Question 1

The ratios that are specifically concerned with assessing the efficiency with which assets have been used by the business are the:

Accepted Answer

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

Question 2

A firm has total assets of $800,000 and total liabilities of $200,000.If profit after tax and interest is $120,000,the return on shareholders' funds is:

Accepted Answer

A)  20%. 
B)  8%. 
C)  12.5%. 
D)  9%. 
A)  20%. 
B)  8%. 
C)  12.5%. 
D)  9%.

Question 3

Place the key steps in financial ratio analysis in order of occurrence.
i.Select the ratios considered appropriate and carry out the calculations.
ii.Interpret and evaluate what the ratios reveal.
iii.Identify the users and their information needs.

Accepted Answer

A)  ii, i, iii. 
B)  iii, ii, i. 
C)  iii, i, ii. 
D)  i, ii, iii. 
A)  ii, i, iii. 
B)  iii, ii, i. 
C)  iii, i, ii. 
D)  i, ii, iii.

Question 4

The current market price of Fixit Ltd's ordinary shares is $5.00 each.If the latest earnings per share is $0.50,the company's price-earnings ratio is:

Accepted Answer

A)  10 times. 
B)  2.0 times. 
C)  2.5 times. 
D)  20 times. 
A)  10 times. 
B)  2.0 times. 
C)  2.5 times. 
D)  20 times.

Question 5

The acid test ratio eliminates ________ from its calculation,because it is considered the least liquid of the current assets.

Accepted Answer

A)  bank bills 
B)  accounts receivable 
C)  government securities 
D)  inventory 
A)  bank bills 
B)  accounts receivable 
C)  government securities 
D)  inventory

Question 6

A company with a higher level of gearing will have:

Accepted Answer

A)  a high liabilities/total assets ratio. 
B)  a lower owners' equity/total assets ratio. 
C)  a higher owners' equity/total assets ratio. 
D)  Both A and B. 
A)  a high liabilities/total assets ratio. 
B)  a lower owners' equity/total assets ratio. 
C)  a higher owners' equity/total assets ratio. 
D)  Both A and B.

Question 7

From the following information,calculate Moore Ltd's rate of return on ordinary shareholders' funds.
Ordinary share capital $600,000.
Retained profits and reserves $200,000.
180,000 fully paid $2.00 10% Preference shares.
Net profit after tax and before preference dividend $276,000.

Accepted Answer

A)  30.0%. 
B)  16.0%. 
C)  20.0%. 
D)  26.0%. 
A)  30.0%. 
B)  16.0%. 
C)  20.0%. 
D)  26.0%.

Question 8

The ratios that are specifically concerned with assessing the returns and performance of shares held for investment purposes are the:

Accepted Answer

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

Question 9

Which of these ratios is not directly relevant to the evaluation of a company's short-term liquidity position?

Accepted Answer

A)  Operating profit ratio. 
B)  Current ratio. 
C)  Quick ratio. 
D)  Acid test ratio. 
A)  Operating profit ratio. 
B)  Current ratio. 
C)  Quick ratio. 
D)  Acid test ratio.

Question 10

If earnings per share is 85c,dividend per share is 50c,and the market price of each share is $9.35,the price-earnings ratio is:

Accepted Answer

A)  18.7:1. 
B)  11:1. 
C)  9:1. 
D)  5:1. 
A)  18.7:1. 
B)  11:1. 
C)  9:1. 
D)  5:1.

Question 11

FCo had a profit of $100,000 before tax,after deducting $16,000 in interest expense.F Co's non-current liabilities and equity total $1,000,000.Return on capital employed,before interest and tax is:

Accepted Answer

A)  13%. 
B)  11.6%. 
C)  10%. 
D)  9%. 
A)  13%. 
B)  11.6%. 
C)  10%. 
D)  9%.

Question 12

Which user would be interested in examining the results of the profitability and gearing ratios?

Accepted Answer

A)  Shareholders. 
B)  Long-term lenders. 
C)  Potential investors. 
D)  All of the above. 
A)  Shareholders. 
B)  Long-term lenders. 
C)  Potential investors. 
D)  All of the above.

Question 13

Which of these is a factor that can influence the amount a company is prepared to distribute as dividends to its shareholders?

