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JOL Co was the market leader with a share of 30% three years ago. The managing director of JOL Co stated at arecent meeting of the board of directors that: ‘our loss of market share during the last three years might lead to theend of JOL Co as an organisa

题目

JOL Co was the market leader with a share of 30% three years ago. The managing director of JOL Co stated at a

recent meeting of the board of directors that: ‘our loss of market share during the last three years might lead to the

end of JOL Co as an organisation and therefore we must address this issue immediately’.

Required:

(b) Discuss the statement of the managing director of JOL Co and discuss six performance indicators, other than

decreasing market share, which might indicate that JOL Co might fail as a corporate entity. (10 marks)

相似考题

1.3 (a) Leigh, a public limited company, purchased the whole of the share capital of Hash, a limited company, on 1 June2006. The whole of the share capital of Hash was formerly owned by the five directors of Hash and under theterms of the purchase agreement, the five directors were to receive a total of three million ordinary shares of $1of Leigh on 1 June 2006 (market value $6 million) and a further 5,000 shares per director on 31 May 2007,if they were still employed by Leigh on that date. All of the directors were still employed by Leigh at 31 May2007.Leigh granted and issued fully paid shares to its own employees on 31 May 2007. Normally share options issuedto employees would vest over a three year period, but these shares were given as a bonus because of thecompany’s exceptional performance over the period. The shares in Leigh had a market value of $3 million(one million ordinary shares of $1 at $3 per share) on 31 May 2007 and an average fair value of$2·5 million (one million ordinary shares of $1 at $2·50 per share) for the year ended 31 May 2007. It isexpected that Leigh’s share price will rise to $6 per share over the next three years. (10 marks)Required:Discuss with suitable computations how the above share based transactions should be accounted for in thefinancial statements of Leigh for the year ended 31 May 2007.

2.3 The Chemical Services Group plc (CSG), which operates a divisionalised structure, provides services to industrial anddomestic customers in Swingland, a country whose economic climate is subject to significant variations. There havebeen a number of recent changes at board level within CSG and therefore the managing director called a meeting ofthe board of directors at which each of four recently appointed directors put forward their view as to what their primaryfocus should be. These were as follows:The research and development director stated that ‘my primary focus is upon ensuring that we continue to developthe products and services that satisfy the requirements of our existing and potential customers’.The finance director stated that ‘my primary focus is upon keeping our investors satisfied’.The human resources director stated that ‘my primary focus is upon ensuring that we take all the steps necessary toestablish and maintain our reputation as a responsible employer’.The corporate affairs director stated that ‘my primary focus is upon the need to ensure that we are recognised as asocially responsible organisation’.Required:(a) Discuss the criteria that should be considered in deciding upon suitable performance measures in respect ofthe primary focus of each of the FOUR directors of CSG providing THREE appropriate quantitative measuresfor each primary focus.Note: your answer may include financial or non-financial quantitative measures. (12 marks)

3.5 The directors of Blaina Packaging Co (BPC), a well-established manufacturer of cardboard boxes, are currentlyconsidering whether to enter the cardboard tube market. Cardboard tubes are purchased by customers whoseproducts are wound around tubes of various sizes ranging from large tubes on which carpets are wound, to smalltubes around which films and paper products are wound. The cardboard tubes are usually purchased in very largequantities by customers. On average, the cardboard tubes comprise between 1% and 2% of the total cost of thecustomers’ finished product.The directors have gathered the following information:(1) The cardboard tubes are manufactured on machines which vary in size and speed. The lowest cost machine ispriced at $30,000 and requires only one operative for its operation. A one-day training course is required in orderthat an unskilled person can then operate such a machine in an efficient and effective manner.(2) The cardboard tubes are made from specially formulated paper which, at times during recent years, has been inshort supply.(3) At present, four major manufacturers of cardboard tubes have an aggregate market share of 80%. The currentmarket leader has a 26% market share. The market shares of the other three major manufacturers, one of whichis JOL Co, are equal in size. The product ranges offered by the four major manufacturers are similar in terms ofsize and quality. The market has grown by 2% per annum during recent years.(4) A recent report on the activities of a foreign-based multinational company revealed that consideration was beinggiven to expanding operations in their packaging division overseas. The division possesses large-scale automatedmachinery for the manufacture of cardboard tubes of any size.(5) Another company, Plastic Tubes Co (PTC) produces a narrow, but increasing, range of plastic tubes which arecapable of housing small products such as film and paper-based products. At present, these tubes are on average30% more expensive than the equivalent sized cardboard tubes sold in the marketplace.Required:(a) Using Porter’s five forces model, assess the attractiveness of the option to enter the market for cardboardtubes as a performance improvement strategy for BPC. (10 marks)

4.(b) On 31 May 2007, Leigh purchased property, plant and equipment for $4 million. The supplier has agreed toaccept payment for the property, plant and equipment either in cash or in shares. The supplier can either choose1·5 million shares of the company to be issued in six months time or to receive a cash payment in three monthstime equivalent to the market value of 1·3 million shares. It is estimated that the share price will be $3·50 inthree months time and $4 in six months time.Additionally, at 31 May 2007, one of the directors recently appointed to the board has been granted the right tochoose either 50,000 shares of Leigh or receive a cash payment equal to the current value of 40,000 shares atthe settlement date. This right has been granted because of the performance of the director during the year andis unconditional at 31 May 2007. The settlement date is 1 July 2008 and the company estimates the fair valueof the share alternative is $2·50 per share at 31 May 2007. The share price of Leigh at 31 May 2007 is $3 pershare, and if the director chooses the share alternative, they must be kept for a period of four years. (9 marks)Required:Discuss with suitable computations how the above share based transactions should be accounted for in thefinancial statements of Leigh for the year ended 31 May 2007.

更多“JOL Co was the market leader with a share of 30% three years ago. The managing director of JOL Co stated at arecent meeting of the board of directors that: ‘our loss of market share during the last three years might lead to theend of JOL Co as an organisa”相关问题

  • 第1题：

    (b) You are an audit manager in a firm of Chartered Certified Accountants currently assigned to the audit of Cleeves

    Co for the year ended 30 September 2006. During the year Cleeves acquired a 100% interest in Howard Co.

    Howard is material to Cleeves and audited by another firm, Parr & Co. You have just received Parr’s draft

    auditor’s report for the year ended 30 September 2006. The wording is that of an unmodified report except for

    the opinion paragraph which is as follows:

    Audit opinion

    As more fully explained in notes 11 and 15 impairment losses on non-current assets have not been

    recognised in profit or loss as the directors are unable to quantify the amounts.

    In our opinion, provision should be made for these as required by International Accounting Standard 36

    (Impairment). If the provision had been so recognised the effect would have been to increase the loss before

    and after tax for the year and to reduce the value of tangible and intangible non-current assets. However,

    as the directors are unable to quantify the amounts we are unable to indicate the financial effect of such

    omissions.

