Economics and Accounting Flashcards
6 cards from real IMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Economics and Accounting flashcards as text
In the UK economy, what does Gross Domestic Product (GDP) measure?
Answer: The total value of all goods and services produced within the UK over a specific period
GDP measures the total monetary value of all finished goods and services produced within a country's borders during a specific time period. It is the broadest quantitative measure of a nation's total economic activity.
Which of the following best describes the concept of 'opportunity cost' in economics?
Answer: The value of the next best alternative foregone when making a choice
Opportunity cost represents the value of the next best alternative that must be given up when a decision is made. It is a fundamental concept in economics that reflects the true cost of any decision.
A company reports revenue of £5 million and cost of goods sold of £3 million. What is its gross profit margin?
Answer: 40%
Gross profit margin = (Revenue - COGS) / Revenue = (£5m - £3m) / £5m = £2m / £5m = 40%. This measures the percentage of revenue retained after direct production costs.
Under International Financial Reporting Standards (IFRS), which principle requires that expenses are recognised in the same period as the revenues they help generate?
Answer: The matching principle
The matching principle (also known as the accruals concept) requires that expenses are recognised in the income statement in the same period as the related revenues. This ensures financial statements accurately reflect the economic activity of a period.
If the Bank of England raises the base interest rate, what is the most likely immediate effect on the gilt market?
Answer: Gilt prices fall and yields rise
When the Bank of England raises the base rate, newly issued bonds offer higher yields, making existing gilts less attractive. This causes existing gilt prices to fall, and since price and yield move inversely, yields on existing gilts rise to match the new market conditions.
Which of the following is classified as a current liability on a balance sheet?
Answer: Trade payables due within 30 days
Trade payables due within 30 days are current liabilities because they are obligations expected to be settled within one year or the normal operating cycle. A 10-year bond is a non-current liability, retained earnings are equity, and PP&E is a non-current asset.