How is the interest coverage ratio calculated? (Difficulty: Moderate)

What is calculated by the following formula: (Net profit or loss for the period attributable to ordinary shareholders)/(Time-weighted average number of ordinary shares outstanding during the period)? (Difficulty: Moderate)

According to IFRS 8, an operating segment is the component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity). (Difficulty: Moderate)

Which of the following situations represents an effective use of assets in a fixed-assets-intensive firm, in which setting the machines for a given product is time consuming. (Difficulty: Moderate)

What do you obtain if you multiply receivables turnover by sales revenue? (Difficulty: Moderate)

Moderato is a business that has regularly provided, year after year, a steady return on assets of 14%. A competitor moved in the market with a value proposition based on lower prices. Moderato must adjust its prices downwards. Its net profit margin used to be 5%. The new prices will reduce the net profit margin by 40%. Moderato’s short-term reaction to maintain (or even improve) the ROA at 14% or more is to: (Difficulty: Moderate)

Scherzando Inc. has 5,000 shares outstanding on 1 January X1. It holds 1,000 shares in treasury stock. On 1 January X1 shares trade at 13 CU per share. On 1 July, it issues, at 13.5 CU per share, an additional 600 shares. On October 1, it issues another 1,400 shares at a price of 14 CU per share. The market value of a share on October 1 is 16 CU per share. For X1, earnings after tax (attributable to ordinary equity holders) were 31,640 CU. The basic earnings per share for X1 amounts to (amount in CU): (Difficulty: Difficult)

Manon Troppo has recently been appointed CFO of a large corporation. She learns that the manager of operations and the manager of sales have agreed to eliminate the one product (out of 4) that is the slowest moving item. She collects the following data: sales revenue of products A, B, C and D is 1,000 CU each. The gross margins are 50% for A, 25% for B, 20% for C and 70% for D. SG&A costs are essentially invariant with volume. They are allocated between the four products on the basis of sales revenue. The average inventories balances are 125 CU for A, 62.5 CU for B, 50 for C and 50 for D. Which product is likely to be considered for elimination first, and in that case what would be the resulting profit in the next period given that no new sales can be envisioned in such a short time. (All figures are in CU) (Difficulty: difficult)

Sarabanda is a retailer that created his business on 1 January X1. When created the WCN was 800 CU. The fixed depreciable assets (only fixed assets) cost 500 CU to acquire. They have a useful life of 5 years and no residual value. Sarabanda chose the use straight-line depreciation for these assets. Unfortunately for Sarabanda, the store was not as successful as forecasted. Sales revenue was 1,000 CU in the first year, and declined by 50 CU each consecutive year until period 4 included. COGS, throughout the first 4 years, stands at 50% of sales revenue. SG&A expenses stand at 10% of sales revenue. WCN for each of the years stands at (75% of sales revenue):



The actual cost of financing the WCN is 5% of the WCN. The sequence of return on average net assets (excluding cash) for each of the four years of operations under scrutiny is: (Difficulty: Difficult)

Two friends are considering creating a business entity. It will be named Allemanda and will sell sheet music. The friends debate about the degree of financial leverage to adopt for their new venture. Johan Sebastian is fairly well established in society and is in favor of a significantly lower leverage than the traditional rule of thumb of the three thirds. Amadeus Wolfgang has difficulties coming up with the cash for the capital and is, therefore, in favor of a significantly higher leverage than the traditional rule of thumb of the three thirds (Banks like the project as both friends are well known in the field and the venture is likely to be a smashing success). If Johan Sebastian were to win the debate, what would likely be the outcome (compared to the outcome that would obtain if Amadeus Wolfgang were to win the debate – assume the business would be created in either case): (Difficulty: Moderate)