CIS September 2011 Exam Diet
Examination Paper 1.1:
Financial Accounting and Financial Statement
Analysis
Economics and Financial Markets
Quantitative Analysis and Statistics
Level 1
Financial Accounting and Financial Statement Analysis (1 - 20)
1.
An investment ratio which relates the dividends announced for the period to the
earnings available for dividends which were generated in that period is:
A. Dividend payout ratio.
B. Dividend per share.
C. Earnings per share.
D. Earnings cover ratio.
2.
Dynamic Nigeria Limited has made a material change to an accounting policy in
preparing its current financial statements for the year ended 31st December, 2010.
Which of the following disclosures are required by IAS 8 on Accounting Policies,
Changes in Accounting Estimates and Errors in the Financial Statements?
I. The reason for the change.
II. An estimate of the effect of the change on the next five accounting periods.
III. The amount of the adjustment in the current period and in comparative
information for prior periods.
A.
B.
C.
D.
I only
I and II only
I and III only
I, II and III
3.
A company operating with inadequate working capital is said to be:
A. Under trading.
B. Trading optimally.
C. Skeletal trading.
D. Overtrading.
4.
The accounting concept that assumes an organization will continue to operate in
perpetuity is known as:
A. Going concern concept.
B. Periodicity concept.
C. Consistency concept.
D. Historical cost concept.
5.
How should a contingent liability be presented in a company’s financial statements if
the likelihood of a transfer of economic benefits to settle it is remote?
A. No disclosure or provision is required.
B. It should be disclosed as a prior-year adjustment.
C. Provision should be made in the account.
D. It should be disclosed as an extra-ordinary item.
6.
Which of the following is a possible explanation for a reduction in stock turnover?
A. Business is slowing down.
B. Inventory is piling up and not being sold.
C. The company is over trading.
D. All of the above.
7.
Alhaji Yahaya, a sole trader, pays off trade creditors from his personal funds outside
the firm. What is the impact of this transaction on the Statement of Financial Position
of the firm?
A. Reduction in assets and reduction in capital.
B. Increase in assets and increase in capital.
C. Decrease in liabilities and decrease in assets.
D. Decrease in liabilities and increase in capital.
8.
Which of the following types of errors will affect the balancing of a trial balance?
A. Errors of omission.
B. Errors of principle.
C. Errors of commission.
D. Errors in addition/casting.
9.
The cash flow statement cannot give adequate explanations about which of these
situations in a business?
A. Why a business needs bank overdraft.
B. Why the cash at bank increased even though the firm recorded losses.
C. The sudden rise in reported profit before tax.
D. The liquidity position of the firm.
10. Financial Statements report only items that have ‘significant economic value’. This
statement summarizes which basic accounting concept?
A. Disclosure.
B. Matching.
C. Materiality.
D. Realization.
11. If a firm has “goodwill” recorded on its balance sheet, it must have done which of the
following?
A. Donated to charity.
B. Demonstrated that it has strong brands.
C. Acquired another firm.
D. Recorded strong profitability in the previous five years.
12. Common size financial statements make it easier to compare which categories of
firms?
A. Firms of different sizes.
B. Firms in different industries.
C. Firms with different degree of leverage.
D. Firms that use different inventory valuation methods.
13. Babayo Limited wants to increase its current ratio from the present level of 1.5 when
it closes the books next week. Which of the following actions would help it achieve
the desired result?
A. Sales of current marketable securities for cash.
B. Write down of impaired assets.
C. Delay of next payroll.
D. Payment of current payables from cash.
14. Return on total assets is a function of which of the following?
A. Interest rates and pre-tax profits.
B. The debt-equity ratio.
C. The after-tax profit margin and asset turnover ratio.
D. None of the above.
15. Which of the following methods of depreciation would not take into account the
salvage value of the asset expected upon its disposal?
A. Sum-of-the-years-digits method.
B. Units of production method.
C. Straight line method.
D. None of the above.
16. Which of the following activities is not considered a financing activity?
A. The purchase of a long-term asset.
B. The retirement of debt by way of sinking fund activities.
C. The issuance of new ordinary shares.
D. The payment of preferred dividends.
17. Which of the following statements about historical cost accounting is correct?
A. Historical cost accounting always overstates the value of assets.
B. Historical cost accounting values assets on a more objective basis
than current value accounting.
