PFM 1 – 1

1. Last year ABC Co made profits before tax of $2,720,000. Tax amounted to $760,000.

ABC Co’s share capital was $2,000,000 (2,000,000 shares of $1) and $4,000,000 6% preference shares.

What was the earnings per share (EPS) for the year (insert your answer to two decimal places)?

2. Which of the following statements describes the main objective of financial management?

3. Indicate, by clicking in the relevant boxes, whether the following objectives are financial or non-financial objectives of a company.

A. Maximisation of market share

B. Earnings growth

C. Sales revenue growth

D. Achieving a target level of customer satisfaction

E. Achieving a target level of return on capital employed

4. A company has recently declared a dividend of 12c per share. The share price is $3.72 cum div and earnings for the most recent year were 60c per share. What is the P/E ratio?

5. The following information relates to a company:

Year                                                0         1         2         3

Earnings per share (cents)           30.0     31.8    33.9    35.7

Dividends per share (cents)         13.0     13.2    13.3    15.0

Share price at start of year ($)     1.95      1.98    2.01    2.25

Which of the following statements is correct?

6. Which of the following is LEAST likely to fall within financial management?

7. Which of the following tasks would typically be carried out by a member of the financial management team?

8. Which of the following is an example of an internal stakeholder in a firm?

9. What is the main purpose of corporate governance?

10. Which of the following does NOT form part of the objectives of a corporate governance best practice framework?

11. Are the following statements true or false?

A. Financial objectives should be quantitative so that their achievement can be measured.

B. Maximising market share is an example of a financial objective.

C. Shareholder wealth maximisation is the primary financial objective for a company listed on a stock exchange.

12. Which THREE of the following are characteristics of a carefully designed remuneration package?

13. Which of the following would you expect to be the responsibility of financial management?

14. Indicate, by clicking in the relevant boxes below, whether the following statements are true or false?

A. Value for money is usually taken to mean economy, efficiency and engagement

B. Cum dividend means the buyer of the share is entitled to receive the dividend shortly to be paid.

C. The dividend payout ratio compares the dividend per share with the market price per share

D. The agency problem means that shareholder wealth is not being maximised

15. ARP is a charity providing transport for people visiting hospitals. Which of the following performance measures would BEST fit with efficiency in a value for money review?

16. A government body uses measures based upon the ‘three Es’ to measure value for money generated by a publicly funded hospital. Which of the following relates to efficiency?

17. Which of the following statements is NOT correct?

18. Geeh Co paid an interim dividend of $0.06 per ordinary share on 31 October 20X6 and declared a final dividend of $0.08 on 31 December 20X The ordinary shares in Geeh Co are trading at a cum-div price of $1.83.

What is the dividend yield (to one decimal place)?

19. Increasing which TWO of the following would be associated with the financial objective of shareholder wealth maximisation?

20. The directors of Portico plc have recently engaged a firm of consultants to negotiate standard terms of trade for one of its strategic business units. This includes the agreement by Portico plc to pay a 5% penalty on any late invoice settlement. This policy is an illustration of the company’s concern for which major stakeholder?