    In view of the failure to provide for the impairments referred to above, in our opinion the financial statements

    do not present fairly in all material respects the financial position of Howard Co as of 30 September 2006

    and of its loss and its cash flows for the year then ended in accordance with International Financial Reporting

    Standards.

    Your review of the prior year auditor’s report shows that the 2005 audit opinion was worded identically.

    Required:

    (i) Critically appraise the appropriateness of the audit opinion given by Parr & Co on the financial

    statements of Howard Co, for the years ended 30 September 2006 and 2005. (7 marks)


    正确答案：

    (b) (i) Appropriateness of audit opinion given
    Tutorial note: The answer points suggested by the marking scheme are listed in roughly the order in which they might
    be extracted from the information presented in the question. The suggested answer groups together some of these
    points under headings to give the analysis of the situation a possible structure.
    Heading
    ■ The opinion paragraph is not properly headed. It does not state the form. of the opinion that has been given nor
    the grounds for qualification.
    ■ The opinion ‘the financial statements do not give a true and fair view’ is an ‘adverse’ opinion.
    ■ That ‘provision should be made’, but has not, is a matter of disagreement that should be clearly stated as noncompliance
    with IAS 36. The title of IAS 36 Impairment of Assets should be given in full.
    ■ The opinion should be headed ‘Disagreement on Accounting Policies – Inappropriate Accounting Method – Adverse
    Opinion’.
    1 ISA 250 does not specify with whom agreement should be reached but presumably with those charged with corporate governance (e.g audit committee or
    2 other supervisory board).
    20
    6D–INTBA
    Paper 3.1INT
    Content
    ■ It is appropriate that the opinion paragraph should refer to the note(s) in the financial statements where the matter
    giving rise to the modification is more fully explained. However, this is not an excuse for the audit opinion being
    ‘light’ on detail. For example, the reason for impairment could be summarised in the auditor’s report.
    ■ The effects have not been quantified, but they should be quantifiable. The maximum possible loss would be the
    carrying amount of the non-current assets identified as impaired.
    ■ It is not clear why the directors have been ‘unable to quantify the amounts’. Since impairments should be
    quantifiable any ‘inability’ suggest a limitation in scope of the audit, in which case the opinion should be disclaimed
    (or ‘except for’) on grounds of lack of evidence rather than disagreement.
    ■ The wording is confusing. ‘Failure to provide’ suggests disagreement. However, there must be sufficient evidence
    to support any disagreement. Although the directors cannot quantify the amounts it seems the auditors must have
    been able to (estimate at least) in order to form. an opinion that the amounts involved are sufficiently material to
    warrant a qualification.
    ■ The first paragraph refers to ‘non-current assets’. The second paragraph specifies ‘tangible and intangible assets’.
    There is no explanation why or how both tangible and intangible assets are impaired.
    ■ The first paragraph refers to ‘profit or loss’ and the second and third paragraphs to ‘loss’. It may be clearer if the
    first paragraph were to refer to recognition in the income statement.
    ■ It is not clear why the failure to recognise impairment warrants an adverse opinion rather than ‘except for’. The
    effects of non-compliance with IAS 36 are to overstate the carrying amount(s) of non-current assets (that can be
    specified) and to understate the loss. The matter does not appear to be pervasive and so an adverse opinion looks
    unsuitable as the financial statements as a whole are not incomplete or misleading. A loss is already being reported
    so it is not that a reported profit would be turned into a loss (which is sometimes judged to be ‘pervasive’).
    Prior year
    ■ As the 2005 auditor’s report, as previously issued, included an adverse opinion and the matter that gave rise to
    the modification:
    – is unresolved; and
    – results in a modification of the 2006 auditor’s report,
    the 2006 auditor’s report should also be modified regarding the corresponding figures (ISA 710 Comparatives).
    ■ The 2006 auditor’s report does not refer to the prior period modification nor highlight that the matter resulting in
    the current period modification is not new. For example, the report could say ‘As previously reported and as more
    fully explained in notes ….’ and state ‘increase the loss by $x (2005 – $y)’.

  • 第2题：

    5 You are the audit manager for three clients of Bertie & Co, a firm of Chartered Certified Accountants. The financial

    year end for each client is 30 September 2007.

    You are reviewing the audit senior’s proposed audit reports for two clients, Alpha Co and Deema Co.

    Alpha Co, a listed company, permanently closed several factories in May 2007, with all costs of closure finalised and

    paid in August 2007. The factories all produced the same item, which contributed 10% of Alpha Co’s total revenue

    for the year ended 30 September 2007 (2006 – 23%). The closure has been discussed accurately and fully in the

    chairman’s statement and Directors’ Report. However, the closure is not mentioned in the notes to the financial

    statements, nor separately disclosed on the financial statements.

    The audit senior has proposed an unmodified audit opinion for Alpha Co as the matter has been fully addressed in

    the chairman’s statement and Directors’ Report.

    In October 2007 a legal claim was filed against Deema Co, a retailer of toys. The claim is from a customer who slipped

    on a greasy step outside one of the retail outlets. The matter has been fully disclosed as a material contingent liability

    in the notes to the financial statements, and audit working papers provide sufficient evidence that no provision is

    necessary as Deema Co’s lawyers have stated in writing that the likelihood of the claim succeeding is only possible.

    The amount of the claim is fixed and is adequately covered by cash resources.

    The audit senior proposes that the audit opinion for Deema Co should not be qualified, but that an emphasis of matter

    paragraph should be included after the audit opinion to highlight the situation.

    Hugh Co was incorporated in October 2006, using a bank loan for finance. Revenue for the first year of trading is

    $750,000, and there are hopes of rapid growth in the next few years. The business retails luxury hand made wooden

    toys, currently in a single retail outlet. The two directors (who also own all of the shares in Hugh Co) are aware that

    due to the small size of the company, the financial statements do not have to be subject to annual external audit, but

    they are unsure whether there would be any benefit in a voluntary audit of the first year financial statements. The

    directors are also aware that a review of the financial statements could be performed as an alternative to a full audit.

    Hugh Co currently employs a part-time, part-qualified accountant, Monty Parkes, who has prepared a year end

    balance sheet and income statement, and who produces summary management accounts every three months.

