$1.$ Sona Manufacturing provided the following information for last month:

$$

Sales $12,000$

Variable Costs $4,000$

Fixed Costs $1,000$

Operating Income $7,000$

If sales double next month, what is the projected operating income?

A$)14,000$

B$)19,000$

C$)18,000$

D$)15,000$

$2.$ Richa is looking at the results of a Capital Investment Appraisal. The report shows that, assuming a Cost of Capital of $10\%,$ investing in a plant to manufacture a new clothing line would give a positive NPV and an IRR of $23\%.$ Should the company buy the machine?

A$)$ Yes. NPV is positive and IRR exceeds cost of capital.

B$)$ Yes. NPV is positive and IRR is less than cost of capital.

C$)$ No$.$ NPV does not provide enough information.

D$)$ No$.$ IRR is higher than the cost of capital

$3.$ Which one of the following statements is NOT true?

A$)$ Retained profits represent a free source of funds.

B$)$ The issuing of shares to raise finance can be expensive.

C$)$ Retained profits are the main source of business funds.

D$)$ Borrowing can increase the risk that a company faces.

$4.$ Which of the following statements most accurately describes the quick $($acid$-$test$)$ ratio?

A$)$ An assessment of short$-$term liquidity that compares inventory, receivables and cash to current liabilities.

B$)$ An assessment of long$-$term solvency which compares total assets to total liabilities.

C$)$ An assessment of short$-$term liquidity which compares receivables and cash to current liabilities, without taking into account the inventories.

D$)$ An assessment of long$-$term solvency which compares short and long$-$term borrowings to total equity.

$5.$ Based on the figures below, what is the current ratio?

$$

Inventory $6,000$

Trade Payables $12,000$

Trade Receivables $11,000$

Long term borrowings $($Non$-$current liabilities$)16,000$

Current portion of long$-$term loans $3,000$

Taxation payable $($within one year$)5,000$

Cash $1,000$

A$)0\mathrm{.}50$:$1$

B$)0\mathrm{.}60$:$1$

C$)0\mathrm{.}75$:$1$

D$)0\mathrm{.}90$:$1$

$6.$ Which of the following statements is NOT true?

A$)$ Financial accounting reports are aimed at internal users of accounting information while management accounting reports are aimed at external users of accounting information.

B$)$ Financial accounting summarizes accounting data while management accounting breaks down costs into their detailed components.

C$)$ Financial accounting reports report on what has happened while management accounting reports focus on current activity and future projections.

D$)$ Financial accounting reports are used by investors to make investment decisions while management accounting reports are used by managers to make business decisions.

The following information must be used to answer Questions $7-9$

ZyadaPaisa Limited has $1,600,000$ to invest. The company is considering a few investment projects but only has sufficient cash to accept one of them.

The projected cash flows of the most likely $($project Solar$)$ are shown below. The directors have asked for your help and advice in reaching a decision on whether to accept this project.

The company requires that investments are required to achieve a minimum target of Accounting Rate of Return $($ARR$)$ of $18\mathrm{.}0\%$ and a maximum acceptable Payback period of $4$ years. The company$$s cost of capital is $9\%.$

Project Solar

Cash flows $000$

Initial investment $(1600)$

Cash inflows year $1300$

Cash inflows year $2500$

Cash inflows year $3600$

Cash inflows year $4480$

Cash inflows year $5400$

Cash inflow from sale of the investment at the end of year $5300$

$7.$ Using the information above, what is the Payback period for project Solar $($Calculate to the nearest whole month$)?$

A$)2$ years $10$ months.

B$)3$ years $4$ months.

C$)3$ years $5$ months.

D$)4$ years.

$8.$ Using the information above, what is the Accounting Rate of Return for project Solar? $($calculate to the nearest $1$ decimal place$)?$

A$)20\mathrm{.}6\%$

B$)48\mathrm{.}0\%$

C$)18\mathrm{.}0\%$

D$)30\mathrm{.}2\%$

$9.$ Using the information above, what is the Net Present Value for project Solar?

A$)+354\mathrm{.}1$

B$)+159\mathrm{.}0$

C$)354\mathrm{.}1$

D$)+259\mathrm{.}0$

$10.$ Black Friday sales $($or other similar sales which have high discounts on sale items$)$ can be seen as a major source of:

A$)$ Debt

B$)$ Short$-$term Internal Finance

C$)$ Long$-$term Internal Finance

D$)$ External finance

$11.$ Financial Gearing $($leverage$)$ occurs when a business is financed by contributions from borrowings.

Which of the following statements is TRUE about financial gearing?

A$)$ Gearing reduces the risk to shareholders.

B$)$ Gearing is beneficial to shareholders because interest payments to lenders are tax$-$deductible.

C$)$ Gearing involves the company taking loans that are an Internal source of finance.

D$)$ Gearing always includes loans which are at very high interest rates.