Unit 4 short questions

Short Questions for Unit 4
Year	Questions
2013	3, 5
2012	3
2011	2,9,10
2010	7, 10
2009	1, 3
2008	3,7,10
2007	/
2006	7,9
2005	2,3,7,8
2004	3,6
2003	2,4
2002	8

2013

3, 5

3.Current Ratio for Sentry Ltd

Current ratio / Working Capital ratio

Current assets : current liabilities

Current Asset (Business owns or is owed day to day)

Debtors €12,000

Cash €15,000

Closing Stock €8,000

Total Assets = €35,000

Current Liabilities (Business owes day to day)

Bank Overdraft €20,000

Creditors €50,000

Total Liabilities = €70,000

 

35,000 : 70,000

35:70  (Remember Assets / Liabilities and answer ALWAYS   :1)

0.5:1

Comment:

For every €1 Sentry owe they have €0.50 to pay it back.

They have a liquidity problem as they cannot pay back what they owe.

Ideally for Current ratio for every €1 owed they should have €2 to pay back

They could fix this by : reducing amount owed to creditors.

 

5.

·         Communication: The website provides opportunities for instant communication, both internally and externally. The Website can be used by management to communicate with customers, suppliers and staff.

·         E-business. Customers can buy on-line (i.e. online payments) and credit card payments can be taken.

 

2011

2,9,10

 

2. Explain the term ‘Return on Investment’

·         Profitability Ratio

·         Ideal should be higher than interest given by banks

Net Profit                          x                100 Capital Employed                             1 Capital Employed = shares+reserves+long term loan 57,000                                                   x              100 140,000+56,000+24,000                 1 =25.9 Answer= 26%

 

 

 

 

 

 

 

 

9. Explain the term short-term finance.

·         Paid back in less than a year

·         Examples include bank overdraft, accrued expenses, factoring.

Business situation:

A business could use a bank overdraft to purchases stock as the stock would be a short term purchase.

10.

        I.            Communication

Speak to staff and include them in the change.  Allow workers directors

ii. Training

Provide on the job and off the job training to allow for the change.  This is especially important with technology

 

 

 

2010

7, 10

 

7. See notes copy

10. Hazel Dunnes net pay

Gross = €50,000 PAYE 36,400@20% = 7,280 13,600@41% = 5,576                                 12,856 Tax Credits          -6,000 Tax payable        6,856 Gross                                                    50,000 -tax payable                                       -6,856 Net Pay                                                                €6,856

 

 

 

 

 

 

 

 

 

 

 

                             Tax credits:

i. PAYE tax credit

ii. Single persons tax credit

 

2009

1, 3

 

1. See notes

3.

Public Liability

·    Insurance used by a business

·    Prottects in the case of a member of the public being injured on the premises

Fidelity Guarantee

·         Insurance used by a business

·         Prottects in the case of staff robbing company profits

 

2008

3,7,10

 

3. Working Capital

·         Calculating

Current Assets – Current Liabilities

·         Illustrates

The money the business is using day to day

Equity Capital

·         Calculating

Shares + reserves

·         Illustrates

The internal finance of a business

7. Source of finance for a van

Medium Term Finance – Leasing

Why?

i. Van last between 1 – 5 yrs and finance should match

ii. Leasing allows for the business to have most up to date models

10. Average Clause

Claim x Amount insured                        Value   63,000   x              300,000                                 350,000 =             €54,000

 

 

 

 

 

 

                                  Principle:

·         Principle of Indemnity applies – you cannot make a profit from a loss

·         Average clause is applied as they are underinsured

2006

7,9

 

7. Debt / Equity

Debt : Equity Long term loans : ordinary share + retained earnings 2004                                                                                                       2005 270,000 : 320,000+40,000                                              140,000 : 420,000+ 30,000 270: 360                                                                                140 : 450 .75 : 1                                                                                    .311   :1 Equity > Debt                                                                     Equity > Debt Improving:                                                          or            Disimproving Reason:                                                                                                Reason: Less external debt to be repaid                                 Less control as more shares sold

 

 

 

 

 

 

 

 

 

 

 

 

9. Short Term Finance

·         Paid back in less than a year

·         Does not require collateral / security

Established Manufacturing Business:

1. Factoring – sell their debts to a 3^rd party and receive cash now

2. Creditors – buy goods now but pay for them later

 

 

2005

2,3,7,8

 

2.  Risk Management requires:

·         Identify the risks facing the business

Commercial risks, financial risks and physical risks a business may face

·         Minimise risk

Come up with a plan to minimise risks business are exposed to

·         Examples used to minimise risk:

o   Fire – sprinkler system

o   Theft – burglar alarm

·         Insurance helps ease the financial loss if such risks occur

3. Similar activities

·         Both a Business and a Household control Income and Expenditure

·         Both a Business and a household organise banking facilities.

