Question 1

Operating profit before interest and taxation,divided by sales × 100/1 is the formula for:

Accepted Answer

A)  return on capital employed. 
B)  asset turnover period. 
C)  return on shareholders' funds. 
D)  operating profit margin. 
A)  return on capital employed. 
B)  asset turnover period. 
C)  return on shareholders' funds. 
D)  operating profit margin.

Question 2

Which of these is not an efficiency ratio?

Accepted Answer

A)  Current ratio. 
B)  Average settlement period for accounts receivable. 
C)  Asset turnover period. 
D)  Average inventory turnover period. 
A)  Current ratio. 
B)  Average settlement period for accounts receivable. 
C)  Asset turnover period. 
D)  Average inventory turnover period.

Question 3

Which statement concerning the average settlement period for accounts payable is correct?

Accepted Answer

A)  It is always best for the business to make creditors wait for their money for as long as possible. 
B)  It is best to pay accounts payable as quickly as possible. 
C)  Accounts payable provide a free source of finance for a business. 
D)  A change in the accounts payable turnover period of 56 days to 65 days means that accounts payable are being paid faster. 
A)  It is always best for the business to make creditors wait for their money for as long as possible. 
B)  It is best to pay accounts payable as quickly as possible. 
C)  Accounts payable provide a free source of finance for a business. 
D)  A change in the accounts payable turnover period of 56 days to 65 days means that accounts payable are being paid faster.

Question 4

Which of these is not considered a limitation of financial ratio analysis?

Accepted Answer

A)  Ratios are difficult to calculate. 
B)  It does not consider qualitative factors. 
C)  There is no adjustment for the effects of inflation. 
D)  All of the above. 
A)  Ratios are difficult to calculate. 
B)  It does not consider qualitative factors. 
C)  There is no adjustment for the effects of inflation. 
D)  All of the above.

Question 5

The current ratio measures:

Accepted Answer

A)  use of assets. 
B)  profitability. 
C)  investments. 
D)  liquidity. 
A)  use of assets. 
B)  profitability. 
C)  investments. 
D)  liquidity.

Question 6

$\begin{array}{lllll}&\times\times  \times  \mathrm{Co}\
&&&&\text { Industry Average }\
&2013 & 2014 & 2015 & 2015 \
\text { Retum on Capital Employed } & 12.6 \% & 11.7 \% & 10.8 \% & 12 \% \
\text { Operating Profit Margin } & 9 \% & 9 \% & 9 \% & 8 \% \
\text { Gross Profit Margin } & 30 \% & 31 \% & 33 \% & 35 \%
\end{array}$ 
REQUIRED:
Discuss what the above ratios reveal about the profitability of the firm XXX Co.

Accepted Answer

The return on capital employed has decli

Question 7

The adequacy of the gross profit margin depends on:

Accepted Answer

A)  selling price. 
B)  buying price. 
C)  total expenses. 
D)  Both A and B. 
A)  selling price. 
B)  buying price. 
C)  total expenses. 
D)  Both A and B.

Question 8

Calculate the return on capital employed if net profit before interest and tax is $440,000,shareholders' funds are $4,000,000 and long-term loans are $3,000,000.

Accepted Answer

A)  3.1%. 
B)  11.0%. 
C)  6.2%. 
D)  12.2%. 
A)  3.1%. 
B)  11.0%. 
C)  6.2%. 
D)  12.2%.

Question 9

Why is interest added back to profit before tax when calculating return on total assets?

Accepted Answer

A)  Because interest rates vary over time. 
B)  To indicate to lenders that some risk is involved. 
C)  Because the efficient use of resources should be examined independently from the method of financing. 
D)  Both A and B. 
A)  Because interest rates vary over time. 
B)  To indicate to lenders that some risk is involved. 
C)  Because the efficient use of resources should be examined independently from the method of financing. 
D)  Both A and B.

Question 10

Which of these is a limitation of financial ratio analysis?