C. Historical cost accounting avoids any overstatement of profits.
D. Historical cost accounting reports the gains arising from holding
assets.
18. Which of the following statements best describe current assets?
A. Assets which are expected to be converted into cash within 12 months.
B. Assets which are owned by a business.
C. Assets which are either controlled or owned by a business.
D. None of the above.
19. After Eze prepared his draft accounts he discovered that he had incorrectly classified
an item of revenue expenditure as capital expenditure.
When the error is corrected, how will his net profit and capital be affected?
Net profit
A.
B.
C.
D.
Increased
Reduced
Increased
Reduced
Capital
Reduced
Increased
Increased
Reduced
20. Which of the following ratios gives information on the amount of profits reinvested in
the firm over the years?
A. Sales/total assets.
B. Retained earnings/total assets.
C. Debt/total assets.
D. Debt/equity.
Economics and Financial Markets (21 - 40)
21. Which of the following is correct in respect of the long run period?
A. All factor input are fixed.
B. Only few factor inputs are fixed.
C. No factor input is fixed.
D. Any of the above could apply depending on the situation.
22. Government monetary policy designed to shift the LM curve rightward is aimed at
achieving which of the following?
A. An expansion.
B. A contraction.
C. Reduction in tax.
D. None of the above.
23. During recession which of the following does not decline?
A. Real GDP.
B. Real per capita income.
C. Income disparity.
D. Real consumption.
24. Economic growth can be shown by:
A. An inward shift of the production possibility frontier.
B. A movement down the production possibility frontier.
C. An outward shift of the production possibility frontier.
D. A movement up the production possibility frontier.
25. In a free market the combination of products produced will be determined by:
A. Market forces of supply and demand.
B. The government.
C. The law.
D. The public sector.
26. Demand curve for a normal product may shift outwards if:
A. Price decreases.
B. The price of a substitute falls.
C. The price of a complement rises.
D. Income rises.
27. If the price elasticity of demand is unit then a fall in price:
A. Reduces revenue.
B. Leaves revenue unchanged.
C. Increases revenue.
D. Reduces costs.
28. An
A.
B.
C.
D.
increase in the costs of production will:
Shift demand outwards.
Shift demand inwards.
Shift supply outwards so more is supplied at each and every price.
Shift supply inwards.
29. The price mechanism cannot:
A. Act as a signal.
B. Act as an incentive.
C. Act as a rationing device.
D. Shift the demand curve.
30. Agricultural prices tend to be unstable because:
A. Supply is price elastic.
B. Demand is price elastic.
C. Supply is stable.
D. Demand and supply are price inelastic.
31. If marginal cost is positive and falling:
A. Total cost is falling.
B. Total cost is increasing at a falling rate.
C. Total cost is falling at a falling rate.
D. Total cost is increasing at an increasing rate.
32. Which of the following statement is true about the perfect competition?
A. The product firms offer is very similar.
B. Products are heavily differentiated.
C. A few firms dominate the market.
D. Consumers have limited information.
33. In monopoly when abnormal profits are made:
A. The price set is greater than the marginal cost.
B. The price is less than the average cost.
C. The average revenue equals the marginal cost.
D. Revenue equals total cost.
34. In the kinked demand curve theory, it is assumed that:
A. Firms act independently.
B. An increase in price by the firm is followed by others.
C. A cut in price by the firm is followed by others.
D. Firms collude to fix the price.
35. Which of the following is NOT a macroeconomic issue?
A. The price of houses in Abuja.
B. The wage rate for plumbers in Lagos.
C. The decision of Solid Rock Limited to expand production in Nigeria.
D. The level of unemployment in Nigeria.
36. A rightward shift in aggregate supply is likely to:
A. Reduce the general price level and reduce national income.
B. Reduce the general price level and increase national income.
C. Increase the general price level and reduce national income.
D. Increase the general price level and increase national income.
37. An
A.
