Exam 15: Financial Statement Analysis

Unstable Ltd has decided to change its depreciation method from straight-line to reducing balance. As a result, its annual depreciation expense increases by $200 000. The company's income tax rate is 30 per cent. What is the effect on the inventory turnover ratio?

Unstable Ltd has decided to change its depreciation method from straight-line to reducing balance. As a result, its annual depreciation expense increases by $200 000. The company's income tax rate is 30 per cent. What is the effect on ROE?

The financial records of Del Ltd reveal the following at 30 June 2016: If Del Ltd reduces the number of days' inventory on hand to 60, what will be the new inventory turnover?

Saw Ltd's inventory at 30 June 2016 it was $20 000. Sales for the year ended 30 June 2016 were $125 000 and the gross margin was 20 per cent. What was the inventory turnover?

Chicago Ltd is a large retailer of hardware equipment that sells its products through a network of suburban stores. Shown below are the calculation of some of its key ratios for 2016 and 2015. Which of the above ratios explains why ROA has decreased from 2015 to 2016?

Hard-up Ltd has a current ratio of 0.75. Its current liabilities amount to $200 000. It borrows $75 000 from a finance company, repayable in five years. What is the immediate effect of the loan on current net profit?

Good credit control is signalled by:

Which of the following could explain a decrease in the quick ratio?

The following question relates to PQR, which has the following ratios: return on assets, (ROA) 10 per cent; return on equity (ROE) 12 per cent; and current ratio (CR) of 1.8:1. Additional credit sales of $2 million (cost price $1.5 million) are made. This transaction will:

Sales of Slider Ltd are $250 million and the operating profit after tax is $25 million. Asset turnover is 4 times p.a. What is the value of Slider Ltd's total assets?

Which of the following statements about the debt-to-equity ratio is NOT true?

Which of the following is NOT true of common size statements?

The inventory of Dyer Ltd for year ended 31 December 2016 was $70 000. The number of days' inventory on hand was 91.25 days. What was the cost of goods sold for the year?

Hard-up Ltd has a current ratio of 0.75. Its current liabilities amount to $200 000. It borrows $75 000 from a finance company, repayable in five years. What is the effect of the loan on working capital?

The following question relates to PQR, which has the following ratios: return on assets, (ROA) 10 per cent; return on equity (ROE) 12 per cent; and current ratio (CR) of 1.8:1. Directors decided to revalue land upwards by $350 000. This transaction will:

The following question relates to PQR, which has the following ratios: return on assets, (ROA) 10 per cent; return on equity (ROE) 12 per cent; and current ratio (CR) of 1.8:1. The company changed accounting methods by deciding to capitalise rather than expense a research and development outlay. This will:

Tomlin Ltd's accounts receivable for year ended 31 December 2016 was $200 000. The number of days in receivables was 146 days. What were the credit sales for the year?

The following question relates to PQR, which has the following ratios: return on assets, (ROA) 10 per cent; return on equity (ROE) 12 per cent; and current ratio (CR) of 1.8:1. A customer provides a deposit of $500 000 near year-end. The product will not be delivered until next year. This transaction will:

A high debt-to-equity ratio does NOT indicate that the company:

Which of the ratios listed helps to indicate the ability of a company to generate a return on its assets before considering the cost of financing those assets?