FM (F9) ACCA Mock Exam 2021 MCQs

Welcome to the Financial Management FM (previously F9) Mock Exam. The FM mock contains 20 MCQs. Make sure you complete the mock under exam conditions to better prepare for your FM exam.

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#1. Carp Co has announced that it will pay an annual dividend equal to 55% of earnings. Its earnings per share is $0.80 and it has ten million shares in issue. The return on equity of Carp Co is 20% and its current cum dividend share price is $4.60. What is the cost of equity of Carp Co?

20.5%

19%

13%

5.2%

#2. A company has a ‘money’ cost of capital of 21% per annum. Inflation for the year is estimated at 8%. What's the real cost of capital?

14%

12%

5.6%

(1 money rate) = (1 real rate) × (1 inflation rate)
1.21 = (1 real rate) × 1.08
Real rate= 12%

#3. Small and medium-sized entities (SMEs) have restricted access to capital markets. The difference between the finance required to operate an SME and the amount obtained is known as the ________?

Maturity Gap

Idle Gap

Loan Gap

Funding Gap

#4. Which of the following is an advantage of keeping cash?

Equity motive

Transactions motive

Movement motive

Asset motive

#5. Which of the following is a common role of the treasury function within a firm?

Financial Reporting

Capturing long term market share

Account receivables management

Risk management

#6. Which TWO of the following statements about the accounting rate of return (ARR) method and the payback method are true?

Select TWO

A requirement for an early payback can decrease a company's liquidity

The payback method is based on the project’s profit

The payback method is based on the project’s cash flows

A requirement for an early payback can increase a company's liquidity

#7. For payback period; which of the following statements is true?

It is calculated after depreciation but before taxation

It is calculated before both depreciation and taxation

It is calculated after depreciation but before interest

It is calculated before depreciation but after taxation

#8. Select the true options

Select TWO

Working capital should increase as sales increase

An increase in the cash operating cycle will decrease profitability

Overtrading is also known as under-capitalisation

#9. When considering standard deviation as a statistical measure, which of the following statements is true?

The wider the dispersion, the less risky the situation

The tighter the distribution, the higher the standard deviation will be

Standard deviation is the weighted average of all the possible outcomes

The wider the dispersion, the more risky the situation

#10. What is the purpose of corporate governance?

To review implementation of the regulatory framework

To separate ownership and management

To maximise share price

To facilitate effective management of organisations and to make organisations more visibly accountable to a wider range of stakeholders

#11. Select the factors that result in increase in aggregate demand?

Decreasing money supply

Decreasing interest rates

Decreasing taxation and increasing government expenditure

Increasing taxation and keeping government expenditure the same

#12. What might be an efficiency target of a not-for-profit entity?

Increasing overall profitability

Staff utilisation

Customer satisfaction

Lower remunerations

#13. Which of the following is least likely to be a reason for seeking stock market listing?

Improving existing owners’ control over the business

Transfer of capital to other users

Exaggerating the company's performance

Access to a wider pool of finance

#14. Which ONE of the following is advantage of the IRR?

It is a measure of absolute return

It is an accurate calculation

Considers the whole life of a project

It is useful when liquidity of the company is poor

#15. Which of the following relates to fiscal policy?

Government actions to raise or lower the amount it spends

Change in money supply

#16. Which of the following is an advantage of implementing just-in-time inventory management?

obsolete inventory is minimised

No quality control costs

Reduction in raw material deliveries

Raw material delivery cost is reduced

#17. Risk that cannot be diversified away can be described as ______

Monetary Risk

Systematic Risk

Financial Risk

Unsystematic Risk

#18. What does the dividend cover ratio measure?

The interest or coupon rate expressed as a percentage of the share price

How much dividends are paid to shareholders in current year

How many times the company’s earnings could pay the dividend

How many times the company’s earnings could pay the loan

#19. Which of the following does NOT directly affect a company’s cost of equity?

Expected market return

Risk-free rate of return

The company’s beta

Return on assets

The formula for the required return is ke = risk free rate beta × (market rate – risk free
rate).

#20. Cash Operating cycle is calculated as?

Receivables days plus inventory holding period minus payables days.

Receivables days plus inventory holding period plus payables days.

Receivables days minus inventory holding period minus payables days.

Inventory holding period minus receivables days minus payables days

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F9 Financial Management ACCA FM Mock Exam