B.
C.
D.
increase in investment is most likely to be caused by:
Lower interest rates.
Lower national income.
A decrease in the marginal propensity to consume.
An increase in withdrawals.
38. If people are made unemployed because of a fall in aggregate demand this is known
as:
A. Frictional unemployment.
B. Seasonal unemployment.
C. Cyclical unemployment.
D. Structural unemployment.
39. The Phillips curve shows the relationship between inflation and what?
A. The balance of trade.
B. The rate of growth in an economy.
C. The rate of price increases.
D. Unemployment.
40. To
A.
B.
C.
D.
prevent the exchange rate rising the government could:
Sell its own currency.
Increase interest rates.
Buy its own currency.
Sell foreign currency.
Quantitative Analysis and Statistics (41 - 60)
41. A trader made a profit of 5 percent when he sold an article for N80,000. How much
would he have to sell the article to make a profit of 6 percent?
A. N86,000
B. N75,000
C. N96,000
D. N92,000
42. The mean age of a random sample of students is 15 years. When the age of their
teacher who is 45 years old is added, the mean age becomes 18 years, how many
students are in the sample?
A. 10
B. 7
C. 12
D. 9
43. The branch of statistics that concerns drawing conclusion from available data is
called:
I.
II.
III.
IV.
Descriptive statistics.
Analytical statistics.
Deductive statistics.
Inferential statistics.
A.
B.
C.
D.
II only
I and III only
IV only
III and IV only
44. A consultancy firm is owned by two partners, Ade and Bayo. It is agreed that their
annual profit will be shared in the ratio 4:5. If at the end of the year, Bayo received
N5,000 more than Ade. What is the total profit for that year?
A. N25,000
B. N30,000
C. N45,000
D. N35,000
45. If the mean income of a group of 80 salesmen is N1,600, what is the total income of
the group?
A. N120,000
B. N118,000
C. N150,000
D. N128,000
46. Which of the following sampling methods cannot be used in the absence of a
sampling frame?
I.
II.
III.
IV.
Systematic Sampling.
Simple Random Sampling.
Convenience Sampling.
Stratified Sampling.
A.
B.
C.
D.
I and III only
II and IV only
II only
III only
47. 60 candidates at a Professional Examination offer Information Technology (I.T) or
Quantitative Analysis (Q.A) or both. If 38 candidates offer I.T and 36 candidates offer
Q.A; how many candidates offer both subjects?
A. 22
B. 12
C. 14
D. 24
48. Which of the following statements appropriately describe quartile deviation?
A. The difference between the first and third quartiles.
B. Half of the sum of the first and third quartiles.
C. The differences between the highest and lowest values.
D. Half of the differences between the first and third quartiles.
49. A small scale entrepreneur deposited N25,000 at a Micro-Finance Bank. He was
offered a simple interest rate of 12% per annum. How long does it take the account
to earn N16,500 interest?
A. 31/2 years.
B. 6 years.
C. 51/2 years.
D. 4 years.
50. You are given the following regression equation:
Growth in Sales = 6.253 + 0.7 GDP
Which of the following statements would be false?
A. Growth rate in sales is the dependent variable.
B. If there is a recession, sales would only grow at 6.253%
C. The GDP rate is the independent variable.
D. The regression coefficient is 0.7
51. Which of the following statements with regards to correlation analysis is not true?
A. Correlation simply means an interrelationship or association.
B. Correlation analysis always assumes that the relationship between the dependent
and independent variable is linear.
C. There is positive correlation when movement in one variable causes movement
in the same direction in the other variable.
D. Coefficient of determination explains that portion of the variability in the
dependent variable that is not explained by the independent variable.
52. For N800,000 invested today, an insurance company promises to start making
perpetual payments to you beginning seven years from now. What must these
perpetual payments be if the long-term savings rate is expected to remain constant
at 5.5%?
A. N166,249
B. N64,006
C. Present value is infinite because payments continue into infinity.
D. N60,669
53. Given the following revenue function:
R = 800q – 4q2
What is the maximum revenue possible?
