"Financial Report":scale and diversification

A is correct. Borrowers can better withstand adverse events when they have more purchasing power with suppliers. Purchasing power reflects the organization’s scale.

B is incorrect. This measure would be of interest to credit analysts, but as an indication of operational efficiency rather than scale and diversification.

C is incorrect. This measure would be of interest to credit analysts, but as an indication of tolerance for leverage rather than scale and diversification.

C is correct. Deferred tax liability = Taxable temporary difference × Tax rate In 2014, if the rates had not changed, the deferred tax liability would be: 0.30 × £4,000 = £1,200 But with the lower tax rate, the deferred tax liability will be: 0.25 × £4,000 = £1,000 Effect of the change in rate thus is a decrease in the liability: –£200 Alternative calculation = Change in rate × Taxable difference –0.05 × £4,000 = –£200

A is incorrect. It is the change in rate (5%) × the taxable amount: 0.05 × 16,000 = 800.

B is incorrect. The deferred tax liability increased by 250: 4,000 × 0.25 – 2,500 × 0.30.