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Hi John.
thanks for your reply.
but i’m still confused about Q10.an increase in the cash operating cycle =
1) shorter pay to vendors, may be able to claim more discount
2) longer inventory turnover days, may be more inventory which is more profitable than cash in hand
3) longer receivable turnover days, may be more attractive to clients
all of them indicate an increase in profitability.i know that shorter cycle might be better, because it lowers risk to liquidity problem and make the business more “healthy”.
but longer cycle do increase profitablity i think.12 Which of the following statements concerning profit are correct?
1 Accounting profit is not the same as economic profit
2 Profit takes account of risk
3 Accounting profit can be manipulated by managers
A 1 and 3 only
B 1 and 2 only
C 2 and 3 only
D 1, 2 and 3OpenTuition suggested A, but I think it’s D.
2 Profit takes account of risk.
When recognizing sales and costs, risk is a factor to consider.
Also, bad-debt allowance is an application of risk accounting I think.
Am I right?10 Which of the following statements concerning working capital management are correct?
1 Working capital should increase as sales increase
2 An increase in the cash operating cycle will decrease profitability
3 Overtrading is also known as under-capitalisation
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3OpenTuition gave a D
But I think B is correct.
2 An increase in the cash operating cycle will decrease profitability
Increase in COC means decrease in liquidity, tranditional trade-off for profitablity. Hence it’s a false statement.it’s neither semi-strong form nor fundamental analysis.
but technical analysis. i’m pretty sure.45, failed
i felt good when i walked out the exam-hall, the paper was easy, and i attempted 90%+
sigh…ps: the pass rate issued by official site is 40%
@Jenn
although my study text doesn’t state such circumstances, i looked for it on internet, you’re right there’s such mechanism in some market.
i have no idea how it works, but it might be enough to understand it literally.if rights itself can be traded alone, regardless of who trade it, assume original cost equals to cum-right price, shareholders have 4 options:
A) take all rights…… it requires more cash to invest in, share number increases, cost per share equals to ex-right price, no cash retained, MV increased since more cash invested, no loss
B) take part of rights and sell the rest…… situation varies, in a special situation, investor can find out a middle point where proceed of selling right equals to cost of taking right, then it requires no extra cash, share number increases, cost per share equals to ex-right price, no cash retained, MV no change, no loss
C) sell all rights…… it requires no extra cash, share numbers no change, cost per share equals to cum-right price, cash obtained and retained, cash+new MV = MV before right issue, no loss
D) give up rights…… it requires no extra cash, share numbers no change, cost per share equals to cum-right price, no cash retained, MV is lowered, suffer a loss PS: the less rights given up, the less loss sufferedif rights itself cannot be traded alone, to sell and buy back is the only way to avoid loss where no more cash is available to be invested in.
as far as i know, the rules vary in different contries.
for a developing country or security market, it more likely that the right is not able to be traded apartly, current holder has options to take the right or ignore it, but cannot sell the right.
since right issue is at discount, ignorance is a bad idea financially, meanwhile for any reason, shareholder may have no willingness or capability to invest more money, the alternative option is to sell out all stocks… and maybe buy back at or after the ex-right date for ex-right price. in this situation, he/she actually lose nothing but transaction cost.
for a developed country or market, shareholder have one more option, to sell the right only. the only reason to ignore such right issue is forget or simply missed the announcement.
in any circumstances, do nothing must make a paper loss.
i have no idea how company can exercise rights on behalf of shareholders and benefit them.i also had bad experiences, on f4, nightmare…
suggest you to think about it:
1) do you gain real things from acca? i mean those can improve your job competence and awareness etc.
2) do you think it’s possible to pass all exams in time?if yes to both, no reason to give up.
otherwise, it might be better to find an alternatives.it doesn’t mean you’re incompetent, perhaps just you and acca are not matching with each other.
think it positive, and broaden your sight out of acca, you’ll be in good mood.ps: if you’re not an auditor, why not consider cma/cima etc… i’m surprised that i chose acca year ago while auditor is never an option for me, sigh.
if it becomes true, acca could earn more from students, not only fees, but also students number, it would bring positive effect to the status of acca over global accounting professional bodies. i think that’s the main purpose.
wondering the update…@Elena
why ignore issue costs?firstly, find out the budget absorb rate=48000/4800=$10 per unit
then, assume x=actual units produced, $10 times x = actual overheads absorbedbudget is $48k, and variance is $2k adverse, indicates actual overheads is $50k
under absorbed by $8k, indicates actual overheads absorbed is $42k (=50-8)combine the two above, you’ll find x=4200 units
for for reference
@gloriakuan
i briefed:
invoice at home currency
netting
leading and laggingas soon as this exam ended, i was happy because i tried 90% questions and most of them are easy
review past papers as many as possible really helpbut, after read this post, i turned to be nervous, i realised my mistake:
q1, last year capital allowance, i forgot to deduct scrap value, and required description about soft capital rationing was totally goofed
q2, negative or positive, i have no idea what’s that for
q4, three objectives, i just sqrt these figures rather than calculate for each year… these scores are easy but missedi think in this paper, only two questions are tricky:
the one is q1 “mutually exclusive”, we have to compare two possible combinations, or analyse opportunity costs… i chose the compare them, not clever but simple.
the other one is q2 “internal methods”……i believe ACCA should bold such words to make exam more fair
@Saad
i think it should be 792 rather than 16
incremental here is opposite to sunk, it tells us to include these figures into appraising, nothing morewhen we deal with WC figures, it’s tricky:
since WC is balance sheet item, firstly we have to confirm if these figures are year-end balance, or change for each year
in most cases, WC figures are balance, we need find out the changes by subtracting retrospectively, as 16 you mentionedbut it’s irrelevant to costs, as costs are not balance figures