    Required:

    (a) Evaluate whether the audit senior’s proposed audit report is appropriate, and where you disagree with the

    proposed report, recommend the amendment necessary to the audit report of:

    (i) Alpha Co; (6 marks)


    正确答案：
    5 BERTIE & CO
    (a) (i) Alpha Co
    The factory closures constitute a discontinued operation per IFRS 5 Non-Current Assets Held for Sale and Discontinued
    Operations, due to the discontinuance of a separate major component of the business. It is a major component due to
    the 10% contribution to revenue in the year to 30 September 2007 and 23% contribution in 2006. It is a separate
    business component of the company due to the factories having made only one item, indicating a separate income
    generating unit.
    Under IFRS 5 there must be separate disclosure on the face of the income statement of the post tax results of the
    discontinued operation, and of any profit or loss resulting from the closures. The revenue and costs of the discontinued
    operation should be separately disclosed either on the face of the income statement or in the notes to the financial
    statements. Cash flows relating to the discontinued operation should also be separately disclosed per IAS 7 Cash Flow
    Statements.
    In addition, as Alpha Co is a listed company, IFRS 8 Operating Segments requires separate segmental disclosure of
    discontinued operations.
    Failure to disclose the above information in the financial statements is a material breach of International Accounting
    Standards. The audit opinion should therefore be qualified on the grounds of disagreement on disclosure (IFRS 5,
    IAS 7 and IFRS 8). The matter is material, but not pervasive, and therefore an ‘except for’ opinion should be issued.
    The opinion paragraph should clearly state the reason for the disagreement, and an indication of the financial
    significance of the matter.
    The audit opinion relates only to the financial statements which have been audited, and the contents of the other
    information (chairman’s statement and Directors’ Report) are irrelevant when deciding if the financial statements show
    a true and fair view, or are fairly presented.
    Tutorial note: there is no indication in the question scenario that Alpha Co is in financial or operational difficulty
    therefore no marks are awarded for irrelevant discussion of going concern issues and the resultant impact on the audit
    opinion.

  • 第3题：

    CUSTOMER REFERRAL From: Bob Smith< bobsmith@3>To: Tompson Harris 10:12 AM, Monday, Dec. 21, 2015 Dear Mr. Harris, Thank you for your cooperation for our business in the recent years. With your great help and support, we have tripled our products in the last three years. And the profits of our company increases steadily. Now, we have enlarged and consolidated our domestic market and European market. Next step we intend to explore the North American market, especially Canada’s and USA’s. However, we do not have good connections in this region. Therefore, we shall be very obliged if you could kindly introduce us to some of your reliable partners in North America who are interested in our products. We look forward to your early reply. Merry Christmas and Happy New Year! Yours sincerely, Bob Smith Project manager

    1. How does Bob begin with his email()

    A. With a self-introduction.

    B. With his company’s current situation.

    C. With presenting thanks for help and support.

    2. What’s the current situation of Bob’s company()

    A. Very good.

    B. Not so good.

    C. Just so so.

    3. What are the market areas of Bob’s company()

    A. Domestic and Asian market.

    B. Domestic and North American market.

    C. Domestic and European market.

    4. What is the recent plan of Bob’s company()

    A. To enlarge the domestic and European market.

    B. To explore the North American market.

    C. To withdraw from European market and strengthen the North American market.

    5. What is the purpose of the email()

    A. To give best wishes for the coming Christmas and New Year.

    B. To ask for the introduction of some business partners in North America.

    C. To consolidate the business relationship.


    参考答案：子问题 1:C; 子问题 2:A; 子问题 3:C; 子问题 4:B; 子问题 5:B

  • 第4题：

    I’ll begin by talking about our total sales last year, and then I’ll talk about our market share of our product in some major countries.Finally I’ll talk about our main customers and future plans.


    正确答案：我首先谈谈去年的销售总额，然后谈谈我们产品目前在主要几个国家的市场份额，最后谈我们的主要客户及今后的计划。

  • 第5题：

    (a) Contrast the role of internal and external auditors. (8 marks)

    (b) Conoy Co designs and manufactures luxury motor vehicles. The company employs 2,500 staff and consistently makes a net profit of between 10% and 15% of sales. Conoy Co is not listed; its shares are held by 15 individuals, most of them from the same family. The maximum shareholding is 15% of the share capital.

    The executive directors are drawn mainly from the shareholders. There are no non-executive directors because the company legislation in Conoy Co’s jurisdiction does not require any. The executive directors are very successful in running Conoy Co, partly from their training in production and management techniques, and partly from their ‘hands-on’ approach providing motivation to employees.

    The board are considering a significant expansion of the company. However, the company’s bankers are

    concerned with the standard of financial reporting as the financial director (FD) has recently left Conoy Co. The board are delaying provision of additional financial information until a new FD is appointed.

    Conoy Co does have an internal audit department, although the chief internal auditor frequently comments that the board of Conoy Co do not understand his reports or provide sufficient support for his department or the internal control systems within Conoy Co. The board of Conoy Co concur with this view. Anders & Co, the external auditors have also expressed concern in this area and the fact that the internal audit department focuses work on control systems, not financial reporting. Anders & Co are appointed by and report to the board of Conoy Co.

    The board of Conoy Co are considering a proposal from the chief internal auditor to establish an audit committee.

    The committee would consist of one executive director, the chief internal auditor as well as three new appointees.

    One appointee would have a non-executive seat on the board of directors.

    Required:

    Discuss the benefits to Conoy Co of forming an audit committee. (12 marks)


