ex your 394 Section A. If a company fails to allow for deferred tax liabilities, it can lead to overstatement of profit with the following consequences i iv. Answer L Distortions of Earnings per share Higher gross Profit margin Shareholders being misled Over-optimistic dividend payments A. (i) and (i) B. (1) and (i) C. (). () and (iv) D. All of the above. 2.International Accounting Standard 12 requires Provision for tax liability in full iii. iv. Answer Recognition of deferred tax liability for all taxable temporary differences Discounting of the liability All of the above A. (i) and ( B. () and () C. (i) and (ii) D. All of the above. (2 marks) (2 marks) 3. While assessing the performance of a company, it was discovered that the Gross Profit Ratio had not increased in line with sales revenue. This discrepancy may be due to: i. Increased 'purchase' costs H. Inventory write-offs iii. iv. Answer Increased credit period allowed to suppliers Other costs being allocated to cost of sales A. (i) and (ii) B. (i) and (iii) C. (1). (i) and (ii) D. (i). (i) and (iv). 4. The formula for calculating the Return on Capital Employed (ROCE) is as follows: A. Profit/Loan capital x100 B Profit/Ordinary Share capital x 100 C Profit/Capital Employed x 100 D. None of the above (2 marks) (2 marks) 5.The overall working capital position of a company can be measured by the use of i. Return on Capital Employed ratio Current ratio iii. Net Profit Margin ratio iv. Acid Test ratio Answer A. (i) and (ii) B. (ii) and (iv) C. (). (i) and (ii) D. (). (i), (ii) and (iv). (2 marks) 6.An increase in the Inventory Turnover Period may be due to all of the following factors except A. Poor inventory control B. Increased Sales Revenue C. Increased storage cost D. Lack of demand for goods (2 marks)