ACCA F4 - Question Bank - 5. Capital & financing

Which of the following statements describes treasury shares?

A company's own shares that it legitimately purchased out of distributable profit

Which of the following statements describes a debenture?

A document that records the term of any loan

Which of the following correctly defines profits available for distribution in a private company?

Accumulated realized profits less accumulated realized losses

On 1 April 2019 Jaen created a fixed charge for £50,000 over the assets of Clogs Ltd and it was registered on 1 June 2019. On 1 Mya 2019 a fixed charge for £100,000 was created over the same assets on behalf of Adel. Adel's fixed charge was registered on 13 May 2019. Which of the following statements describes the priority of the two fixed charges?

Adel's fixed charge has priority as it was registered within 21 days of creation before Jaen's fixed charge

In the context of company finance, which of the following statements is true?

Fixed charges are security over a class of assets

Which of the following are ordinary partnerships unable to create in relation to their property?

Floating Charges

In company law, a premium received on the issue of new shares must be credited to a share premium reserve. Which of the following can the share premium reserve not be used for?

Funding dividends to shareholders

In the context of company finance, which of the following are disadvantages of debentures?

Interest must be paid to debenture holders irrespective of whether there are profits available & high levels of debt will adversely affect a company's share price

In the context of a company issuing shares, which one of the following is forbidden by the companies act 2006?

Issuing shares at a discount to nominal value

Which of the following correctly describes a floating charge?

It is on a class of assets, present or future, which may change in the ordinary course of business

When a company sells its shares at a higher value than the nominal value what happens to the difference in value?

It is transferred into a share premium account

Which of the following statements is correct in relation to a private company whishing to reduce it's share capital?

It must pass a special resolution

If a charge is created over property where must it be registered?

Land registry

Which of the following sources of company finance typically carries NO fixed entitlement to income?

Ordinary shares

What is the amount of the nominal share capital that has been paid for by the company members called?

Paid-up share capital

Which of the following sources of company finance is classed as 'equity' but typically carries no voting rights?

Preference Shares

In the context of company finance, which of the following is usually repaid first on liquidation of a company?

Preference shareholders

In company law, directors require authority to make a share issue. Which of the following is not true?

The maximum expiry date for authority is two years

In relation to charges which of the following is correct?

Both private and public companies may create fixed and floating charges

Which of the following statements in relation to company finance is correct?

Debentures can be issued at a discount to nominal value

In the context of company finance, fixed and floating charges must be registered with the registrar at companies house. Which of the following statements is not true?

Registration must occur within 14 days of creation

A company wishes to raise finance by issuing new shares to existing shareholders for an amount slightly less than their current market value. This is an example of which of the following?

Rights issue

In company law, a company can only make a dividend payment out of distributable reserves. Which of the following are distributable reserves?

Share premium reserve, revaluation reserve and share capital reserve

In company law there are strict rules concerning how public companies receive payment for newly issued shares. Which of the following statements is not true for public companies?

Shares cannot be allotted until at least on-half of the nominal value has been paid

Which of the following is not a type of share of a company?

Special

In relation to non-cash consideration as a payment for public shares, which of the following statements are correct?

The valuation of non-cash consideration must be carried out with six months of allotment

In the context of company finance, which of the following are advantages of debentures?

There are no restrictions on the company issuing debentures at a discount & the board of directors do not usually require authority of shareholders to issue debentures

The category of treasury shares comes into existence under which of the following circumstances?

They are purchased as such by a private or public company

Where a company legitimately purchases 10% of it's own shares out of profit, what can it hold them as?

Treasury shares