    正确答案：
    (a)Roleofinternalandexternalauditors–differencesObjectivesThemainobjectiveofinternalauditistoimproveacompany’soperations,primarilyintermsofvalidatingtheefficiencyandeffectivenessoftheinternalcontrolsystemsofacompany.Themainobjectiveoftheexternalauditoristoexpressanopiniononthetruthandfairnessofthefinancialstatements,andotherjurisdictionspecificrequirementssuchasconfirmingthatthefinancialstatementscomplywiththereportingrequirementsincludedinlegislation.ReportingInternalauditreportsarenormallyaddressedtotheboardofdirectors,orotherpeoplechargedwithgovernancesuchastheauditcommittee.Thosereportsarenotpubliclyavailable,beingconfidentialbetweentheinternalauditorandtherecipient.Externalauditreportsareprovidedtotheshareholdersofacompany.Thereportisattachedtotheannualfinancialstatementsofthecompanyandisthereforepubliclyavailabletotheshareholdersandanyreaderofthefinancialstatements.ScopeofworkTheworkoftheinternalauditornormallyrelatestotheoperationsoftheorganisation,includingthetransactionprocessingsystemsandthesystemstoproducetheannualfinancialstatements.Theinternalauditormayalsoprovideotherreportstomanagement,suchasvalueformoneyauditswhichexternalauditorsrarelybecomeinvolvedwith.Theworkoftheexternalauditorrelatesonlytothefinancialstatementsoftheorganisation.However,theinternalcontrolsystemsoftheorganisationwillbetestedastheseprovideevidenceonthecompletenessandaccuracyofthefinancialstatements.RelationshipwithcompanyInmostorganisations,theinternalauditorisanemployeeoftheorganisation,whichmayhaveanimpactontheauditor’sindependence.However,insomeorganisationstheinternalauditfunctionisoutsourced.Theexternalauditorisappointedbytheshareholdersofanorganisation,providingsomedegreeofindependencefromthecompanyandmanagement.(b)BenefitsofauditcommitteeinConoyCoAssistancewithfinancialreporting(nofinanceexpertise)TheexecutivedirectorsofConoyCodonotappeartohaveanyspecificfinancialskills–asthefinancialdirectorhasrecentlyleftthecompanyandhasnotyetbeenreplaced.ThismaymeanthatfinancialreportinginConoyCoislimitedorthattheothernon-financialdirectorsspendasignificantamountoftimekeepinguptodateonfinancialreportingissues.AnauditcommitteewillassistConoyCobyprovidingspecialistknowledgeoffinancialreportingonatemporarybasis–atleastoneofthenewappointeesshouldhaverelevantandrecentfinancialreportingexperienceundercodesofcorporategovernance.ThiswillallowtheexecutivedirectorstofocusonrunningConoyCo.EnhanceinternalcontrolsystemsTheboardofConoyCodonotnecessarilyunderstandtheworkoftheinternalauditor,ortheneedforcontrolsystems.ThismeansthatinternalcontrolwithinConoyComaybeinadequateorthatemployeesmaynotrecognisetheimportanceofinternalcontrolsystemswithinanorganisation.TheauditcommitteecanraiseawarenessoftheneedforgoodinternalcontrolsystemssimplybybeingpresentinConoyCoandbyeducatingtheboardontheneedforsoundcontrols.Improvingtheinternalcontrol‘climate’willensuretheneedforinternalcontrolsisunderstoodandreducecontrolerrors.RelianceonexternalauditorsConoyCo’sinternalauditorscurrentlyreporttotheboardofConoyCo.Aspreviouslynoted,thelackoffinancialandcontrolexpertiseontheboardwillmeanthatexternalauditorreportsandadvicewillnotnecessarilybeunderstood–andtheboardmayrelytoomuchonexternalauditorsIfConoyCoreporttoanauditcommitteethiswilldecreasethedependenceoftheboardontheexternalauditors.Theauditcommitteecantaketimetounderstandtheexternalauditor’scomments,andthenviathenon-executivedirector,ensurethattheboardtakeactiononthosecomments.AppointmentofexternalauditorsAtpresent,theboardofConoyCoappointtheexternalauditors.Thisraisesissuesofindependenceastheboardmaybecometoofamiliarwiththeexternalauditorsandsoappointonthisfriendshipratherthanmerit.Ifanauditcommitteeisestablished,thenthiscommitteecanrecommendtheappointmentoftheexternalauditors.Thecommitteewillhavethetimeandexpertisetoreviewthequalityofserviceprovidedbytheexternalauditors,removingtheindependenceissue.Corporategovernancerequirements–bestpracticeConoyCodonotneedtofollowcorporategovernancerequirements(thecompanyisnotlisted).However,notfollowingthoserequirementsmaystarttohaveadverseeffectsonConoy.Forexample,ConoyCo’sbankisalreadyconcernedaboutthelackoftransparencyinreporting.EstablishinganauditcommitteewillshowthattheboardofConoyCoarecommittedtomaintainingappropriateinternalsystemsinthecompanyandprovidingthestandardofreportingexpectedbylargecompanies.Obtainingthenewbankloanshouldalsobeeasierasthebankwillbesatisfiedwithfinancialreportingstandards.Givennonon-executives–independentadvicetoboardCurrentlyConoyCodoesnothaveanynon-executivedirectors.Thismeansthatthedecisionsoftheexecutivedirectorsarenotbeingchallengedbyotherdirectorsindependentofthecompanyandwithlittleornofinancialinterestinthecompany.Theappointmentofanauditcommitteewithonenon-executivedirectorontheboardofConoyCowillstarttoprovidesomenon-executiveinputtoboardmeetings.Whilenotsufficientintermsofcorporategovernancerequirements(aboutequalnumbersofexecutiveandnon-executivedirectorsareexpected)itdoesshowtheboardofConoyCoareattemptingtoestablishappropriategovernancesystems.AdviceonriskmanagementFinally,thereareothergeneralareaswhereConoyCowouldbenefitfromanauditcommittee.Forexample,lackofcorporategovernancestructuresprobablymeansConoyCodoesnothaveariskmanagementcommittee.Theauditcommitteecanalsoprovideadviceonriskmanagement,helpingtodecreasetheriskexposureofthecompany.

  • 第6题：

    KFP Co, a company listed on a major stock market, is looking at its cost of capital as it prepares to make a bid to buy a rival unlisted company, NGN. Both companies are in the same business sector. Financial information on KFP Co and NGN is as follows:

    NGN has a cost of equity of 12% per year and has maintained a dividend payout ratio of 45% for several years. The current earnings per share of the company is 80c per share and its earnings have grown at an average rate of 4·5% per year in recent years.

    The ex div share price of KFP Co is $4·20 per share and it has an equity beta of 1·2. The 7% bonds of the company are trading on an ex interest basis at $94·74 per $100 bond. The price/earnings ratio of KFP Co is eight times.

    The directors of KFP Co believe a cash offer for the shares of NGN would have the best chance of success. It has been suggested that a cash offer could be financed by debt.

    Required:

    (a) Calculate the weighted average cost of capital of KFP Co on a market value weighted basis. (10 marks)

    (b) Calculate the total value of the target company, NGN, using the following valuation methods:

    (i) Price/earnings ratio method, using the price/earnings ratio of KFP Co; and

    (ii) Dividend growth model. (6 marks)

    (c) Discuss the relationship between capital structure and weighted average cost of capital, and comment on

    the suggestion that debt could be used to finance a cash offer for NGN. (9 marks)


