OCR Past Paper: Financial Management COM/PA/02 PDF

EN INTERNAL COMPETITION FOR TRANSFER FROM CATEGORY B TO CATEGORY A COM/PA/02 Test b) Test comprising a series of multiple choice questions to assess your specific knowledge in financial mana...

EN INTERNAL COMPETITION FOR TRANSFER FROM CATEGORY B TO CATEGORY A COM/PA/02 Test b) Test comprising a series of multiple choice questions to assess your specific knowledge in financial management Questions numbered from 1 to 42 Time allowed : 1 hour Incorrect answers will not be penalised ! Do not turn the page until instructed to do so 1) Which of the following principles is not one of the basis principles of budget law? a) eligibility b) universality c) annuality d) specification 2) From when will the new Financial Regulation apply? a) on the accession of the new Member States b) on 1 January 2004 c) on adoption by the Council d) on 1 January 2003 3) Who takes the decision on transfer within a budget (not including transfers between B lines and BA lines)? a) the Commission, although it must inform the budgetary authority b) the Commission, without having to inform the budgetary authority c) the European Parliament d) the Council 4) When is a financial statement necessary? a) for all Council Regulations b) for all proposed legislation c) for all proposals likely to have a financial impact d) for all the Commission’s financial decisions 5) Which of the following tasks is not the responsibility of the Commission’s accounting officer? a) checking the existence of debtor’s debts b) the proper implementation of payments, collection of revenue and recovery of amounts established as being receivable c) the preparation and presentation of accounts d) treasury management 6) What is the definition of “differentiated appropriations”? Are they: a) appropriations directly covering the implementation of Community policies b) appropriations covering multiannual operations c) appropriations not requiring a specific legal base d) off-budget appropriations 1 7) Economy, efficiency and effectiveness fall within the principle of sound financial management. What is the objective of the concept of efficiency? a) meeting deadlines b) attaining the specific objectives set and achieving the intended results c) providing resources for a specific activity in appropriate quantity and quality and at the best price d) assuring the best relationship between resources employed and results achieved 8) In the budgetary procedure which institution has the last say on compulsory expenditure? a) Parliament b) the Commission c) the Council d) the Council and Parliament together 9) What is the main role of internal auditor? a) verifying the management and control systems set up by the authorising officers b) the ex-ante control of financial operations c) the ex-post evaluation of financial operations d) drawing up a plan for financial management 10) If unforeseen factors arise after the preliminary draft budget is established but before the budget is adopted, the Commission may submit to the Council: a) an amending budget b) a letter of amendment c) a supplementary and amending budget d) a proposal for an omnibus transfer 11) Which of the following types of appropriation may not be carried over (from year n to year n+1)? a) differentiated appropriations b) payment appropriations c) non-compulsory appropriations d) appropriations placed in reserve 2 12) What types of appropriations may not be implemented without a specific legal base? a) appropriations for pilot schemes of an experimental nature b) appropriations for the operation of each institution under its administrative autonomy c) appropriations for emergency operations d) appropriations for preparatory actions 13) Which concept is the opposite of “fixed capital” a) financial capital b) circulating capital c) permanent capital d) monetary capital 14) The ratio between debts and total assets is an indication of: a) effective management b) liquidity c) solvency d) financial independence 15) A cost-benefit analysis calls for a decision: a) based on the balance of all its positive and negative effects b) based on the importance of the objectives pursued c) based on the possibility of a firm borrowing funds, given its financial structure d) based on the capacity to meet financial commitments quickly 16) At what moment should a proposal for a provisional commitment be made in order to reserve the necessary appropriations a) when the budget forecasts are drawn up b) when no more appropriations are available c) before a draft decision is submitted to the Commission d) before the Commission approves an empowerment procedure 3 17) When sampling transactions, the financial controller must ensure that the samples selected provide a) the best evidence that is reasonably obtainable b) reasonable assurance that they are representative of the sampled population c) reasonable assurance that the evidence has a logical relationship to the audit objective d) absolute assurance that a sample is representative of the population 18) Which of the following information need not be included in a service contract: a) the name and address of the beneficiary b) the arrangements for payment c) the results of the evaluation of tenders received in reply to the call for tenders d) the amount involved 19) Which of the following situations does not constitute a reason for waiving an established debt? a) when recovery is impossible b) where the foreseeable cost of recovery exceeds the amount of the debt c) where there is a decision by the Committee on Budgetary Control (COCOBU) d) where the principle of proportionality applies 4  e) Provence Communications GmbH: revenue, expenses & profits 1998-2001 14000 12000 10000 8000 Total revenus (million euros) Total expenses (million euros 6000 Net profits (millions euros) 4000 2000 0 1998 1999 2000 2001 20) From the above graph it is possible to say: a) total revenue continued to rise between 2000 and 2001, although at a slower rate than over the previous years b) total expenses remained unchanged throughout the period 1998-2001 c) net profit rose between 2000 and 2001 but at a slower rate than total revenue 21) Evidence in the above graph that the business became financially more efficient during the period 2000-2001 includes the fact that: a) the rise in total expenses was faster than the increase in total revenue b) net profit rose each year between 1999 and 2001 as a proportion of total revenue c) net profit and total expenses together exceeded total revenue d) answers a) and b) 5 22) If a company has current assets of € 15 000 000 and current liabilities of € 10 000 000, its working capital ratio is: a) 2 : 3 b) 3 : 2 c) 15 : 1 d) 10 : 15 23) Which of the following is not a method for the valuation of assets: a) Historical cost b) Replacement cost c) Verifiable cost d) Current cost 24) Return on equity is a common measure of the management performance of a company. If the shareholder equity of Company A is € 400 000 at the beginning of the financial year and € 600 000 at the end of the year, while its income over the year is € 100 000, what is the return on equity? a) 10 % b) 60 % c) 40 % d) 20 % 25) EPS (earnings per share) is a management performance measure. Company Y has earnings of € 500 000, a dividend for preference shares of € 100 000 and 50 000 common shares. What is the EPS? a) € 5 per share b) € 8 per share c) € 10 per share d) € 16 per share 26) The principle of unity stipulated by the Treaty and by the Financial Regulation means that: a) all Community expenditure must be presented in one document without any exceptions b) the euro is the only currency to be used in the Community budget c) all revenue and expenditure must be incorporated into a single budget document without offsetting expenditure against revenue d) adoption of the Community budget requires unanimity between the Council and the Parliament. 6 27) Budget lines with a token entry ( p.m.) are lines: a) where no appropriations have been entered, but to which appropriations can be assigned b) for which the budgetary authority has refused to accept the Commission’s proposal c) for which the Commission must present an entry in a supplementary and amending budget d) on which expenditure is directly carried over from the previous budget 28) In the financing of the Community budget, revenue based on the GNP of the Member States a) has been reduced during the past 10 years as revenue from VAT has increased b) has been defined as a constant percentage of each year’s GNP c) is now the second largest revenue item in the Community budget d) ensures that the EU budget is always balanced 29) There are several methods for evaluating which of a number of alternative investment projects will be most profitable. Which of the following methods is not used? a) The payback period b) The gross current value c) The accounting rate of return d) The internal rate of return 30) The distinction between capital and current expenditure is central in accounting. Which of the following is not an item of capital expenditure? a) Purchase of a second hand machine b) Maintenance of a machine c) Transport and installation costs of machinery d) Painting and partitioning of new offices 31) If a company has an extremely high current ratio, this implies: a) Some of the company’s assets are not being used productively. b) Current assets are so low that the company is insolvent. c) The company’s total assets are generating little income. d) Current liabilities are higher than current assets. 7 32) Management has a responsibility to make the best possible use of the money supplied by the shareholders. Which is the best measure of how well they do this? a) Profit margin ratio b) Debt to equity ratio c) Return on equity ratio d) Inventory turnover ratio 33) A company’s liquid assets comprise: a) inventories and transferable securities b) real estate and accounts receivable c) cash and transferable securities d) cash and current liabilities 34) Under a call for tender by restricted procedure: a) no contrast notice is published. b) the contract price is negotiated freely with the contractor. c) the contracting authority contracts the persons chosen because of their specific qualifications. d) any person interested may take part in the call for tender and receive the specifications. 35) Under a public works contract with an estimated value of more than € 5 000 000 the contractor is chosen after: a) a call for tenders which must take the form of an open procedure. b) a call for tenders which must take the form of an open or restricted procedure following publication of a contract notice in the OJ. c) direct agreement with a contractor. d) a call for an expression of interest 36) Which of the following distinctions between a public contract and a grant or financial contribution is correct: a) A public contract concerns the acquisition of goods or services needed by the Commission; a grant or financial contribution finances a measure which the Commission considers useful. b) A public contract is paid for on the basis of the real cost of the operation; a grant or financial contribution is paid for on the basis of a lump sum. c) There is no difference between a public contract notice; a grant or financial contribution. d) A public contract must be advertised in a contract notice; a grant or financial contribution is not published and the beneficiary is chosen on the basis of requests received. 8 37) In 2002 for the first time, the Directors-General of the Commission have had to present a statement of assurance relating to the sound management of their department to: a) the Committee on Budgetary Control (COCOBU) b) the budgetary authority c) the European Court of Auditors d) the college of Commissioners 38) To perfect the early warning system, at what stage does an entry have to be made in the third party file: a) for provisional commitments b) for individual commitments c) for global commitments after a Commission decision d) for payments 39) Which of the following fields is not subject to internal control? a) Management of risks and performance b) Proposed legislation c) The control environment d) Information and communication within the hierarchy and between departments 40) The EDF ‘ European Development Fund): a) is funded under a budget line in the general budget of the European Communities b) is funded under a budget chapter in the general budget of the European Communities c) does not come under the general budget, but the 15 Member States contribute d) does not come under the general budget, and only 12 Member States contribute 41) Collective investment undertakings ( unit trusts and investment funds): a) are not yet covered by a European Directive. b) are covered by a European Directive adopted in 1985. c) are covered by a European Directive adopted in 1993. d) are covered by a European Directive adopted in 1995. 42) The Financial Services Action Plan was adopted by: a) the Commission in 1989 and was completed in 1995 b) the Commission in 1994 and was completed in 2000 c) the Commission in 1999 and should be completed in 2005 d) the Seville European Council in 2002 for the period 2003/2008 9