Chapter 20 Self-test questions

. What type of economy is the UK?

A free market economy.

A mixed economy.

A planned economy.

A competitive economy.

. Which one of the following statements is correct?

When demand goes up, prices increase. This is illustrated by a demand curve which slopes downward.

When demand goes down, prices decrease. This is illustrated by a demand curve which slopes upward.

When supply increases, prices increase. This is illustrated by a supply curve which slopes upward.

Price elasticity is the point at which supply is equal to demand. This is the point at which the supply and demand curves cross.

. When is an economy in recession?

When the economy grows at a rate below the government's target.

When the economy fails to grow for two or more successive quarters of the year.

When unemployment is above the government target.

When imports exceed exports.

. Which one of the following statements is correct?

Only UK companies can be listed on the London Stock Exchange.

The Alternative Investment Market (AIM) is independent of the London Stock Exchange.

The FTSE 100 tracks the performance of the largest UK companies.

Only government bonds (gilts) are traded on the bond markets.

. Which of the following is not an asset?

Cash

Premises

Debtors

Income

. Which one of the following is a current liability?

Trade receivables.

Trade payables.

A bank loan repayable in 5 years.

Interest on a bank loan.

. Which one of the following statements is not correct?

The profit and loss account of a business shows whether it is profitable.

The balance sheet of a business shows whether it is solvent in the long term.

The balance sheet of a business shows whether it is solvent in the short term.

The cash flow position of a business can only be ascertained by looking at a cash flow statement.

. Which one of the following insolvency processes is not available to a company in the UK.

Bankruptcy.

Liquidation.

Administration.

Receivership.

. XYZ Ltd goes into liquidation. Its balance sheet shows that the company owes £50,000 to its (unsecured) trade creditors and has further unsecured debts of £10,000 owed to customers who have ordered goods on credit. The liquidator calculates that after paying its secured creditors, the company's employees and the costs of the liquidation, the company has £20,000.

Which one of the following statements is correct?

[Note: all figures have been rounded down to the nearest full pence.]

The trade creditors will receive a dividend of 40p in the pound.

The unsecured creditors will receive a dividend of 33p in the pound.

The customers will get their money back as company has enough money to pay this debt.

The trade creditors will receive a dividend of 50p in the pound.

. Which one of the following statements is not correct?

Once an individual is made bankrupt, he is discharged from his debts.

An individual who has been made bankrupt cannot lose his home.

An undischarged bankrupt cannot practice as a solicitor

Credit reference agencies keep records of bankruptcy orders for 6 years.

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