    正确答案：
    (b)(i)Price/earningsratiomethodEarningspershareofNGN=80cpersharePrice/earningsratioofKFPCo=8SharepriceofNGN=80x8=640cor$6·40NumberofordinarysharesofNGN=5/0·5=10millionsharesValueofNGN=6·40x10m=$64millionHowever,itcanbearguedthatareductionintheappliedprice/earningsratioisneededasNGNisunlistedandthereforeitssharesaremoredifficulttobuyandsellthanthoseofalistedcompanysuchasKFPCo.Ifwereducetheappliedprice/earningsratioby10%(othersimilarpercentagereductionswouldbeacceptable),itbecomes7·2timesandthevalueofNGNwouldbe(80/100)x7·2x10m=$57·6million(ii)DividendgrowthmodelDividendpershareofNGN=80cx0·45=36cpershareSincethepayoutratiohasbeenmaintainedforseveralyears,recentearningsgrowthisthesameasrecentdividendgrowth,i.e.4·5%.Assumingthatthisdividendgrowthcontinuesinthefuture,thefuturedividendgrowthratewillbe4·5%.Sharepricefromdividendgrowthmodel=(36x1·045)/(0·12–0·045)=502cor$5·02ValueofNGN=5·02x10m=$50·2million(c)Adiscussionofcapitalstructurecouldstartfromrecognisingthatequityismoreexpensivethandebtbecauseoftherelativeriskofthetwosourcesoffinance.Equityisriskierthandebtandsoequityismoreexpensivethandebt.Thisdoesnotdependonthetaxefficiencyofdebt,sincewecanassumethatnotaxesexist.Wecanalsoassumethatasacompanygearsup,itreplacesequitywithdebt.Thismeansthatthecompany’scapitalbaseremainsconstantanditsweightedaveragecostofcapital(WACC)isnotaffectedbyincreasinginvestment.Thetraditionalviewofcapitalstructureassumesanon-linearrelationshipbetweenthecostofequityandfinancialrisk.Asacompanygearsup,thereisinitiallyverylittleincreaseinthecostofequityandtheWACCdecreasesbecausethecostofdebtislessthanthecostofequity.Apointisreached,however,wherethecostofequityrisesataratethatexceedsthereductioneffectofcheaperdebtandtheWACCstartstoincrease.Inthetraditionalview,therefore,aminimumWACCexistsand,asaresult,amaximumvalueofthecompanyarises.ModiglianiandMillerassumedaperfectcapitalmarketandalinearrelationshipbetweenthecostofequityandfinancialrisk.Theyarguedthat,asacompanygearedup,thecostofequityincreasedataratethatexactlycancelledoutthereductioneffectofcheaperdebt.WACCwasthereforeconstantatalllevelsofgearingandnooptimalcapitalstructure,wherethevalueofthecompanywasatamaximum,couldbefound.Itwasarguedthattheno-taxassumptionmadebyModiglianiandMillerwasunrealistic,sinceintherealworldinterestpaymentswereanallowableexpenseincalculatingtaxableprofitandsotheeffectivecostofdebtwasreducedbyitstaxefficiency.Theyrevisedtheirmodeltoincludethistaxeffectandshowedthat,asaresult,theWACCdecreasedinalinearfashionasacompanygearedup.Thevalueofthecompanyincreasedbythevalueofthe‘taxshield’andanoptimalcapitalstructurewouldresultbygearingupasmuchaspossible.Itwaspointedoutthatmarketimperfectionsassociatedwithhighlevelsofgearing,suchasbankruptcyriskandagencycosts,wouldlimittheextenttowhichacompanycouldgearup.Inpractice,therefore,itappearsthatcompaniescanreducetheirWACCbyincreasinggearing,whileavoidingthefinancialdistressthatcanariseathighlevelsofgearing.Ithasfurtherbeensuggestedthatcompanieschoosethesourceoffinancewhich,foronereasonoranother,iseasiestforthemtoaccess(peckingordertheory).Thisresultsinaninitialpreferenceforretainedearnings,followedbyapreferencefordebtbeforeturningtoequity.TheviewsuggeststhatcompaniesmaynotinpracticeseektominimisetheirWACC(andconsequentlymaximisecompanyvalueandshareholderwealth).TurningtothesuggestionthatdebtcouldbeusedtofinanceacashbidforNGN,thecurrentandpostacquisitioncapitalstructuresandtheirrelativegearinglevelsshouldbeconsidered,aswellastheamountofdebtfinancethatwouldbeneeded.Earliercalculationssuggestthatatleast$58mwouldbeneeded,ignoringanypremiumpaidtopersuadetargetcompanyshareholderstoselltheirshares.Thecurrentdebt/equityratioofKFPCois60%(15m/25m).Thedebtofthecompanywouldincreaseby$58minordertofinancethebidandbyafurther$20maftertheacquisition,duetotakingontheexistingdebtofNGN,givingatotalof$93m.Ignoringotherfactors,thegearingwouldincreaseto372%(93m/25m).KFPCowouldneedtoconsiderhowitcouldservicethisdangerouslyhighlevelofgearinganddealwiththesignificantriskofbankruptcythatitmightcreate.ItwouldalsoneedtoconsiderwhetherthebenefitsarisingfromtheacquisitionofNGNwouldcompensateforthesignificantincreaseinfinancialriskandbankruptcyriskresultingfromusingdebtfinance.

  • 第7题：

    资料：“Our cars are for people who want something different.”
    This has been the slogan for over 50 years of Suprema Cars, a manufacturer of an English sports car. The car is mostly handmade in the company's factory in northern England. Suprema Car produces approximately 500 cars a year. About 5 years ago, the company began to lose sales and market share, and in the last two years, it has made a loss.
    Recently, there have been problems with the labor force. The factory workers have demand higher wages and better working conditions. They are also unhappy because the management is insisting that they increase production, but the workers think this will have a bad effect on the quality of the cars.
    The company still has many loyal customers. People buy Suprema sports cars because they are handmade and have an image of quality and craftsmanship.

    Which of the following is NOT a problem that Suprema Cars is facing?

    A.Customers’ distrust of products.
    B.A financial loss.
    C.Unhappy workers.
    D.Loss on sales and market share.

    答案：A
    解析：
    本题的问题是“以下哪一项不是Suprema汽车面临的问题？”。选项A意为“客户对产品的不信任”；选项B意为“经济损失”；选项C意为“不快乐的工人”；选项D意为“失去销售和市场份额”。根据主题句可知，B、C、D选项均有提及，故选A。

  • 第8题：

    The last time I saw her was （） my brother"s wedding ceremony three years ago.

    Ato

    Bat

    Cin

    Dduring


    B
    [解析] 句意：我最后一次见她是在三年前我弟弟的婚礼上。词语搭配。at one"s wedding ceremony为固定搭配，意为“在某人的婚礼上”。

  • 第9题：

    What is the Cisco goal regarding market share for each of the major markets that its products compete in?（）

    • A、to be first in every market in whichcisco participates
    • B、to compete effectively in every market in whichcisco participates
    • C、to be in the top 1 percent in every market in whichcisco participates
    • D、to be No.1 or No.2 in every market in whichcisco participates

    正确答案:D

  • 第10题：

    The large market share in china’s transportation is （）transport.

    • A、air  
    • B、rail  
    • C、truck  
    • D、pipeline

    正确答案:B

  • 第11题：

    填空题
    Ms Clark came to Beijing three years ago.→ It has been ____ Ms Clark came to Beijing.

    正确答案： three years since
    解析：
    本题为时态转换题。原句用的是一般过去时，而转换句用的是完成时态且用it作形式主语，因此将原句中的时间状语作转换句表语。而用连词since引导原句谓语动词使之变成转换句中的时间状语从句。注意，进行这种转换时，原句中的ago、before等不能再保留。

  • 第12题：

    单选题
    In order to recover their share of the world market, U.S. auto-makers’ are _____.
    A

    improving product quality

    B

    increasing product features

    C

    modernizing product style

    D

    repositioning their product in the market


    正确答案： B
    解析：
    细节推断题。文章末尾说，美国汽车制造商正采用提高质量，作为重新夺回世界市场的一种方法。这与A项同义，故A为答案。

  • 第13题：

    4 You are an audit manager in Nate & Co, a firm of Chartered Certified Accountants. You are reviewing three situations,

    which were recently discussed at the monthly audit managers’ meeting:

    (1) Nate & Co has recently been approached by a potential new audit client, Fisher Co. Your firm is keen to take the

    appointment and is currently carrying out client acceptance procedures. Fisher Co was recently incorporated by

    Marcellus Fisher, with its main trade being the retailing of wooden storage boxes.

