could now be used on a six months contract that is being considered If not used on this contract, the equipment would be sold now for a net amount of $2,000 After use on the contract, the equipment would have no saleable value and would be dismantled The cost of dismantling and disposing of it would be $800 What is the total relevant cost of the equipment to the contract? A $1,200 B $1,800 C $2,000 D $2,800 KA PL AN P U BLI SH IN G (2 marks) 19 P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T CAPITAL INVESTMENTS 73 The net present value of a proposed project is $20,000 at a discount rate of 5% and $(28,000) at 10% What is the internal rate of return of the project, to the nearest one decimal place? 74 75 A 7.1 % B 7.5 % C 2.3 % D 8.6% (2 marks) A company is considering purchasing a new machine for $25,000 This would increase the annual cash flow of the company by $6,500 in each of the next six years If the cost of capital is per cent per annum, the net present value of this investment is: A $4,159 B $10,780 C $10,901 D $14,000 (2 marks) Investment is possible in one or more of three projects Outlay Expected returns (t1 – t4) A $ 10,000 4,000 B $ 7,000 2,500 C $ 1,250 325 The firm can borrow the finance at 10% pa Which project(s) should be undertaken? 76 20 A A only B A and B C A and C D A and B and C (3 marks) The internal rate of return is the interest rate that equates the present value of expected future net cash receipts to A the initial cost of the investment outlay B the firm’s cost of capital (1 mark) KA PL AN P U BLI SH IN G MU L TIP LE -C HO ICE Q UES TI ON S : S E CT I ON 77 A company has identified two mutually-exclusive projects which have an equivalent effect on the risk profile of the company Discounted payback period Net present value Internal rate of return Average accounting rate of return Project I 2.8 years $17,200 18% 19% Project II 3.2 years $15,700 22% 21% Cost of capital is 15% Assuming that the directors wish to maximise shareholder wealth and no shortage of capital is expected, which project should the company choose? 78 A Project I because it has the shorter payback period B Project I because it has the higher net present value C Project II because it has the higher internal rate of return D Project II because it has the higher accounting rate of return (2 marks) A project has a normal pattern of cash flows (i.e An initial outflow followed by several years of inflows) What would be the effects on the internal rate of return (IRR) of the project and its discounted payback period (DPP) of a decrease in the company’s cost of capital? 79 IRR DPP A Decrease Decrease B Decrease Increase C No change Decrease D No change Increase (2 marks) A project has a normal pattern of cash flows (i.e An initial outflow followed by several years of inflows) What would be the effects on the internal rate of return (IRR) of the project and its payback period of an increase in the company’s cost of capital? IRR Payback period A Increase Increase B Increase No change C No change Increase D No change No change KA PL AN P U BLI SH IN G (2 marks) 21 P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T 80 Consider the following graph NPV Project X Project Y 15% Discount rate Which statement is true? 81 A Project Y has a higher internal rate of return than project X B At discount rates of less than 15%, project Y is preferred to project X C Project X is preferred to project Y irrespective of discount rate D Project Y is preferred to project X irrespective of discount rate (2 marks) Details of a new machine are as follows Capital cost Expected operating life Expected scrap value at the end of five years Annual depreciation Expected annual cash inflows from operations $120,000 years $20,000 $20,000 $40,000 What is the payback period? 82 A years B years C years D 2½ years (2 marks) Details of a new machine are as follows Capital cost Expected operating life Expected scrap value at the end of five years Expected annual cash inflows from operations $500,000 years $100,000 $100,000 What is the accounting rate of return, based on initial investment? 22 A 20% B 33.3% C 100% D 166.7% (2 marks) KA PL AN P U BLI SH IN G MU L TIP LE -C HO ICE Q UES TI ON S : S E CT I ON 83 84 Which of the following statements about payback period is true? A It will minimises the effects of risk by giving greater weight to earlier cash flows B It is easy to set a target C It takes account of all the cash flows arising from a project D It takes account of the overall profitability of the project (2 marks) Details of a new machine are as follows Capital cost Expected scrap value at the end of five years Annual depreciation Expected annual profit from operations $210,000 $10,000 $40,000 $50,000 What is the payback period? A years B 4.20 years C 2.33 years D years (2 marks) LEGAL ISSUES 85 86 The Data Protection Act applies to: A All records held by the company B Only manual records (1 mark) Which of the following is/are correct? (i) A person who signs a contract is deemed to have read it (ii) A person who signs a contract is bound by all its terms (iii) A person who has not read a contract cannot be bound by it Options: 87 A (i) only B (ii) only C (iii) only D (i) and (ii) only (2 marks) The essential features of a valid simple contract are: A Offer, acceptance and consideration only B Offer, acceptance, consideration, intention to create legal relations and certainty of terms only C Offer and acceptance only D Offer, acceptance, intention to create legal relations only KA PL AN P U BLI SH IN G (2 marks) 23 P AP ER F FM : FO UN DA TI ON S IN FIN AN CI AL MAN AGE ME N T 88 89 Which of the following is not an essential element of a valid simple contract? A The contract must be in writing B The parties must be in agreement C Each party must provide consideration D Each party must intend legal relations (2 marks) Alan shops at a supermarket A contract is formed when: 90 91 92 93 A Alan pays for his shopping B Alan puts his selection in the trolley C The checkout assistant takes Alan’s goods D Alan picks up items from the shelves (2 marks) Retention of title is: A The right of the purchaser to retain ownership of the goods received B The right of the seller to retain ownership of the goods until a cheque has been posted C The right of the seller to retain ownership of the goods until payment is made D The right of the purchaser to expect that title is retained by the seller even when payment has been received (2 marks) The Data Protection Act applies to: A Data about individuals only B Data about individuals, companies and government departments C Data about companies only D Data about individuals and companies only (2 marks) Which of the following is the first stage in a bankruptcy procedure? A A statutory demand for payment is issued B A petition is made to the court (1 mark) The following statement has been made about an essential element of a contract: `All contracts need to be in a strict legal form in order to be binding' Is this true or false? 24 A True B False (1 mark) KA PL AN P U BLI SH IN G MU L TIP LE -C HO ICE Q UES TI ON S : S E CT I ON 94 Which of the following statement(s) about contracts is/are true? Statement 1: An offer can be made orally or in writing Statement 2: An offer can expire after a set period of time 95 96 A Statement only B Statement only C Neither of them D Both of them (2 marks) Which of the following is NOT a responsibility of a customer to its bank? A to ensure safety and security of the cheque book B to give responsible financial advice C to keep authorisations current D to provide safeguards for electronic communications (2 marks) What is a garnishee order? A a legal document that prevents a customer who owed money from taking money out of a bank or building society account B a legal document that gives the court bailiff the authority to take goods from the customer’s home or business (1 mark) JUNE 2009 SAMPLE MULTIPLE-CHOICE QUESTIONS (PUBLISHED BY ACCA) The following statements have been made about the benefits of debt finance compared to equity finance: Statement 1: Interest payments on debt attract tax relief Statement 2: Control of the company is diluted Which of the above statements is true? A Both of them B Statement only C Statement only D Neither of them KA PL AN P U BLI SH IN G (2 marks) 25 ... the major financial intermediaries.[k] (c) Outline the general roles of financial intermediaries.[k] (d) Outline the key benefits of financial intermediation [k] KA PL AN P U BLI SH IN G S YLL... What is the financial effect of this proposal, after taking into account any increase in finances charges? 33 A Increase in profit of $35,000 B Decrease in profit of $35,000 C Increase in profit... Sitting the examination Answering the questions Spend the first few minutes of the examination reading the paper, deciding which question to answer first Discussion questions: Make a quick plan in