Finance & Accounting for Managers

Finance and
Accounting for
Managers

Contents
INTRODUCTION...........................................................................................................................3
Section A.........................................................................................................................................3
Solve the following MCQs..........................................................................................................3
Section B..........................................................................................................................................4
Question 1. Answer the following questions...............................................................................4
Question 2. Define the below mentioned decision making terms along with their roles in the
organisation..................................................................................................................................5
Section C..........................................................................................................................................6
Question 1. Analyse the financial ratios......................................................................................6
Question2. Explain why Pay back method should not be used alone without any other
investment appraisal technique along with the comments of two scenarios...............................7
Question 3. Address the following questions............................................................................10
Decide the portfolio which is best on the basis of risk neutral investor and which one is best
from the perspective of risk averse investor along with the reason...........................................11
Explain the relationship between risk and return......................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Finance refers to all the activities linked with the allocation and management of funds in
the organisation. Accounts can be defined as the process of recording all the transactions in
books and extracting some useful information from them. It is very important for managers to
control both the actions (Aifuwa and Embele, 2019). The report is divided into three sections.
First section relates to MCQs. Second one analysis the various users of financial statements and
their needs along with respective ratios. Third one deals with calculating ratios and decisions on
some investment proposals.
Section A
Solve the following MCQs
1. The decisions related to organisation are related to borrowing and allocation of funds.
Select the option which is not a financial decision that a financial manager is expected to
take part in?
Answer: B. Bookkeeping decision
2. Horizontal analysis is used to review the financial statements of the company over a
period of time.
Answer: A. True
3. Boss is not good in management of finances. It is asking about the future value of money.
What would be told to it?
Answer: B. It is the nominal future sum of money that a particular total of amount is worth
enough at a specified data in future considering a certain interest rate.
4. Select the one which is not an investment appraisal technique?
Answer: C. Calculus
5. According to the information provided calculate the pay back period? Investment
£50,000
1st year returns £30,000
2nd Year returns £30,000
3rd Year returns £30,000
Answer: C. 1 Year 8 Months

6. Identify the example of systematic risk?
Answer: A. Inflation rates
7. CAPM formula is used for the calculation of cost of equity. At the time of using its, what
is the risk free rate of interest.
Answer: B. Interest that an investor expects for a risk-free investment over a period of time.
8. When current assets is £ 20000 , Non-current liabilities is £ 20000 and Current Liabilities
£10000. calculate the current ratio?
Answer: B. 2
9. Identify the way of reducing risk in the portfolio of investments?
Answer: B. Diversification
10. Users of financial statements are interested in its various sections. Liquidity does not
show the ability of the organisation in setting off its short term obligations as they fall
due.
Answer: B. False
Section B
Question 1
1. Name any 7 users of financial statements along with their needs.
The most important users of financial statements are as follows:
1. Company management- They are the managers and directors of the organisation.
They are interested in knowing the financial health of the company along with its
liquidity and profitability. Financial statement will help the administration to build
profit plan , expansion plan and to know where improvement is required.
2. Competitors- They compete against the business for which they desire to gain access
of the financial statements of the company. They extract knowledge of firm from that
and tries to frame their own strategies (Cohen, Bisogno and Malkogianni, 2019). It
helps them to know their financial position in the market also to provide information
related to cash flow statement and would help in influence courses of action.
3. Customers- they are the people that takes the supplies from the companies for the
products. They take a look at the financial statements to view financial abilities of
these companies so that they can provide them goods in right time. It helps customers