Exam 8: Understanding Financial Reports: Trend Analysis

Day & Co's trade payables increased by 6% between 20X4 and 20X5.Which one of the following is a plausible explanation for the increase?

Which two of the following useful characteristics of financial information are identified as key characteristics by the IASB? A.Accuracy B. Conciseness C. Faithful representation D. Relevance

Trev's revenue for 20X6 was £346 410, and for 20X7 was £366 270.His gross profit margin in 20X6 was 26.2%, improving to 26.3% in 20X7.In 20X8 he expects revenue to increase by the same percentage as between 20X6 and 20X7.Gross profit margin is likely to remain static at 26.3%. What is Trev's expected gross profit in 20X8 (to the nearest £)?

Extracts from the common size analysis for Denton Products Limited over a three-year period are as follows: Statement of financial position elements are expressed in terms of total assets which were as follows: 20X3 £663 700 20X4 £675 300 20X5 £681 400 Which of the following statements are correct? A.The non-current assets figure in £s has increased slightly over the period covered by the analysis. B. The long-term borrowings figure in £s has increased slightly over the period covered by the analysis.

Ainul's business had the following trade receivables and trade payables at 31 March 20X6: Total assets in 20X6 were £385 520 (20X5 - £387 772). Which of the following statements are correct? A.Trade receivables as a percentage of total assets have decreased between 20X5 and 20X6. B.Trade payables as a percentage of total assets have decreased between 20X5 and 20X6. Applying vertical analysis:

Extracts from the 20X3 and 20X4 accounts of Goodge and Patel are as follows: Two of the following four statements are correct: Between 20X3 and 20X4 A. Gross profit margin increased slightly B. Revenue increased by 4.5% C. Cost of sales increased by more than £15 000 D. The interest rate payable on loans increased slightly Which two statements are correct?

AB Limited reports revenue of £752 200 in its 20X4 financial year, and its gross profit margin in the period is 27.3%.The gross margin of its rival CD Limited is higher at 28.2%.The directors of AB think that it will be possible to increase revenue by 1.7% in the 20X5 financial year.What is the maximum increase permissible to cost of sales if the directors wish to achieve the same gross profit margin as that of CD Limited?

Saleema's business had the following current assets at 31 December 20X9 and 20X8: Total assets in 20X9 were £228 760 (20X8 - £214 270). Which of the following statements are correct? A.Inventory as a percentage of total assets has increased between 20X8 and 20X9. B. Trade receivables as a percentage of total assets was higher in 20X8 than in the subsequent year. Applying vertical analysis:

Which one of the following statements describes vertical analysis? Vertical analysis:

Pixley Potter Limited has the following results for 20X5 and 20X6: A recent survey of similar businesses shows that between 20X5 and 20X6 revenue increased on average by 2.2% and gross profit by 5.0%. Which one of the following statements is correct? A horizontal analysis of Pixley Potter's revenue and gross profit figures for 20X6 and 20X7 shows:

Carnforth Amberly, a professional partnership, has the following results for 20X2 and 20X3: Millie Carnforth, the senior partner, had expected a 7% increase in fees between 20X2 and 20X3, and a 20% increase in net profit. Which one of the following statements is correct?

Silworth Limited and De Souza Limited are both engaged in fish canning operations.The trading accounts for the two companies for the year ended 31 March 20X7 are as follows: The majority of Silworth's business, and the whole of De Souza's, comprises fish canning.However, Silworth also runs a fish farming operation.15% of Silworth's revenue arise from fish farming and this operation yields a gross profit margin of 22.7%. Which one of the following statements is correct?

Paul is keen to expand his business.He has set himself a target of increasing revenue by 12% between 20X3 and 20X4 and of increasing gross profit by 13.5%. His actual results for 20X3 and 20X4 are as follows: Which one of the following statements is correct?

Extracts from Harald's statements of profit or loss over a four-year period are as follows: Which one of the following statements is correct? Analysed horizontally, these figures show:

Otter Services Limited had the following results in 20X1 and 20X2: Which one of the following statements is incorrect? Between 20X1 and 20X2:

The four enhancing characteristics of financial information identified by the IASB are:

May & Co's equity (share capital and retained earnings) decreased by 4% between 20X3 and 20X4.Which two of the following are plausible explanations for the decrease? A.The business made a substantial loss in the 20X4 financial year. B. Inventory and trade payables were both higher at the 20X4 year end because inventory was being built up to fulfil a large order. C. A substantial bad trade receivable amount was written off during the 20X4 financial year. D. The business disposed of several non-current assets at their carrying amounts during the 20X4 financial year.The assets were surplus to requirements and were not replaced.

Which one of the following useful characteristics of financial information is identified as a key characteristic by the IASB?

Sturgeon and Hak Limited (S&H) runs a chain of restaurants.Revenue for 20X4 was £10 804 000, and the company's net profit margin was 17.2%.S&H is in fierce competition with a similar chain of restaurants, Carver and Bell Limited (C&H).S&H's managing director has heard from a contact that C&H's net profit margin for 20X4 was 20.3%.What percentage increase (to one decimal place) would be required in S&H's revenue in order to achieve the same net profit margin as C&H, assuming that their cost figures remain exactly the same?

Brinscall Limited and Petworth Limited are both engaged in travel agency activities.While 100% of the revenue of Petworth arises from this activity, Brinscall Limited is also engaged in running its own watersports holidays.20% of Brinscall's revenue arises from the latter activity, which yields a gross profit margin of 36.2%. The most recent trading account figures for the two companies are as follows: Which one of the following statements is correct?