    (2) Nate & Co provides the audit service to CF Co, a national financial services organisation. Due to a number of

    errors in the recording of cash deposits from new customers that have been discovered by CF Co’s internal audit

    team, the directors of CF Co have requested that your firm carry out a review of the financial information

    technology systems. It has come to your attention that while working on the audit planning of CF Co, Jin Sayed,

    one of the juniors on the audit team, who is a recent information technology graduate, spent three hours

    providing advice to the internal audit team about how to improve the system. As far as you know, this advice has

    not been used by the internal audit team.

    (3) LA Shots Co is a manufacturer of bottled drinks, and has been an audit client of Nate & Co for five years. Two

    audit juniors attended the annual inventory count last Monday. They reported that Brenda Mangle, the new

    production manager of LA Shots Co, wanted the inventory count and audit procedures performed as quickly as

    possible. As an incentive she offered the two juniors ten free bottles of ‘Super Juice’ from the end of the

    production line. Brenda also invited them to join the LA Shots Co office party, which commenced at the end of

    the inventory count. The inventory count and audit procedures were completed within two hours (the previous

    year’s procedures lasted a full day), and the juniors then spent four hours at the office party.

    Required:

    (a) Define ‘money laundering’ and state the procedures specific to money laundering that should be considered

    before, and on the acceptance of, the audit appointment of Fisher Co. (5 marks)


    正确答案：
    4 NATE & CO
    (a) – Money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds
    of criminal activity, allowing them to maintain control over the proceeds, and ultimately providing a legitimate cover for
    their sources of income. The objective of money laundering is to break the connection between the money, and the crime
    that it resulted from.
    – It is widely defined, to include possession of, or concealment of, the proceeds of any crime.
    – Examples include proceeds of fraud, tax evasion and benefits of bribery and corruption.
    Client procedures should include the following:
    – Client identification:
    ? Establish the identity of the entity and its business activity e.g. by obtaining a certificate of incorporation
    ? If the client is an individual, obtain official documentation including a name and address, e.g. by looking at
    photographic identification such as passports and driving licences
    ? Consider whether the commercial activity makes business sense (i.e. it is not just a ‘front’ for illegal activities)
    ? Obtain evidence of the company’s registered address e.g. by obtaining headed letter paper
    ? Establish the current list of principal shareholders and directors.
    – Client understanding:
    ? Pre-engagement communication may be considered, to explain to Marcellus Fisher and the other directors the
    nature and reason for client acceptance procedures.
    ? Best practice recommends that the engagement letter should also include a paragraph outlining the auditor’s
    responsibilities in relation to money laundering.

  • 第14题：

    The war broke out ( )years ago.

    A、scores of

    B、three scores

    C、score of

    D、score


    参考答案：A

  • 第15题：

    MONTHLY MEETING MINUTES OF BOARD OF DIRECTORS Time: 2:30 p.m., March 5, 2015 Place: Conference room, second floor of 3T Co. Ltd. Participants: All the directors Chairman: Chairman of the board, Mr. William Forest Minutes keeper: Linda The main activities at the meeting are as follows: Firstly, Mr. William Forest, chairman of the board, made a report on the work and total sales of the company this season. Then the report was followed by a heated discussion. Secondly, all the directors agreed to hold a press conference for the company next month. Thirdly, the meeting suggested inviting experts from Canada to give a five-day training course to staff in the Sales Department. The meeting finished at 3:30 p.m.

    1. Who are the meeting participants().

    A. The executive assistants.

    B. The directors.

    C. The interviewees.

    2. How many activities does the meeting have().

    A. The executive assistants.

    B. The directors.

    C. The interviewees.

    3. Mr. William Forest made a report ()this season.

    A. on training course to staff in the Sales Department

    B. on the advertisement policies of the company

    C. on the work and total sales of the company

    4. What did all the directors agree to do ()

    A. To carry out a training project in the company next year.

    B. To have another board meeting of all directors next season.

    C. Tohave a press conference for the company next month.

    5. How long did the meeting last ()

    A.1.5 hours.

    B.1 hour.

    C.2 hour.


    参考答案：子问题 1:B; 子问题 2:C; 子问题 3:C; 子问题 4:C; 子问题 5:B

  • 第16题：

    The wealthy doctor has a __________ daughter.

    A、three-years-old

    B、three years’ old

    C、three-year-old

    D、three-year old


    参考答案：C

  • 第17题：

    One of your audit clients is Tye Co a company providing petrol, aviation fuel and similar oil based products to the government of the country it is based in. Although the company is not listed on any stock exchange, it does follow best practice regarding corporate governance regulations. The audit work for this year is complete, apart from the matter referred to below.

    As part of Tye Co’s service contract with the government, it is required to hold an emergency inventory reserve of 6,000 barrels of aviation fuel. The inventory is to be used if the supply of aviation fuel is interrupted due to unforeseen events such as natural disaster or terrorist activity.

    This fuel has in the past been valued at its cost price of $15 a barrel. The current value of aviation fuel is $120 a barrel. Although the audit work is complete, as noted above, the directors of Tye Co have now decided to show the ‘real’ value of this closing inventory in the financial statements by valuing closing inventory of fuel at market value, which does not comply with relevant accounting standards. The draft financial statements of Tye Co currently show a profit of approximately $500,000 with net assets of $170 million.

    Required:

    (a) List the audit procedures and actions that you should now take in respect of the above matter. (6 marks)

    (b) For the purposes of this section assume from part (a) that the directors have agreed to value inventory at

    $15/barrel.

    Having investigated the matter in part (a) above, the directors present you with an amended set of financial

    statements showing the emergency reserve stated not at 6,000 barrels, but reported as 60,000 barrels. The final financial statements now show a profit following the inclusion of another 54,000 barrels of oil in inventory. When queried about the change from 6,000 to 60,000 barrels of inventory, the finance director stated that this change was made to meet expected amendments to emergency reserve requirements to be published in about six months time. The inventory will be purchased this year, and no liability will be shown in the financial statements for this future purchase. The finance director also pointed out that part of Tye Co’s contract with the government requires Tye Co to disclose an annual profit and that a review of bank loans is due in three months. Finally the finance director stated that if your audit firm qualifies the financial statements in respect of the increase in inventory, they will not be recommended for re-appointment at the annual general meeting. The finance director refuses to amend the financial statements to remove this ‘fictitious’ inventory.

