You’re on a roll
Create a free account to save your ACCA progress, track your accuracy by topic, and pick up right where you left off.
Free Questions › ACCA › Strategic Business Reporting
Free ACCA Strategic Business Reporting Practice Questions & Answers
400 exam-style Strategic Business Reporting questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 301
'Verifiability' as an enhancing characteristic means:
Select an option first.
Correct answer: B — Different knowledgeable independent observers could reach consensus that a depiction is a faithful representation
Explanation: B is correct: verifiability = independent observers reaching consensus that information faithfully represents what it purports to. A is wrong — legal verification is not the criterion. C is wrong — audit provides assurance but is not the definition. D is wrong — internal verification is preparation, not the characteristic.
Question 302
Information is material if:
Select an option first.
Correct answer: B — Omitting or misstating it could influence decisions of primary users of the financial statements
Explanation: B is correct: materiality is entity-specific and decision-oriented — no universal monetary threshold applies. B is the Conceptual Framework definition. A is wrong — no fixed amount. C is wrong — auditors assess materiality but don't confirm it as a financial reporting definition. D is wrong — 5% is a rule of thumb, not the standard.
Question 303
A key limitation of financial statements for performance measurement is:
Select an option first.
Correct answer: B — Valuable internally generated intangibles (brands, customer relationships) are not recognised; estimates involve uncertainty
Explanation: B is correct: financial statements exclude much of a company's economic value (internally generated intangibles, human capital) and rely on estimates with inherent uncertainty. A is wrong — accruals basis is a strength. C is wrong — cash flow statement is a feature not a limitation. D is wrong — functional currency presentation is neutral.
Question 304
Segment reporting under IFRS 8 helps investors by:
Select an option first.
Correct answer: B — Allowing disaggregated analysis of performance across different business parts — improving assessment of risk, return and prospects
Explanation: B is correct: segmental disclosure lets analysts assess each part of the business separately — risk, margins, growth — rather than relying on group averages. A is wrong — it increases disclosure. C is wrong — multiple segments are reported. D is wrong — it supplements, not replaces, consolidated statements.
Question 305
Going concern affects financial statements because:
Select an option first.
Correct answer: B — The assumption that the entity will continue operating is fundamental; if not valid, statements must be on a liquidation basis with required disclosures
Explanation: B is correct: going concern is a fundamental assumption. If not valid, measurement bases change (assets at break-up values, liabilities at accelerated amounts) and disclosures are required. A is wrong — current/non-current classification is affected but that is secondary. C is wrong — going concern does not permit deferral. D is wrong — it applies to all entities.
Get the full ACCA question bank — free
Drop your email and we'll send you fresh ACCA practice questions, fully worked solutions and exam-deadline reminders. No spam — unsubscribe in one click.
Want to save your score and take a full mock exam? Create a free account →
Question 306
Interest cover ratio =
Select an option first.
Correct answer: B — EBIT ÷ interest expense
Explanation: B is correct: interest cover = EBIT / interest expense. Shows how many times operating profit covers interest. A is wrong — using PAT understates coverage. C is wrong — revenue/debt is not interest cover. D is wrong — that is ROE.
Question 307
Price/Earnings (P/E) ratio =
Select an option first.
Correct answer: B — Market price per share ÷ EPS
Explanation: B is correct: P/E = market price / EPS. Shows how much investors pay per unit of earnings. A is wrong — price/book is a different ratio. C is wrong — EPS/DPS is related to dividend cover. D is wrong — market cap/book equity is price-to-book.
Question 308
A key limitation of ratio analysis is:
Select an option first.
Correct answer: B — Ratios are based on historical accounting data; policies can differ between companies; they don't capture non-financial value drivers
Explanation: B is correct: ratio analysis is backward-looking, affected by different accounting policies across companies, and misses non-financial drivers. A is wrong — using audited data is a strength. C is wrong — ratios measure; they don't improve anything. D is wrong — judgment is still required.
Question 309
EBITDA margin improved 18%→22% but net profit margin fell 10%→6%. The likely explanation is:
Select an option first.
Correct answer: B — Higher interest, depreciation or tax charges below the EBITDA line are eroding profits
Explanation: B is correct: EBITDA excludes interest, tax, D&A. If EBITDA improves but net margin falls, the drag is from items below EBITDA — higher debt service, larger depreciation from investment, or higher tax. A is wrong — operational improvement would lift both margins. C is wrong — revenue growth would improve all margins. D is wrong — revenue policy change affects both.
Question 310
Prior year EPS was $3.00. In January a 1-for-4 bonus issue occurs. Restated prior year EPS for comparability is:
Select an option first.
Correct answer: B — $2.40 ($3.00 × 4/5)
Explanation: B is correct: bonus fraction = original shares / new total shares = 4/(4+1) = 4/5. Restated EPS = $3.00 × 4/5 = $2.40. A is wrong — no restatement fails comparability. C is wrong — $3.75 adjusts in wrong direction. D is wrong — $1.50 is not supported.
Question 311
10m ordinary shares; 2m warrants with exercise price $4.00; average market price $5.00. Diluted EPS additional shares (treasury stock method) are:
Select an option first.