Accepted Answer

A)  Suitable yardsticks for comparisons are not always available. 
B)  Ratios have a restricted vision as they only assess the past. 
C)  Year-end data is not necessarily typical of the position during the year. 
D)  All of the above. 
A)  Suitable yardsticks for comparisons are not always available. 
B)  Ratios have a restricted vision as they only assess the past. 
C)  Year-end data is not necessarily typical of the position during the year. 
D)  All of the above.

Question 11

If earnings per share is 30c and the market price of each share is $6,the price-earnings ratio is:

Accepted Answer

A)  20:1. 
B)  10:1. 
C)  5:1. 
D)  25:1. 
A)  20:1. 
B)  10:1. 
C)  5:1. 
D)  25:1.

Question 12

U2 Ltd is considering whether to offer trade credit to A1 Ltd.The ratio from A1's accounts that will be most useful in assessing the firm's ability to repay its trade debts on time is the:

Accepted Answer

A)  gearing. 
B)  asset turnover period. 
C)  interest cover. 
D)  average settlement period for accounts payable. 
A)  gearing. 
B)  asset turnover period. 
C)  interest cover. 
D)  average settlement period for accounts payable.

Question 13

Blue Company reported:
$$\begin{array} { l l } 
\text { Share price } & \$ 18 \
\text { Net profit } & \$ 3,000 \
\text { Freference dividend } & \$ 500 \
\text { Ordinary dividend } & \$ 1,000 \
\text { Issued ordinary shares } & 1,000 \text { shares }
\end{array}$$
-
Earnings per ordinary share is:

Accepted Answer

A)  $2.50. 
B)  $3.00. 
C)  $1.80. 
D)  $1.50. 
A)  $2.50. 
B)  $3.00. 
C)  $1.80. 
D)  $1.50.

Question 14

If the earnings yield is 6.67%,the price-earnings ratio is:

Accepted Answer

A)  12:1. 
B)  15:1. 
C)  6:1. 
D)  6.7:1. 
A)  12:1. 
B)  15:1. 
C)  6:1. 
D)  6.7:1.

Question 15

The ratio that helps to measure the risk involved in financing a business with borrowed funds is the:

Accepted Answer

A)  asset turnover ratio. 
B)  current ratio. 
C)  interest cover ratio. 
D)  profit margin ratio. 
A)  asset turnover ratio. 
B)  current ratio. 
C)  interest cover ratio. 
D)  profit margin ratio.

Question 16

Which statement is not correct?

Accepted Answer

A)  A business will prefer a shorter settlement time for its accounts receivable rather than a longer settlement period. 
B)  An asset turnover figure of 1.5 times is preferred to a figure of 1.2 times. 
C)  A business will prefer a longer average inventory turnover time rather than a shorter turnover time. 
D)  None of the statements, i.e., all are correct. 
A)  A business will prefer a shorter settlement time for its accounts receivable rather than a longer settlement period. 
B)  An asset turnover figure of 1.5 times is preferred to a figure of 1.2 times. 
C)  A business will prefer a longer average inventory turnover time rather than a shorter turnover time. 
D)  None of the statements, i.e., all are correct.

Question 17

Dividend yield is calculated as:

Accepted Answer

A)  market price per share/dividend per share. 
B)  dividend per share/market price per share. 
C)  dividend/ number of issued shares. 
D)  net profit/market price per share. 
A)  market price per share/dividend per share. 
B)  dividend per share/market price per share. 
C)  dividend/ number of issued shares. 
D)  net profit/market price per share.

Question 18

Which of these is not a limitation of ratio analysis?

Accepted Answer

A)  Different accounting methods used by competitors. 
B)  Firms of different size cannot be compared. 
C)  One ratio is not enough information to make an overall judgement. 
D)  All are limitations. 
A)  Different accounting methods used by competitors. 
B)  Firms of different size cannot be compared. 
C)  One ratio is not enough information to make an overall judgement. 
D)  All are limitations.

Question 19

Which business would you expect to have the highest current ratio?

Accepted Answer

A)  Service business that sells on credit. 
B)  Manufacturer. 
C)  Retailer. 
D)  Service business that sells for cash. 
A)  Service business that sells on credit. 
B)  Manufacturer. 
C)  Retailer. 
D)  Service business that sells for cash.

