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ACCT7106 Final Exam
Part I – Multiple choice questions
INSTRUCTIONS
1. You need to answer all questions.
2. You are required to type your responses.
3. For numeric questions, do not include dollar/cents symbols (e.g. $/c), comma (,) or
percentage (%) in your answers.
4. Unless otherwise stated, answer questions based on the methods/theories taught in lectures.
ACCT7106 Final Exam - Semester 2, 2021
2
Question 1. Which of the following is NOT one of Porter’s Five Forces? (1 mark)
[ ] A. The threat of substitute products or services.
[ ] B. The threat of entry of new firms.
[ ] C. The threat of exit between existing firms.
[ ] D. Rivalry between existing firms.
Question 2. Which of the following should NOT be classified as an operating liability on the
reformulated statement of financial position? (1 mark)
[ ] A. Deferred revenue.
[ ] B. Accrued compensation.
[ ] C. Trade payables.
[ ] D. Lease liability.
Question 3. John works for a brokerage firm as an equity analyst. He calculated the value of a
company equal to $ 8 per share using the dividend discount model (DDM) and used beta of 0.7
in the calculation. He later found that there was a calculation error and the correct beta should
have been 0.8. Assuming beta of 0.8 and no change in other parameters, the value of that
company from the same valuation model will be: (1 mark)
[ ] A. More than 8.
[ ] B. Equal to 8.
[ ] C. Less than 8.
[ ] D. Cannot say without further information.
Question 4. A firm has a P/E ratio of 18 and a profit margin of 5 percent. What should be the
price-to-sales (P/Sales) ratio? (1 mark)
[ ] A. 3.6
[ ] B. 0.9
[ ] C. 0.278
[ ] D. Cannot say without further information.
Question 5. What is the most appropriate classification of share of profits/loss on equity-
accounted investments on the reformulated statement of profit and loss? (1 mark)
[ ] A. Core operating income from sales.
[ ] B. Core other operating income.
[ ] C. Unusual operating income.
[ ] D. Core net financial income.
Question 6. Which of the following is FALSE? (1 mark)
ACCT7106 Final Exam - Semester 2, 2021
3
[ ] A. ∆CSE = CI - d
[ ] B. ∆NOA = OI - FCF
[ ] C. ∆NFO = NFE + FCF - d
[ ] D. FCF = F + d
Question 7. What is a key determinant of sales revenue for a retailer? (1 mark)
[ ] A. Profit margin.
[ ] B. Outlook of senior management.
[ ] C. The number of stores.
[ ] D. Gross margin.
Question 8. Sales growth is mean-reverting. What does it mean? Select the most appropriate
answer. (1 mark)
[ ] A. A firm with below-average rates of sales growth will tend to revert to a more ‘normal’
level in the future.
[ ] B. A firm with above-average rates of sales growth will tend to revert to a more ‘normal’
level in the future.
[ ] C. A firm with above- or below-average rates of sales growth will tend to revert to a more
‘normal’ level in the future.
[ ] D. None of the above.
Question 9. It is expected that a company’s dividend at the end of year t+1 will be $10. The
cost of equity for this company is 7 percent and WACC is 6 percent. The stock for this company
is trading at $ 200 on the stock exchange. Assuming that after year t+1 the company’s dividends
will grow at a constant rate, what is the implied terminal growth rate of dividends for this
company? (1 mark)
[ ] A. 1.9%
[ ] B. 2.86%
[ ] C. 1%
[ ] D. 2%
Question 10. Which of the following is a levered figure? (1 mark)
[ ] A. Comprehensive income.
[ ] B. Operating income after tax.
[ ] C. Net operating assets.
[ ] D. None of the above.
Question 11. A firm incurred wage expenses of $ 48 M. The cash paid for wages was $ 40 M.
What is the change in wages payable in this period? (1 mark)