Correct answer: B — 400,000
Explanation: B is correct: proceeds from exercise = 2m × $4 = $8m. Shares repurchased at average price = $8m / $5 = 1.6m. Net dilutive shares = 2m − 1.6m = 400,000. A is wrong — 2m is gross warrants. C is wrong — 1.6m is shares repurchased. D is wrong — not supported.
Question 312
IFRS S1 'connectivity' requires:
Select an option first.
Correct answer: B — Sustainability disclosures to be part of the same general purpose financial report and connected to financial statements
Explanation: B is correct: IFRS S1 requires sustainability disclosures to appear in the same general purpose financial report and be connected to financial statements — enabling users to see financial implications of sustainability risks. A is wrong — ratings are not part of IFRS S1. C is wrong — integrated reporting is a separate framework. D is wrong — sustainability disclosures are not on the income statement.
Question 313
ESRS 'double materiality' means:
Select an option first.
Correct answer: B — Both financial materiality (how sustainability affects the entity) AND impact materiality (how entity affects people/environment) must be disclosed
Explanation: B is correct: ESRS requires disclosure of both directions of materiality — inward (financial impact on entity) and outward (entity's impact on environment/society). ISSB covers only inward financial materiality. A is wrong — double materiality is conceptual, not procedural. C is wrong — no duplicate statements. D is wrong — currency is unrelated.
Question 314
A shorter cash conversion cycle generally indicates:
Select an option first.
Correct answer: B — More efficient working capital management — cash tied up for shorter time
Explanation: B is correct: CCC = inventory days + receivables days − payables days. Shorter CCC = faster conversion of inventory to cash = less working capital tied up. A is wrong — more inventory increases CCC. B is correct. C is wrong — shorter CCC reduces financing need. D is wrong — longer receivables increases CCC.
Question 315
ROIC differs from ROCE in that ROIC:
Select an option first.
Correct answer: B — Uses NOPAT and invested capital (excluding financial assets/liabilities) — focusing on operational value creation
Explanation: B is correct: ROIC = NOPAT / invested capital (operations only). ROCE = EBIT / total capital employed (may include financial assets). ROIC is a purer operational measure. A is wrong — ROCE can also use EBIT or PAT variants. C is wrong — working capital is included in invested capital. D is wrong — both include depreciation in P&L.
Question 316
IFRS 8 aggregation criteria allow combining segments when:
Select an option first.
Correct answer: B — They have similar economic characteristics AND similar products/services, processes, customer types, distribution and regulatory environment
Explanation: B is correct: aggregation requires both similar economic characteristics and qualitative similarity across five criteria. A is wrong — geography alone is insufficient. C is wrong — shared manager is not a criterion. D is wrong — small segments below 10% go to 'all other', not aggregated.
Question 317
A non-financial KPI most relevant to investors is:
Select an option first.
Correct answer: C — Customer satisfaction score and employee retention rate
Explanation: C is correct: non-financial KPIs capture value drivers outside the financial statements — customer satisfaction predicts future revenue; employee retention affects future costs and capability. A, B and D are all financial KPIs.
Question 318
IFRS S2 Scope 3 GHG emissions cover:
Select an option first.
Correct answer: C — Indirect emissions in the entity's value chain — suppliers (upstream) and customers (downstream)
Explanation: C is correct: Scope 3 = all other indirect emissions in the value chain. Scope 1 = direct from owned sources. Scope 2 = purchased energy. D is wrong — trading schemes may cover Scope 1/2 but don't define Scope 3.
Question 319
Which statement about ratio analysis is correct?
Select an option first.
Correct answer: B — Trend analysis over multiple periods is more informative than a single-year snapshot — revealing direction and momentum
Explanation: B is correct: trend analysis reveals patterns, improvement or deterioration over time — far more informative than a single year. A is wrong — industry averages may be distorted; peer selection matters. C is wrong — very high ROCE may indicate under-investment. D is wrong — excessive current ratio may indicate poor working capital management.
Question 320
Under IAS 33, if shares are issued during the year, weighted average shares is:
Select an option first.
Correct answer: B — Weighted by the fraction of the year each tranche was outstanding
Explanation: B is correct: each tranche is multiplied by the proportion of the year it was in issue. E.g. shares issued 1 April are weighted 9/12 for December year end. A is wrong — year-end shares ignore timing. C is wrong — ignores new issuances. D is wrong — maximum is not the weighted average.
Question 321
A high P/E ratio most likely indicates:
Select an option first.
Correct answer: B — The market expects strong future earnings growth or the stock is considered low risk
Explanation: B is correct: high P/E = investors paying a premium for each dollar of current earnings — reflecting high growth expectations, strong competitive position or low risk. A is wrong — it may be justified. C is wrong — high current earnings with low price = low P/E. D is wrong — capital structure doesn't directly drive P/E.
Question 322
Under IFRS 8, the reconciliation requirement means entities must reconcile:
Select an option first.
