- (Topic 1)
LMN Ltd, a British firm, has a financial covenant with its bank mat interest coverage based on earnings before interest taxes, depreciation, and amortization (EBITDA), must be at least 2.5 for each quarter Shown below are summary financial data.

An expected decline m sales will result In net Income of £ 1.500.000 The other elements of EBITDA will be similar to the most recently completed Quarter Given the above information, what is the ratio for the latest completed quarter and do the forecasted results meet the required covenant?

1. A. 1.31. and will not be compliant in the next quarter
2. B. 2.50. and will not be compliant in the next quartet
3. C. 2.59. and will be compliant in the next quarter
4. D. 2.69 and will not be compliant in the next quarter

Correct Answer: D

- (Topic 1)
Below is the income statement and balance sheet for a retail corporation.

What is the corporation??s return on equity in Year 2?

1. A. 23%
2. B. 26%
3. C. 39%
4. D. 48%

Correct Answer: D

- (Topic 1)
A co league claims that morality is usually perceived and interpreted differently by different people so there is no method to judge whether one decision is better than another. This is commonly referred to as

1. A. ethical relativity
2. B. moral philosophy
3. C. comparative ethics
4. D. moral relativism

Correct Answer: D

- (Topic 1)
Given the financial information shown below, what amounts would be shown for sales revenue and for gross prom, respectively in a common size income statement?

1. A. 100% and 20%
2. B. 100% and 45%
3. C. 222% and 225$
4. D. 100% and 55%

Correct Answer: B

- (Topic 1)
The production process of a company s main product yields a by-product Production costs or $700,000 are incurred during this process and $300,000 m additional costs are incurred to finalize the main product. The by-product can be sold for $200 000 without further processing A manager proposed the conversion of the by-product into another product that would cost $100,000 and generate revenue of $250,000. When deciding on this proposal the company should

1. A. select an approbate cost allocation method to allocate the $1 100 000 joint costs
2. B. evaluate whether other nonfinancial factors outweigh the Si 50.000 in incremental income
3. C. treat the $100,000 conversion cost as the marginal cost 1o produce the new product
4. D. ignore the $200 000 sales revenue for the by-product because it Is irrelevant

Correct Answer: C