Question 1

Equity refers to

Accepted Answer

A)   Economic fairness
B)   Funds from investors
C)   Funds from lenders
D)   The cost of borrowingsE) B) and C)
F) A) and B)

Question 2

For shareholder value to be created, a business must:

Accepted Answer

A)   Sell its products in product markets for more than they cost to produce
B)   Borrow from lenders at a cost that is lower than the cost of capital
C)   Generate profits in product markets that exceed the cost of capital in capital markets
D)   Generate profits in capital markets that exceed the cost of capital in product marketsE) A) and B)
F) A) and C)

Question 3

In company law, the group to whom boards of directors owe the most responsibility are:

Accepted Answer

A)   Stakeholders
B)   Shareholders
C)   Lenders
D)   GovernmentE) B) and C)
F) A) and B) B

Question 4

The cost of debt is

Accepted Answer

A)   Interest
B)   Dividend
C)   Capital growth
D)   Dividend and capital growthE) A) and B)
F) A) and C)

Question 5

Total shareholder return is calculated by:

Accepted Answer

A)   comparing the dividends received by shareholders and the increase in the share price with the original shareholder investment
B)   discounting estimated future cash flows to their present values using the cost of capital
C)   deducting the total capital invested in the business from the total market capitalization
D)   deducting from net operating profit a charge to cover the opportunity cost of the capital invested in the businessE) None of the above
F) B) and C)

Question 6

The financial statements of a company are the responsibility of the:

Accepted Answer

A)   Shareholders
B)   Directors
C)   Senior managers
D)   Accountants and auditorsE) All of the above
F) B) and C) B

Question 7

A detrimental consequence of the emphasis on shareholder value may be that it has led to a focus on:

Accepted Answer

A)   Sales growth and the return on investment
B)   Dividends and share price
C)   Short-term financial performance
D)   Long-term performanceE) B) and C)
F) A) and C)

Question 8

Shareholders in a company have the right to:

Accepted Answer

A)   Participate in the management of the company
B)   Visit the company top observe its practices
C)   Obtain additional information to that shown in the annual financial statements
D)   Receive an Annual Report and attend an Annual General MeetingE) None of the above
F) A) and B)

Question 9

The role of a company's board of directors is generally accepted as being to:

Accepted Answer

A)   Create value for its shareholders
B)   Provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed
C)   Set the strategy for the business and then manage the implementation of that strategy
D)   Make important decisions in relation to capital and product marketsE) All of the above
F) C) and D)

Question 10

The difference between total market capitalization and the total capital invested in the business is termed:

Accepted Answer

A)   total shareholder return
B)   market value added
C)   shareholder value added
D)   economic value addedE) A) and B)
F) A) and C)

Question 11

According to Rappaport (1998) , the main drivers of shareholder value are:

Accepted Answer

A)   Sales growth, net operating profit, and capital investment
B)   The mix of debt and equity, and the weighted average cost of capital
C)   Operating, investment and financing decisions
D)   Cash flow from operations, the level of debt, and the cost of capitalE) A) and B)
F) A) and C)

Question 12

According to Rappaport (1998) , the focus of increasing shareholder wealth is to:

Accepted Answer

A)   Obtain funds at competitive rates from capital markets
B)   Invest funds to exploit imperfections in product markets
C)   Both of the above
D)   None of the aboveE) A) and C)
F) All of the above

Question 13

Which of the following statements is true?:

Accepted Answer

A)   Managers have much the same information requirements as do investors
B)   Strategy involves taking a longer term view about the sustainable performance of the business
C)   Financial accounting is about creating shareholder value
D)   Management accounting is concerned with reporting shareholder value to investorsE) B) and D)
F) None of the above B

Question 14

Value-based management emphasizes shareholder value, because this is the:

Accepted Answer

A)   Primary goal of every business
B)   Required under Corporations legislation
C)   Necessary for economic growth
D)   Function of accounting processesE) A) and B)
F) None of the above

Question 15

Decisions made using management accounting information are made in the context of:

Accepted Answer

A)   Whether those decisions are likely to lead to shareholder value in the longer term
B)   How those decisions will appear when they are reported in the annual financial statements
C)   Both a and b above
D)   None of the above. Management accounting information has no relevance to shareholder value or financial statementsE) B) and D)
F) C) and D)