    Required:

    (i) State the external auditor’s responsibilities regarding the detection of fraud; (4 marks)

    (ii) Discuss to which groups the auditors of Tye Co could report the ‘fictitious’ aviation fuel inventory;

    (6 marks)

    (iii) Discuss the safeguards that the auditors of Tye Co can use in an attempt to overcome the intimidation

    threat from the directors of Tye Co. (4 marks)


    正确答案：
    (a)Valuationofaviationinventory–ReviewGAAPtoensurethattherearenoexceptionsforaviationfuelorinventoryheldforemergencypurposeswhichwouldsuggestamarketvaluationshouldbeused.–Calculatethedifferenceinvaluation.Theerrorininventoryvaluationis$105*6,000barrelsor$630k,whichisamaterialamountcomparedtoprofit.–Reviewprioryearworkingpaperstodeterminewhetherasimilarsituationoccurredlastyearandascertaintheoutcomeatthatstage.–Discussthematterwiththedirectorstoobtainreasonswhytheybelievethatmarketvalueshouldbeusedfortheinventorythisyear.–Warnthedirectorsthatinyouropinion,aviationfuelshouldbevaluedatthelowerofcostornetrealisablevalue(thatis$15/barrel)andthatusingmarketvaluewillresultinamodificationtotheauditreport.–Ifthedirectorsnowamendthefinancialstatementstoshowinventoryvaluedatcost,thenconsidermentioningtheissueintheweaknessletteranddonotmodifytheauditreportinrespectofthismatter.–Ifthedirectorswillnotamendthefinancialstatements,quantifytheeffectofthedisagreementinthevaluationmethod–thesumof$630,000ismaterialtothefinancialstatementsasTyeCo’sincomestatementfigureisdecreasedfromasmalllosstoalossof$130,000althoughnetassetsdecreasebyonlyabout0·3%.–ObtainamanagementrepresentationletterfromthedirectorsofTyeCoconfirmingthatmarketvalueistobeusedfortheemergencyinventoryofaviationfuel.–Ifthedirectorswillnotamendthefinancialstatements,drafttherelevantsectionsoftheauditreport,showingaqualificationonthegroundsofdisagreementwiththeaccountingpolicyforvaluationofinventory.(b)(i)ExternalauditorresponsibilitiesregardingdetectionoffraudOverallresponsibilityofauditorTheexternalauditorisprimarilyresponsiblefortheauditopiniononthefinancialstatementsfollowingtheinternationalauditingstandards(ISAs).ISA240(Redrafted)TheAuditor’sResponsibilitiesRelatingtoFraudinanAuditofFinancialStatementsisrelevanttoauditworkregardingfraud.Themainfocusofauditworkisthereforetoensurethatthefinancialstatementsshowatrueandfairview.Thedetectionoffraudisthereforenotthemainfocusoftheexternalauditor’swork.Anauditorisresponsibleforobtainingreasonableassurancethatthefinancialstatementsasawholearefreefrommaterialmisstatement,whethercausedbyfraudorerror.Theauditorisresponsibleformaintaininganattitudeofprofessionalscepticismthroughouttheaudit,consideringthepotentialformanagementoverrideofcontrolsandrecognisingthefactthatauditproceduresthatareeffectivefordetectingerrormaynotbeeffectivefordetectingfraud.MaterialityISA240statesthattheauditorshouldreduceauditrisktoanacceptablylowlevel.Therefore,inreachingtheauditopinionandperformingauditwork,theexternalauditortakesintoaccounttheconceptofmateriality.Inotherwords,theexternalauditorisnotresponsibleforcheckingallthetransactions.Auditproceduresareplannedtohaveareasonablelikelihoodofidentifyingmaterialfraud.DiscussionamongtheauditteamAdiscussionisrequiredamongtheengagementteamplacingparticularemphasisonhowandwheretheentity’sfinancialstatementsmaybesusceptibletomaterialmisstatementduetofaud,includinghowfraudmightoccur.IdentificationoffraudInsituationswheretheexternalauditordoesdetectfraud,thentheauditorwillneedtoconsidertheimplicationsfortheentireaudit.Inotherwords,theexternalauditorhasaresponsibilitytoextendtestingintootherareasbecausetheriskofprovidinganincorrectauditopinionwillhaveincreased.(ii)GroupstoreportfraudtoReporttoauditcommitteeDisclosethesituationtotheauditcommitteeastheyarechargedwithmaintainingahighstandardofgovernanceinthecompany.Thecommitteeshouldbeabletodiscussthesituationwiththedirectorsandrecommendthattheytakeappropriateactione.g.amendthefinancialstatements.ReporttogovernmentAsTyeCoisactingunderagovernmentcontract,andtheover-statementofinventorywillmeanTyeCobreachesthatcontract(thereportedprofitbecomingaloss),thentheauditormayhavetoreportthesituationdirectlytothegovernment.TheauditorofTyeConeedstoreviewthecontracttoconfirmthereportingrequiredunderthatcontract.ReporttomembersIfthefinancialstatementsdonotshowatrueandfairviewthentheauditorneedstoreportthisfacttothemembersofTyeCo.Theauditreportwillbequalifiedwithanexceptfororadverseopinion(dependingonmateriality)andinformationconcerningthereasonforthedisagreementgiven.Inthiscasetheauditorislikelytostatefactuallytheproblemofinventoryquantitiesbeingincorrect,ratherthanstatingorimplyingthatthedirectorsareinvolvedinfraud.ReporttoprofessionalbodyIftheauditorisuncertainastothecorrectcourseofaction,advicemaybeobtainedfromtheauditor’sprofessionalbody.Dependingontheadvicereceived,theauditormaysimplyreporttothemembersintheauditreport,althoughresignationandtheconveningofageneralmeetingisanotherreportingoption.(iii)Intimidationthreat–safeguardsInresponsetotheimpliedthreatofdismissaliftheauditreportismodifiedregardingthepotentialfraud/error,thefollowingsafeguardsareavailabletotheauditor.DiscusswithauditcommitteeThesituationcanbediscussedwiththeauditcommittee.Astheauditcommitteeshouldcomprisenon-executivedirectors,theywillbeabletodiscussthesituationwiththefinancedirectorandpointoutclearlytheauditor’sopinion.Theycanalsoremindthedirectorsasawholethattheappointmentoftheauditorrestswiththemembersontherecommendationoftheauditcommittee.Iftherecommendationoftheauditcommitteeisrejectedbytheboard,goodcorporategovernancerequiresdisclosureofthereasonforrejection.ObtainsecondpartnerreviewTheengagementpartnercanaskasecondpartnertoreviewtheworkingpapersandotherevidencerelatingtotheissueofpossiblefraud.Whilethisactiondoesnotresolvetheissue,itdoesprovideadditionalassurancethatthefindingsandactionsoftheengagementpartnerarevalid.ResignationIfthematterisserious,thentheauditorcanconsiderresignationratherthannotbeingre-appointed.Resignationhastheadditionalsafeguardthattheauditorcannormallyrequirethedirectorstoconveneageneralmeetingtoconsiderthecircumstancesoftheresignation.

  • 第18题：

    JJG Co is planning to raise $15 million of new finance for a major expansion of existing business and is considering a rights issue, a placing or an issue of bonds. The corporate objectives of JJG Co, as stated in its Annual Report, are to maximise the wealth of its shareholders and to achieve continuous growth in earnings per share. Recent financial information on JJG Co is as follows:

    Required:

    (a) Evaluate the financial performance of JJG Co, and analyse and discuss the extent to which the company has achieved its stated corporate objectives of:

    (i) maximising the wealth of its shareholders;

    (ii) achieving continuous growth in earnings per share.