Correct answer: B — Segment revenue, profit/loss and assets to corresponding consolidated amounts
Explanation: B is correct: IFRS 8 requires reconciliation of total reportable segment revenue, profit/loss, assets (and liabilities if reported) to consolidated amounts — enabling users to understand the relationship between segment and total figures. A is wrong — that is a segment P&L. C is wrong — assets vs liabilities is not the reconciliation. D is wrong — all reportable segments.
Question 323
High-quality financial reporting is characterised by:
Select an option first.
Correct answer: B — Faithful, neutral, unbiased information reflecting economic substance of transactions
Explanation: B is correct: quality reporting = faithful representation — completeness, neutrality, freedom from error — reflecting economic substance over legal form. A is wrong — profit maximisation through aggressive policies reduces quality. C is wrong — building provisions to release = earnings management. D is wrong — appropriate disclosure enhances quality.
Question 324
EPS: earnings = $12m. Shares: 8m at start; +2m issued 1 July; −1m buyback 1 October. Weighted average shares are:
Select an option first.
Correct answer: B — 8.75m
Explanation: B is correct: 8m × 12/12 = 8m; + 2m × 6/12 = 1m; − 1m × 3/12 = 0.25m. WA = 8 + 1 − 0.25 = 8.75m. Basic EPS = $12m / 8.75m = $1.37. A is wrong — 10m ignores buyback. C is wrong — 9m ignores partial year weighting. D is wrong — 7m is unsupported.
Question 325
IFRS S1 requires sustainability disclosures to be in the same general purpose financial report because:
Select an option first.
Correct answer: B — Users need to see sustainability risks connected to financial figures to make complete investment decisions
Explanation: B is correct: connectivity — sustainability disclosures alongside financial statements let investors assess how sustainability risks affect financial position and prospects in an integrated way. A is wrong — audit cost is unrelated. C is wrong — IFRS S1 adoption is jurisdiction-specific. D is wrong — it is more complex, not simpler.
Question 326
DuPont analysis decomposes ROE into:
Select an option first.
Correct answer: B — ROE = net profit margin × asset turnover × financial leverage (equity multiplier)
Explanation: B is correct: DuPont ROE = (profit/sales) × (sales/assets) × (assets/equity) = margin × turnover × leverage. This identifies whether ROE changes come from profitability, efficiency or leverage. A is wrong — that is ROCE decomposition. C is wrong — that is EPS. D is wrong — ROA uses assets not equity.
Question 327
Comparing two companies' ratios is misleading if:
Select an option first.
Correct answer: B — One uses FIFO and other uses AVCO for inventory; year ends differ
Explanation: B is correct: different inventory methods (FIFO vs AVCO) affect COGS, gross profit and inventory values — distorting margin and turnover comparisons. Different year ends capture different cyclical periods. A is wrong — same industry makes comparison more meaningful. C and D are wrong — similar size/revenue makes comparison easier.
Question 328
A credit analyst adjusting leverage analysis would typically:
Select an option first.
Correct answer: B — Capitalise operating leases, adjust for off-balance sheet items and normalise one-offs
Explanation: B is correct: credit analysts adjust for items distorting economic leverage — historical operating lease capitalisation (now largely done by IFRS 16), off-balance sheet commitments, and normalising one-offs to get a 'true' debt/EBITDA multiple. A is wrong — marketing is not a leverage adjustment. C is wrong — goodwill impairment is already reflected. D is wrong — cash basis revenue is not a leverage adjustment.
Question 329
Digital assets (cryptocurrencies) under current IFRS are most likely accounted for as:
Select an option first.
Correct answer: B — Intangible assets under IAS 38 OR as inventory under IAS 2 for commodity broker-traders — depending on business model
Explanation: B is correct: no specific IFRS standard exists. Most holders apply IAS 38 (intangible assets). Commodity broker-traders may apply IAS 2 (FV less costs to sell). Cryptocurrencies are not financial instruments so IFRS 9 FVTPL generally does not apply. A is wrong — not financial instruments. C is wrong — IAS 2 only for broker-traders. D is wrong — crypto does not meet the definition of cash equivalent.
Question 330
A red flag in earnings quality analysis is:
Select an option first.
Correct answer: B — Operating profit consistently exceeds operating cash flow by a significant margin — suggesting aggressive accruals
Explanation: B is correct: profit materially exceeding operating cash flows persistently may indicate earnings manipulation — over-recognition of revenue, under-provisioning, or improper deferral of costs. High-quality earnings should be broadly confirmed by cash flows. A is wrong — consistency is a quality indicator. C is wrong — EPS/FCF alignment is quality. D is wrong — stable margins indicate consistency.
More free ACCA topics
Management Accounting401
Financial Accounting400
Corporate and Business Law400
Performance Management400
Financial Reporting400
Financial Management400
Advanced Financial Management400
Advanced Performance Management400
Advanced Taxation400
Business and Technology300
Taxation300
Audit and Assurance300
Strategic Business Leader300
Advanced Audit and Assurance296
Ten questions in
- The ones you miss are saved as a drill you can repeat
- Your place is kept, on this device and any other
- A streak, if that is the thing that gets you back tomorrow
Every question on this page stays free and open either way.