Question 16

An audit is best defined as:

Accepted Answer

A)   A thorough checking of financial transactions to ensure they are recorded correctly
B)   A certification by an independent accountant that the financial statements are true and correct
C)   The production of financial statements that comply with legislation, accounting standards and present a true and fair view (or present fairly) 
D)   An examination of accounting records of a company carried out by an independent accountant to ensure that the financial statements present a true and fair view (or present fairly) E) A) and B)
F) All of the above

Question 17

An organization's system of financial and other controls, established in order to provide reasonable assurance of effective and efficient operation, internal financial control and compliance with laws and regulations is referred to as a system of:

Accepted Answer

A)   Governance
B)   Audit
C)   Risk management
D)   Internal controlE) A) and B)
F) A) and C)

Question 18

Stakeholder theory is concerned primarily with:

Accepted Answer

A)   Those groups who influence, or are influenced by, the organization
B)   Employees, customers and suppliers
C)   Investors and lenders
D)   Society as a wholeE) A) and C)
F) None of the above

Exam 2: Accounting and Its Relationship to Shareholder Value and Corporate Governance

Equity refers to

Correct Answer
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For shareholder value to be created, a business must:

Correct Answer
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In company law, the group to whom boards of directors owe the most responsibility are:

Correct Answer
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B

The cost of debt is

Correct Answer
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Total shareholder return is calculated by:

Correct Answer
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The financial statements of a company are the responsibility of the:

Correct Answer
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B

A detrimental consequence of the emphasis on shareholder value may be that it has led to a focus on:

Correct Answer
verified

Shareholders in a company have the right to:

Correct Answer
verified

The role of a company's board of directors is generally accepted as being to:

Correct Answer
verified

The difference between total market capitalization and the total capital invested in the business is termed:

Correct Answer
verified

According to Rappaport (1998) , the main drivers of shareholder value are:

Correct Answer
verified

According to Rappaport (1998) , the focus of increasing shareholder wealth is to:

Correct Answer
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Which of the following statements is true?:

Correct Answer
verified
B

Value-based management emphasizes shareholder value, because this is the:

Correct Answer
verified

Decisions made using management accounting information are made in the context of:

Correct Answer
verified

An audit is best defined as:

Correct Answer
verified

An organization's system of financial and other controls, established in order to provide reasonable assurance of effective and efficient operation, internal financial control and compliance with laws and regulations is referred to as a system of:

Correct Answer
verified

Stakeholder theory is concerned primarily with:

Correct Answer
verified

Exam 2: Accounting and Its Relationship to Shareholder Value and Corporate Governance

Equity refers to

Correct AnswerverifiedShow Answer

For shareholder value to be created, a business must:

Correct AnswerverifiedShow Answer

In company law, the group to whom boards of directors owe the most responsibility are:

Correct AnswerverifiedB

The cost of debt is

Correct AnswerverifiedShow Answer

Total shareholder return is calculated by:

Correct AnswerverifiedShow Answer

The financial statements of a company are the responsibility of the:

Correct AnswerverifiedB

A detrimental consequence of the emphasis on shareholder value may be that it has led to a focus on:

Correct AnswerverifiedShow Answer

Shareholders in a company have the right to:

Correct AnswerverifiedShow Answer

The role of a company's board of directors is generally accepted as being to:

Correct AnswerverifiedShow Answer

The difference between total market capitalization and the total capital invested in the business is termed:

Correct AnswerverifiedShow Answer

According to Rappaport (1998) , the main drivers of shareholder value are:

Correct AnswerverifiedShow Answer

According to Rappaport (1998) , the focus of increasing shareholder wealth is to:

Correct AnswerverifiedShow Answer

Which of the following statements is true?:

Correct AnswerverifiedB

Value-based management emphasizes shareholder value, because this is the:

Correct AnswerverifiedShow Answer

Decisions made using management accounting information are made in the context of:

Correct AnswerverifiedShow Answer

An audit is best defined as:

Correct AnswerverifiedShow Answer

An organization's system of financial and other controls, established in order to provide reasonable assurance of effective and efficient operation, internal financial control and compliance with laws and regulations is referred to as a system of:

Correct AnswerverifiedShow Answer

Stakeholder theory is concerned primarily with:

Correct AnswerverifiedShow Answer

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B

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B

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B

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