    Note: up to 7 marks are available for financial analysis.(12 marks)

    (b) If the new finance is raised via a rights issue at $7·50 per share and the major expansion of business has

    not yet begun, calculate and comment on the effect of the rights issue on:

    (i) the share price of JJG Co;

    (ii) the earnings per share of the company; and

    (iii) the debt/equity ratio. (6 marks)

    (c) Analyse and discuss the relative merits of a rights issue, a placing and an issue of bonds as ways of raising the finance for the expansion. (7 marks)


    正确答案：
    AchievementofcorporateobjectivesJJGCohasshareholderwealthmaximisationasanobjective.Thewealthofshareholdersisincreasedbydividendsreceivedandcapitalgainsonsharesowned.Totalshareholderreturncomparesthesumofthedividendreceivedandthecapitalgainwiththeopeningshareprice.TheshareholdersofJJGCohadareturnof58%in2008,comparedwithareturnpredictedbythecapitalassetpricingmodelof14%.Thelowestreturnshareholdershavereceivedwas21%andthehighestreturnwas82%.Onthisbasis,theshareholdersofthecompanyhaveexperiencedasignificantincreaseinwealth.Itisdebatablewhetherthishasbeenasaresultoftheactionsofthecompany,however.Sharepricesmayincreaseirrespectiveoftheactionsanddecisionsofmanagers,orevendespitethem.Infact,lookingatthedividendpersharehistoryofthecompany,therewasoneyear(2006)wheredividendswereconstant,eventhoughearningspershareincreased.Itisalsodifficulttoknowwhenwealthhasbeenmaximised.Anotherobjectiveofthecompanywastoachieveacontinuousincreaseinearningspershare.Analysisshowsthatearningspershareincreasedeveryyear,withanaverageincreaseof14·9%.Thisobjectiveappearstohavebeenachieved.CommentonfinancialperformanceReturnoncapitalemployed(ROCE)hasbeengrowingtowardsthesectoraverageof25%onayear-by-yearbasisfrom22%in2005.Thissteadygrowthintheprimaryaccountingratiocanbecontrastedwithirregulargrowthinturnover,thereasonsforwhichareunknown.Returnonshareholders’fundshasbeenconsistentlyhigherthantheaverageforthesector.ThismaybeduemoretothecapitalstructureofJJGCothantogoodperformancebythecompany,however,inthesensethatshareholders’fundsaresmalleronabookvaluebasisthanthelong-termdebtcapital.Ineverypreviousyearbut2008thegearingofthecompanywashigherthanthesectoraverage.(b)CalculationoftheoreticalexrightspershareCurrentshareprice=$8·64pershareCurrentnumberofshares=5·5millionsharesFinancetoberaised=$15mRightsissueprice=$7·50pershareNumberofsharesissued=15m/7·50=2millionsharesTheoreticalexrightspricepershare=((5·5mx8·64)+(2mx7·50))/7·5m=$8·34pershareThesharepricewouldfallfrom$8·64to$8·34pershareHowever,therewouldbenoeffectonshareholderwealthEffectofrightsissueonearningspershareCurrentEPS=100centspershareRevisedEPS=100x5·5m/7·5m=73centspershareTheEPSwouldfallfrom100centspershareto73centspershareHowever,asmentionedearlier,therewouldbenoeffectonshareholderwealthEffectofrightsissueonthedebt/equityratioCurrentdebt/equityratio=100x20/47·5=42%Revisedmarketvalueofequity=7·5mx8·34=$62·55millionReviseddebt/equityratio=100x20/62·55=32%Thedebt/equityratiowouldfallfrom42%to32%,whichiswellbelowthesectoraveragevalueandwouldsignalareductioninfinancialrisk(c)Thecurrentdebt/equityratioofJJGCois42%(20/47·5).Althoughthisislessthanthesectoraveragevalueof50%,itismoreusefulfromafinancialriskperspectivetolookattheextenttowhichinterestpaymentsarecoveredbyprofits.Theinterestonthebondissueis$1·6million(8%of$20m),givinganinterestcoverageratioof6·1times.IfJJGCohasoverdraftfinance,theinterestcoverageratiowillbelowerthanthis,butthereisinsufficientinformationtodetermineifanoverdraftexists.Theinterestcoverageratioisnotonlybelowthesectoraverage,itisalsolowenoughtobeacauseforconcern.Whiletheratioshowsanupwardtrendovertheperiodunderconsideration,itstillindicatesthatanissueoffurtherdebtwouldbeunwise.Aplacing,oranyissueofnewsharessuchasarightsissueorapublicoffer,woulddecreasegearing.Iftheexpansionofbusinessresultsinanincreaseinprofitbeforeinterestandtax,theinterestcoverageratiowillincreaseandfinancialriskwillfall.GiventhecurrentfinancialpositionofJJGCo,adecreaseinfinancialriskiscertainlypreferabletoanincrease.Aplacingwilldiluteownershipandcontrol,providingthenewequityissueistakenupbynewinstitutionalshareholders,whilearightsissuewillnotdiluteownershipandcontrol,providingexistingshareholderstakeuptheirrights.Abondissuedoesnothaveownershipandcontrolimplications,althoughrestrictiveornegativecovenantsinbondissuedocumentscanlimittheactionsofacompanyanditsmanagers.Allthreefinancingchoicesarelong-termsourcesoffinanceandsoareappropriateforalong-terminvestmentsuchastheproposedexpansionofexistingbusiness.Equityissuessuchasaplacingandarightsissuedonotrequiresecurity.Noinformationisprovidedonthenon-currentassetsofJJGCo,butitislikelythattheexistingbondissueissecured.Ifanewbondissuewasbeingconsidered,JJGCowouldneedtoconsiderwhetherithadsufficientnon-currentassetstoofferassecurity,althoughitislikelythatnewnon-currentassetswouldbeboughtaspartofthebusinessexpansion.

  • 第19题：

    We packed up the things we had accumulated（积累）over the last three years.

    A:ate
    B:recent
    C:final
    D:past

    答案：D
    解析：
    last意思是“过去的”，与past同义。late意思是“晚的”;recent意思是“最近的”; final意思是“最后的”。

  • 第20题：

    The last time I saw her was （） my brother"s wedding ceremony three years ago.

    • A、to
    • B、at
    • C、in
    • D、during

    正确答案:B

  • 第21题：

    The large market share of transportation in China is （）transport.

    • A、air 
    • B、rail 
    • C、truck 
    • D、pipeline

    正确答案:B

  • 第22题：

    英译中：Market share


    正确答案: 市场份额

  • 第23题：

    名词解释题
    英译中：Market share

    正确答案： 市场份额
    解析： 暂无解析

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