ACCA Advanced Financial Management (AFM) Practice Exam

Which statement accurately describes passive owners in a trust structure?

1. They actively manage the assets

2. They share in the revenue generated

3. They report to a board of directors

4. They make all investment decisions

The correct answer is: They share in the revenue generated

Passive owners in a trust structure refer to individuals or entities that hold beneficial interest in the trust assets but do not actively manage or make decisions regarding those assets. Instead, they receive income generated by the trust without being involved in the day-to-day management or investment decisions. The key characteristic of passive owners is their receipt of revenue, which comes in the form of distributions from the trust. These distributions can be capital gains, interest, rents, or other income produced from the assets held in the trust. The fact that they share in the revenue generated by the trust illustrates their role as beneficiaries rather than as active managers or decision-makers. In contrast, active management of assets, reporting to a board of directors, or making investment decisions are roles typically associated with trustees or investment managers, who are responsible for overseeing the trust's operations. Passive owners do not engage in these roles; they simply benefit from the results of the trust's activities.