Question 20

The ratios that measure the degree of risk associated with borrowing money from outsiders to finance the business are the:

Accepted Answer

A)  liquidity ratios. 
B)  investment ratios. 
C)  gearing ratios. 
D)  efficiency ratios. 
A)  liquidity ratios. 
B)  investment ratios. 
C)  gearing ratios. 
D)  efficiency ratios.

Operating profit before interest and taxation,divided by sales × 100/1 is the formula for:

Which of these is not an efficiency ratio?

Which statement concerning the average settlement period for accounts payable is correct?

Which of these is not considered a limitation of financial ratio analysis?

The current ratio measures:

\times\times\times\ Industry Average 2013 2014 2015 2015 Retum on Capital Employed 12.6\% 11.7\% 10.8\% 12\% Operating Profit Margin 9\% 9\% 9\% 8\% Gross Profit Margin 30\% 31\% 33\% 35\% REQUIRED: Discuss what the above ratios reveal about the profitability of the firm XXX Co.

The adequacy of the gross profit margin depends on:

Calculate the return on capital employed if net profit before interest and tax is $440,000,shareholders' funds are $4,000,000 and long-term loans are $3,000,000.

Why is interest added back to profit before tax when calculating return on total assets?

Which of these is a limitation of financial ratio analysis?

If earnings per share is 30c and the market price of each share is $6,the price-earnings ratio is:

U2 Ltd is considering whether to offer trade credit to A1 Ltd.The ratio from A1's accounts that will be most useful in assessing the firm's ability to repay its trade debts on time is the:

Blue Company reported: Share price \ 18 Net profit \ 3,000 Freference dividend \ 500 Ordinary dividend \ 1,000 Issued ordinary shares 1,000 shares - Earnings per ordinary share is:

If the earnings yield is 6.67%,the price-earnings ratio is:

The ratio that helps to measure the risk involved in financing a business with borrowed funds is the:

Which statement is not correct?

Dividend yield is calculated as:

Which of these is not a limitation of ratio analysis?

Which business would you expect to have the highest current ratio?

The ratios that measure the degree of risk associated with borrowing money from outsiders to finance the business are the:

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Costvolumeprofit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters

Exam 8: Analysis and Interpretation of Financial Statements

Operating profit before interest and taxation,divided by sales × 100/1 is the formula for:

Which of these is not an efficiency ratio?

Which statement concerning the average settlement period for accounts payable is correct?

Which of these is not considered a limitation of financial ratio analysis?

The current ratio measures:

\times\times\times\ Industry Average 2013 2014 2015 2015 Retum on Capital Employed 12.6\% 11.7\% 10.8\% 12\% Operating Profit Margin 9\% 9\% 9\% 8\% Gross Profit Margin 30\% 31\% 33\% 35\% REQUIRED: Discuss what the above ratios reveal about the profitability of the firm XXX Co.

The adequacy of the gross profit margin depends on:

Calculate the return on capital employed if net profit before interest and tax is $440,000,shareholders' funds are $4,000,000 and long-term loans are $3,000,000.

Why is interest added back to profit before tax when calculating return on total assets?

Which of these is a limitation of financial ratio analysis?

If earnings per share is 30c and the market price of each share is $6,the price-earnings ratio is:

U2 Ltd is considering whether to offer trade credit to A1 Ltd.The ratio from A1's accounts that will be most useful in assessing the firm's ability to repay its trade debts on time is the:

Blue Company reported: Share price \ 18 Net profit \ 3,000 Freference dividend \ 500 Ordinary dividend \ 1,000 Issued ordinary shares 1,000 shares - Earnings per ordinary share is:

If the earnings yield is 6.67%,the price-earnings ratio is:

The ratio that helps to measure the risk involved in financing a business with borrowed funds is the:

Which statement is not correct?

Dividend yield is calculated as:

Which of these is not a limitation of ratio analysis?

Which business would you expect to have the highest current ratio?

The ratios that measure the degree of risk associated with borrowing money from outsiders to finance the business are the:

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Costvolumeprofit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters