Old exams

Question 1

Which are the key indicators of an income statement?

Answer 1

• gross profit mrgin (gross profit/sales)
• Ebitda margin (ebitda/sales)
• ebit margin (ebit/sales)
• earnings per share
• dividend per share
• return on investment (net income/TA)
• return on equity (profit after tax/shareholders equity)
• return on sales (profit after tax/sales)

Question 2

What does a low debt ratio (total debt/TA) indicate?

Answer 2

-The debt ration indicates which part of the TA is financed by debt. Low ratio shows that only a small part of assets is financed by debt
low ratio=good sign. Shows that the company only has small debts and higher equity.

Question 3

Who are the addressees of the internal reports?

Answer 3

top management,

middle management, generally all decision makers on all levels

Question 4

A company lost the last months sales of a dramatic value and will be facing economic and financial problems. Where will the controlling start the analyses and preparing the recommendations?

Answer 4

• By asking the right questions to the right people, the controller needs to find out what happened, where and why. He/she starts at the sales department and then goes through all steps of income statement/ budget
  He needs to find reasons why the company did not reach the budgeted sales numbers (e.g. lost a customer, seasonal business). He need to find reasons for all occurring variances to be able to take the corrective actions, so that if the company faces a loss, it will be as small as possible.

Question 5

The controller is responsible for supervising the budgeting process .What are the different steps of the planning process?

Answer 5

1) sales planning
2) sourcing and procurement/production
3) personal expenses (do we need more people/less people?)
4) administrative expenses (senior executives, accounting, IT services)
5) other operating expenses (insurance, licences…)
6) CAPEX/depreciation
7) financial result (interest income/interest expenses)
8) tax

Question 6

Why is the analysis of the global market, branches and competition even for a domestic business of any importance?

Answer 6

The domestic market does not really exist anymore. Due to globalization and digitization, your customers are able to buy your product over the world -> you automatically have global competitors even though you are only operating in a domestic market - you need to know your competitors! Additionally, your competitors might expand geographically and would also enter your market.

Question 7

One of the controller’s activity i to anticipate the future development of the company. How might this projection be realised?

Answer 7

Controllers can anticipate the future by asking the right question to the right people. So, he needs to go to all department and ask “What are the current and future projects” What are you expecting in the future?” to get an idea of how the future of the company will look like.

Question 8

A company plans to launch a new product on the market. It has been developed in the company’s R&D department and has been approved by the managing director of the company. Which cost types, cost center and which cost unit are involved in this project?

Answer 8

Cost type= classification of cost and cost categories (what kind of cost did arise?)
here - material/ingredients, personnel expenses etc.

Cost center = allocation of costs to cost center. A location such as a department or part of a department, a person, a group of people etc. => here R&D department.

Cost unit=what did the cost arise for? A unit of a product, service or time in relation to which costs may be ascertained or expressed. here - for 1 unit of the product.

Question 9

Definition of the Balance Sheet

Answer 9

Balance sheet is a financial statement that reports a company’s assets, liabilities and the shareholders’ equity at a specific point of time. Provides the basis for computing rates fo return and evaluating it CAPITAL STRUCTURE.

It provides a SNAPSHOT of what company owns and owes, as well as the amount invested by the shareholders.

Most common ratios are: Days Sales Outstanding, D/E ratio, Inventory turnover, WC turnover ratio,

Key Indicators: equity ratio, debt ratio, WC ratio (CA/CL), Inventory Turnover

Question 10

Definition of Profit.

Answer 10

=surplus of income over expenses.
Profit is a positive Net Income.

= It is the net income which is remaining after all expenses, debts, tax etc has been paid.
Can be used for further investment or for the payment of dividends to the shareholders.