·         Both a Business and a household require insurance cover

·         Both a Business and a Household pay Tax

·         Both a Business and a Household organise finance

 

7. Principles

See notes

CA – CL Stock : CL 2003                                                                       2004 85000-25000:40000                 90000-20000:60000 60000:40000                                       70000:60000 6:4                                                          7:6 1.5:1                                                      1.17:1

8. Acid Test Ratio

 

 

 

 

 

Improving

Reason:

·         Ideal situation 1:1

·         In 2004 they are getting closer to this

 

2004

3,6

 

3.Tax Credit

·         Reduce Tax payable

After calculating PAYE tax credits are taken away

·         Depend on personal Circumstances

Each person is entitled to tax credits, they can be single persons tax credit, married person tax credit etc.  When circumstances change tax revenue commissioner should be notified

·         Given on completion of tax form

When starting work an employee should get a form 12A from the revenue commission in order to obtain their tax credits

6. Debt / Equity

·         Shows gearing position of the business

o   Low gearing

If the business is financed by equity – self financing

o   High gearing

If the business is financed by external debt

Debt : Equity Long term loans : ordinary shares + reserves 100,000 : 50,000 + 25,000 100,000 : 75,000 100:75 1.333:1 Debt > equity High Gearing

 

 

 

 

 

 

 

 

 

 

 

 

2003

2,4

 

2.Tax forms

See notes copy

4.Empowerment helps a business to:

·         Better Customer Service

If a customer has a grievance the employee has the power to deal with it.  Customers will be impressed that the first person they speak to can deal with the problem

·          High Motivation Levels

Employees are given more responsibility and this will increase motivation (McGregor Theory Y).  It satisfies their esteem needs (Maslow’s Hierarchy of needs) they are happier in their job and work harder

·          Fully utilising Staff skills

Employees should not just be for simple mindless tasks.  Instead the business uses their analytical and decision making skills to sort out problems in the business

2002

8

 

8. Performance Appraisal

·         Assessing each employees performance

Examine how each staff member contributes to the Business

·         Involves carrying out an interview with the employee to evaluate their performance

The results will allow workers that score highly may be rewarded with a bonus, promotion or pay rise or workers that score badly may need more training or their contract terminated (if temporary)

Example: Tell ltd interviewed staff at end of year, they found several of the staff could not produce parts to top quality and sent them on off the job training.  Those who could got achieve top standards received €1000 bonus

 

2001

9

 

9. Working Capital ratio

o   To see the liquidity position of the position – do they owe more than they own

o   To see if the business is able to pay back short term debts as they fall due

2000

3,7,9,10

3.

Risk Management

·         Identify the risks facing the business

Commercial risks, financial risks and physical risks a business may face

·         Minimise risk

Come up with a plan to minimise risks business are exposed to

·         Examples used to minimise risk:

o   Fire – sprinkler system

o   Theft – burglar alarm

·         Insurance helps ease the financial loss if such risks occur

7. Debt Equity

Debt : Equity Long term loans : ordinary shares + reserves 1999                                                                       2000 307,000:150,000+55,000                310,000:210,000+98,000 307000:205,000                 310,000: 308,000 1.49:1                                                                    1.006:1

 

 

 

 

 

 

 

 

Comment:

1999 = high gearing business is financed more by external debt

2000= still high gearing but almost equal as business sold more shares and increased reserves.  Issuing more shares may result in loss of control.

Claim x Amount insured                        Value   124000  x              350000                                 450,000 =             €96,444

9.

 

 

 

 

 

 

·         Principle of Indemnity applies – you cannot make a profit from a loss

·         Average clause is applied as they are underinsured

10. Differences in managing a business and a household

·         Both a Business and a Household control Income and Expenditure using different methods

·         Both a Business and a household have different requirements in obtaining a bank loan.

·         Both a Business and a household require different insurance cover

·         Both a Business and a Household pay different Taxes

 

Short Questions for Unit 4
Year	Questions
2013	3, 5
2012
2011	2,9,10
2010	7, 10
2009	1, 3
2008	3,7,10
2007	/
2006	7,9
2005	2,3,7,8
2004	3,6
2003	2,4
2002	8