Accepted Answer

A)  The availability of cash. 
B)  Investors expectations. 
C)  The need to retain funds within the business for future growth. 
D)  All of the above. 
A)  The availability of cash. 
B)  Investors expectations. 
C)  The need to retain funds within the business for future growth. 
D)  All of the above.

Question 14

The following information was extracted from the financial records of Goss Ltd for the year ended 30 June 2014:
$$\begin{array} { l r } 
\text { Cash Sales } & \$ 30,000 \
\text { Credit Sales } & 180,000 \
\text { Accounts receivable } & 25,000 \
\text { Cost of Sales } & 130,000
\end{array}$$
If there are 365 trading days per year,calculate for the managing director the number of days that accounts receivable are outstanding at 30 June 2014.

Accepted Answer

A)  86 days. 
B)  51 days. 
C)  114 days. 
D)  43 days. 
A)  86 days. 
B)  51 days. 
C)  114 days. 
D)  43 days.

Question 15

If the turnover period for accounts receivable is 8.1 times per annum,the average number of days it takes to collect cash from accounts receivable is:

Accepted Answer

A)  81 days. 
B)  45 days. 
C)  295 days. 
D)  60 days. 
A)  81 days. 
B)  45 days. 
C)  295 days. 
D)  60 days.

Question 16

BBB Ltd has provided the following information from its financial statements for the year ended 30 June 2015.
$$\begin{array} { l r } 
\text { Sales (all on credit) } & \$ 1,900,000 \
\text { Gross profit on sales } & 900,000 \
\text { Net profit } & 150,000 \
\text { Cost of sales } & 1,000,000 \
\text { Inventory at end of year } & 200,000 \
\text { Accounts receivable at end of year } & 500,000
\end{array}$$
The company trades 365 days per year.
-The number of times BBB's accounts receivable turned over for 2015 is:

Accepted Answer

A)  5.0 times. 
B)  1.8 times. 
C)  3.8 times. 
D)  2.0 times. 
A)  5.0 times. 
B)  1.8 times. 
C)  3.8 times. 
D)  2.0 times.

Question 17

Which statement concerning financial ratios is not true?

Accepted Answer

A)  A ratio expresses the relationship between two figures appearing in the financial statements. 
B)  Ratios are easy to interpret but difficult to calculate. 
C)  Ratios adjust for scale of operations and allow comparisons between businesses of different sizes. 
D)  None of the above, i.e., all are true statements. 
A)  A ratio expresses the relationship between two figures appearing in the financial statements. 
B)  Ratios are easy to interpret but difficult to calculate. 
C)  Ratios adjust for scale of operations and allow comparisons between businesses of different sizes. 
D)  None of the above, i.e., all are true statements.

Question 18

Dollar Ltd has a current ratio of 2:1.This means that:

Accepted Answer

A)  there is $2 of current assets for every $1 of current liabilities. 
B)  its current assets are half its current liabilities. 
C)  its current assets are insufficient to meet its current liabilities. 
D)  its current assets are equal to its current liabilities. 
A)  there is $2 of current assets for every $1 of current liabilities. 
B)  its current assets are half its current liabilities. 
C)  its current assets are insufficient to meet its current liabilities. 
D)  its current assets are equal to its current liabilities.

Question 19

The inventory turnover period ratio:

Accepted Answer

A)  measures the liquidity of the firm. 
B)  explains how much the firm's current assets could decrease and still leave it able to pay its current liabilities. 
C)  measures profitability. 
D)  measures the average time an organisation holds inventory. 
A)  measures the liquidity of the firm. 
B)  explains how much the firm's current assets could decrease and still leave it able to pay its current liabilities. 
C)  measures profitability. 
D)  measures the average time an organisation holds inventory.

Question 20

Sports Ltd reports the following information:
$$\begin{array} { l l } 
\text { Net profit } & \$ 30,000 \
\text { Total assets } & 950,000 \
\text { Current liabilities } & 285,000 \
\text { Deferred liabilities } & 405,000
\end{array}$$
If current assets represent 60% of total assets,Sports Ltd's current ratio is:

Accepted Answer

A)  150%. 
B)  67%. 
C)  200%. 
D)  50%. 
A)  150%. 
B)  67%. 
C)  200%. 
D)  50%.

