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Part 13

The document presents various scenarios related to investment choices, risk management strategies, and characteristics of financial and management accounting. It includes questions about risk approaches, normal distribution properties, and the effectiveness of centralized finance functions. Additionally, it discusses the roles of finance professionals and the purposes of published financial statements.

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16 views3 pages

Part 13

The document presents various scenarios related to investment choices, risk management strategies, and characteristics of financial and management accounting. It includes questions about risk approaches, normal distribution properties, and the effectiveness of centralized finance functions. Additionally, it discusses the roles of finance professionals and the purposes of published financial statements.

Uploaded by

ngochuongotuon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Investment A Investment B

Average return 5% 20%


Coefficient of variation 0% 5%

The investor has selected Investment B.


Requirement
The investor has selected Investment B.
Which of the following approaches to risk could the investor be said to have demonstrated?
(1) A risk averse
(2) A risk neutral approach
(3) A risk seeking approach
A 1 only
B 2 only
C 3 only
D (2) and (3)
LO 3f

36 The risk committee has identified a new risk relating to the potential damage that would be suffered
in a catastrophic event. The calculation of the gross risk is as follows:

Impact Probability Gross risk


A £1,000,000 1% £ 10,000
A loss of more than £500,000 would seriously threaten the survival of the company.
Requirement
Which of the following would be the most appropriate way to deal with the risk?
A Accept it as the gross risk is quite low
B Insure the risk as the potential impact is high
C Avoid the activities that create the risk as the potential impact is high
D Take actions that could reduce the probability of the event occurring
LO 1f

37 Which two of the following statements about the normal distribution are correct?
A the mean is less than the median, which is less than the mode
B the distribution is a continuous distribution
C the closer a range of values is to the mean, the higher is the probability of that range of values
occurring
D 99% of values lie within one standard deviation above and one standard deviation below the
mean
LO 3f

38 A distribution is left skewed (negatively skewed). Which statement is correct?


A The mean is lower than the median, which is lower than the mode.
B The mean is higher than the median, which is higher than the mode.
C The median is lower than the mean, which is lower than the mode.
D The median is higher than the mean, which is higher than the mode.
LO 3f

ICAEW 2023 5: Introduction to risk management 33


39 A manufacturing company identifies health and safety risks in all of its operational sites. If the cost of
reducing those risks further is considered to be reasonable, then action is taken to reduce them. If
the cost of reducing the risks is disproportionate given the reduction of risk that would be achieved,
then the action is not taken.
Requirement
What is this approach to risk management referred to as?
A ALARP
B Avoidance
C Transfer
D Accept
LO 1f

34 Business, Technology and Finance ICAEW 2023


Chapter 6: The finance function and financial
information
1 Collinson plc is a medium-sized group operating at four locations in the UK. It operates a centralised
finance function and is concerned that the function as a whole is not performing well. Centralisation
of this finance function is least likely to be effective in:
A external reporting to shareholders
B recording financial transactions
C managing cash
D internal reporting to operational managers
LO 3a, 3b

2 Maureen is employed in the finance function of Gralam plc. Her duties are to ensure that the
company always has sufficient funds available to meet both its short-term and long-term financial
requirements. It is clear that Maureen is employed by Gralam plc in its:
A financial reporting section
B management accounting section
C treasury management section
D transaction processing section
LO 3a, 3e

3 Which three of the following are characteristics of management accounting information rather than
financial reporting information?
A It is both forward looking and historical
B It is governed by statute
C It is primarily used by shareholders
D It is likely to include a statement of cash flows
E It is likely to include a cash flow forecast
F It is likely to include budgetary information
LO 3a

4 Harold is an accountant with Farnworth plc. He was asked to join a project team examining the
company’s compliance with both FRC and IASB standards. It appears, therefore, that Harold has been
recruited into this project team to exploit his expertise in:
A financial reporting
B performance measurement
C corporate governance
D information systems
LO 3a

5 Novel plc is establishing its accounting and finance function. The company has been told there are
two purposes of published, audited financial statements. These are to help users assess how
effectively managers are running a business, and to make judgements about the likely levels of risk
and return in the future.

ICAEW 2023 6: The finance function and financial information 35

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