QUESTION: 69

Which of the following is a related party according to the definition of a related party in IAS24 Related Party Disclosures?

Major customer
Provider of finance
Managing Director
Major supplier

Answer(s): C

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The dividend yield of ST has fallen in the year to 31 May 20X5, compared to the previous year. The share price on 31 May 20X4 was $4.50 and on 31 May 20X5 was $4.00. There were no issues of share capital during the year.
Which of the following should explain the reduction in the dividend yield for the year to 31 May 20X5 compared to the previous year?

The dividend paid in the year was reduced in order to pay for new assets.
Surplus cash was used to pay a special dividend in addition to the normal dividend in the year.
The profit for the year fell significantly and the dividend per share stayed the same.
To compensate investors for the reduction in share price a higher dividend per share was paid.

Answer(s): A

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QUESTION: 71

MNO has calculated its return on capital employed ratio for 20X4 and 20X5 as 41% and 56% respectively.
Taking each statement in isolation, which would explain the movement in the ratio between the 2 years?

In 20X5 the average interest rate on borrowing decreased compared to 20X4.
In 20X4 an onerous contract was provided for and this provision did not change in 20X5.
In 20X5 the increase in value of MNO's head office was reflected in the financial statements.
In 20X4 an unused building was sold at a price in excess of its carrying value.

Answer(s): B

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QUESTION: 72

AB sold the majority of its operating equipment to LM for cash on 30 December 20X9 and then immediately leased it back under an operating lease.
AB used the cash proceeds from the sale to reduce its long term borrowings significantly. No early repayment charge was levied by the lender.
Which of the following statements is true in respect of AB's ratios calculated at 31 December 20X9?

AB's return on capital employed would be lower as a result of this sale being recorded.
AB's current ratio would be lower as a result of this sale being recorded.
AB's non-current asset turnover would be lower as a result of this sale being recorded.
AB's gearing ratio would be lower as a result of this sale being recorded.

Answer(s): D

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QUESTION: 69

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QUESTION: 72