A. N10,000
B. N20,000
C. N30,000
D. N40,000
54. What is the present value of the following series at 10%?
Year
Cash flow
A.
B.
C.
D.
0
- 2,000
1
800
2
600
3
700
4
500
N90
N200
N300
N600
55. How much will have to be invested now to produce N20,000 after 5 years where a
rate of 10% p.a. is compounded half yearly?
A. N10,350
B. N12,278
C. N12,418
D. N15,518
56. The correlation co-efficient that indicates the strongest linear relationship between
variables is:
A. -0.75
B. -0.22
C. 0.35
D. 0.70
57. The probability of a defective bolt is 0.1; using binomial distribution, find the mean
for the distribution of defective bolts in a total of 400?
A. 4
B. 20
C. 36
D. 40
58. Which of the following statements about the Internal Rate of Return (IRR) in
incorrect?
A. IRR is the discount rate that gives zero NPV.
B. IRR can be found by drawing a graph known as present value profile.
C. IRR is an absolute measure of the returns of a project just like NPV.
D. A situation of multiple IRR could occur, if a project has non-conventional cash
flow.
59. Suppose that the prices of a bag of tomatoes in the year 2005, 2008 and 2010 were
N250, N260 and N300 respectively. Taking 2005 as the base year, compute the price
relative for year 2010.
A. 0.83
B. 0.87
C. 1.15
D. 1.2
60. The following table represents the relative frequency of the number of new
customers opening an account in a stockbroking firm each day, in the last month:
Number of customers
Relative frequency
0
1
2
3
4
0.55
0.20
0.10
0.15
0
Which of the following statements is/are true?
I. The mean and modal numbers of customers are equal.
II. The mean and median numbers of customers are equal.
III. The median and modal numbers of customers are equal.
A.
B.
C.
D.
I only
II only
III only
I, II and III
Financial Accounting and Financial Statement Analysis
Question 2
What do you understand by efficiency ratios? Give three examples.
(4 marks)
Economics and Financial Markets
Question 3
Clearly distinguish between government monetary policy and fiscal policy. Give an
example of each.
(3 marks)
Quantitative Analysis and Statistics
Question 4
Explain and illustrate the use of scatter graph in correlation/regression analysis. (3 marks)
Financial Accounting and Financial Statement Analysis
Question 5
5(a) You are given the following information about Blex Limited’s financial results for the
year ended 31 December, 2010:
Profit after tax
N100 million
Increase in accounts receivable
N20 million
Increase in accounts payable
N2 million
Depreciation
N10 million
Cost of goods sold
N20 million
Cash dividends
N5 million
Debt repayment
N5 million
Opening cash balance
N3 million
Required:
From the above information, prepare the Cash flow statement of Blex Limited in line
with the provisions of IAS 7, clearly highlighting the following:
a1)
a2)
a3)
a4)
Cash flow from operating activities.
Cash flow from investing activities.
Cash flow from financing activities.
Closing cash balance.
(2 marks)
(1 mark)
(2 marks)
(1 mark)
5(b)
Briefly discuss the performance of the company based on your result in 5(a) above.
(4 marks)
Economics and Financial Markets
Question 6
Financial intermediaries play a crucial role in the economy of nations.
With specific reference to the Nigerian economy, answer the following questions:
6(a1) What are financial intermediaries?
(1 mark)
6(a2) List and discuss four key roles performed by financial intermediaries in the Nigerian
economy.
(4 marks)
6(b)
Unlike firms under perfect competition, the monopoly firm is a ‘price maker’.
Discuss.
(5 marks)
Quantitative Analysis and Statistics
Question 7
You are given the following probability distribution for the annual sales of Emele Plc, a
quoted company.
Probability Distribution for Emele Annual Sales
Probability
Sales (Millions)
0.20
275
0.40
250
0.25
200
0.10
190
0.05
180
Required
Calculate the following in respect of Emele’s annual sales:
7(a1) Expected value.
(2 marks)
7(a2) Variance.
(3 marks)
7(a3) Standard Deviation.
(2 marks)
7(b)
List three weaknesses of the concept of expected value as a tool in investment
analysis.
(3 marks)