The ratios that are specifically concerned with assessing the efficiency with which assets have been used by the business are the:

A firm has total assets of $800,000 and total liabilities of $200,000.If profit after tax and interest is $120,000,the return on shareholders' funds is:

Place the key steps in financial ratio analysis in order of occurrence. i.Select the ratios considered appropriate and carry out the calculations. ii.Interpret and evaluate what the ratios reveal. iii.Identify the users and their information needs.

The current market price of Fixit Ltd's ordinary shares is $5.00 each.If the latest earnings per share is $0.50,the company's price-earnings ratio is:

The acid test ratio eliminates ________ from its calculation,because it is considered the least liquid of the current assets.

A company with a higher level of gearing will have:

From the following information,calculate Moore Ltd's rate of return on ordinary shareholders' funds. Ordinary share capital $600,000. Retained profits and reserves $200,000. 180,000 fully paid $2.00 10% Preference shares. Net profit after tax and before preference dividend $276,000.

The ratios that are specifically concerned with assessing the returns and performance of shares held for investment purposes are the:

Which of these ratios is not directly relevant to the evaluation of a company's short-term liquidity position?

If earnings per share is 85c,dividend per share is 50c,and the market price of each share is $9.35,the price-earnings ratio is:

FCo had a profit of $100,000 before tax,after deducting $16,000 in interest expense.F Co's non-current liabilities and equity total $1,000,000.Return on capital employed,before interest and tax is:

Which user would be interested in examining the results of the profitability and gearing ratios?

Which of these is a factor that can influence the amount a company is prepared to distribute as dividends to its shareholders?

If the turnover period for accounts receivable is 8.1 times per annum,the average number of days it takes to collect cash from accounts receivable is:

Which statement concerning financial ratios is not true?

Dollar Ltd has a current ratio of 2:1.This means that:

The inventory turnover period ratio:

Sports Ltd reports the following information: Net profit \ 30,000 Total assets 950,000 Current liabilities 285,000 Deferred liabilities 405,000 If current assets represent 60% of total assets,Sports Ltd's current ratio is:

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

The ratios that are specifically concerned with assessing the efficiency with which assets have been used by the business are the:

A firm has total assets of $800,000 and total liabilities of $200,000.If profit after tax and interest is $120,000,the return on shareholders' funds is:

Place the key steps in financial ratio analysis in order of occurrence. i.Select the ratios considered appropriate and carry out the calculations. ii.Interpret and evaluate what the ratios reveal. iii.Identify the users and their information needs.

The current market price of Fixit Ltd's ordinary shares is $5.00 each.If the latest earnings per share is $0.50,the company's price-earnings ratio is:

The acid test ratio eliminates ________ from its calculation,because it is considered the least liquid of the current assets.

A company with a higher level of gearing will have:

From the following information,calculate Moore Ltd's rate of return on ordinary shareholders' funds. Ordinary share capital $600,000. Retained profits and reserves $200,000. 180,000 fully paid $2.00 10% Preference shares. Net profit after tax and before preference dividend $276,000.

The ratios that are specifically concerned with assessing the returns and performance of shares held for investment purposes are the:

Which of these ratios is not directly relevant to the evaluation of a company's short-term liquidity position?

If earnings per share is 85c,dividend per share is 50c,and the market price of each share is $9.35,the price-earnings ratio is:

FCo had a profit of $100,000 before tax,after deducting $16,000 in interest expense.F Co's non-current liabilities and equity total $1,000,000.Return on capital employed,before interest and tax is:

Which user would be interested in examining the results of the profitability and gearing ratios?

Which of these is a factor that can influence the amount a company is prepared to distribute as dividends to its shareholders?

If the turnover period for accounts receivable is 8.1 times per annum,the average number of days it takes to collect cash from accounts receivable is:

Which statement concerning financial ratios is not true?

Dollar Ltd has a current ratio of 2:1.This means that:

The inventory turnover period ratio:

Sports Ltd reports the following information: Net profit \ 30,000 Total assets 950,000 Current liabilities 285,000 Deferred liabilities 405,000 If current assets represent 60% of total assets,Sports Ltd's current ratio is:

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