Question 1

Which of the following rations considers the relationship between equity and long-term borrowing?

Accepted Answer

A)  Quick ratio 
B)  Current ratio 
C)  Capital gearing ratio 
D)  ROCE 
A)  Quick ratio 
B)  Current ratio 
C)  Capital gearing ratio 
D)  ROCE C

Question 2

The following information is from the annual report of Thunderstruck Ltd:
Statement of financial position of Thunderstruck Ltd as at 31 December 201X
 
Income statement extract of Thunderstruck Ltd for the year ended 31 December 201X
$$\begin{array} { l r } 
\text { Revenue } & 250 \
\text { Gross profit } & 75 \
\text { Operating profit } & 45 \
\text { Profit for the period } & 25
\end{array}$$
From the information provide above,calculate the gross profit ratio

Accepted Answer

A)  40% 
B)  30% 
C)  10% 
D)  20% 
A)  40% 
B)  30% 
C)  10% 
D)  20% B

Question 3

If a company was interested in calculating how long it takes to receive payment from customers,which of the calculations would they make?

Accepted Answer

A)  Trade receivables/sales revenue x 365 
B)  Sales revenue/trade receivables x 365 
C)  Trade payables/cost of sales x 365 
D)  Cost of sales/trade payables x 365 
A)  Trade receivables/sales revenue x 365 
B)  Sales revenue/trade receivables x 365 
C)  Trade payables/cost of sales x 365 
D)  Cost of sales/trade payables x 365 A

Question 4

A gearing ratio of above 50% suggests:

Accepted Answer

A)  The company is profitable 
B)  The company is over-reliant on borrowing 
C)  The company is financed mostly by equity 
D)  The company is almost bankrupt 
A)  The company is profitable 
B)  The company is over-reliant on borrowing 
C)  The company is financed mostly by equity 
D)  The company is almost bankrupt

Question 5

The following information is from the annual report of Thunderstruck Ltd:
Statement of financial position of Thunderstruck Ltd as at 31 December 201X
 
Income statement extract of Thunderstruck Ltd for the year ended 31 December 201X
$$\begin{array} { l r } 
\text { Revenue } & 250 \
\text { Gross profit } & 75 \
\text { Operating profit } & 45 \
\text { Profit for the period } & 25
\end{array}$$
From the information provide above,calculate the capital gearing ratio

Accepted Answer

A)  62.9% 
B)  67.4% 
C)  59.5% 
D)  56.3% 
A)  62.9% 
B)  67.4% 
C)  59.5% 
D)  56.3%

Question 6

Which of the following rations considers the relationship between current assets and current liabilities?

Accepted Answer

A)  Quick ratio 
B)  Current ratio 
C)  Capital gearing ratio 
D)  ROCE 
A)  Quick ratio 
B)  Current ratio 
C)  Capital gearing ratio 
D)  ROCE

Question 7

Which of the following ratios considers the relationship between inventory and cost of sales?

Accepted Answer

A)  Inventory turnover ratio 
B)  Trade payables ratio 
C)  Cost of sales turnover ratio 
D)  Trade receivables ratio 
A)  Inventory turnover ratio 
B)  Trade payables ratio 
C)  Cost of sales turnover ratio 
D)  Trade receivables ratio

Question 8

One way to improve return on capital employed (ROCE)is to reduce costs and increase sales

Accepted Answer

A) True 
 B)False

Question 9

If a supplier was interested in whether or not they will be paid on time,which of the calculations would they make?

Accepted Answer

A)  Trade receivables /sales revenue x 365 
B)  Sales revenue/trade receivables x 365 
C)  Trade payables/cost of sales x 365 
D)  Cost of sales/trade payables x 365 
A)  Trade receivables /sales revenue x 365 
B)  Sales revenue/trade receivables x 365 
C)  Trade payables/cost of sales x 365 
D)  Cost of sales/trade payables x 365

Question 10

Which of the following rations considers the relationship between profit,equity and long-term borrowing?

Accepted Answer

A)  Quick ratio 
B)  Current ratio 
C)  Capital gearing ratio 
D)  ROCE 
A)  Quick ratio 
B)  Current ratio 
C)  Capital gearing ratio 
D)  ROCE

Question 11

If a company reported a profit for the year of £90m,share capital of £200m and a share price of £9.00 - what is the price/earnings (P/E)ratio?

Accepted Answer

A)  20 
B)  10 
C)  45 
D)  22 
A)  20 
B)  10 
C)  45 
D)  22

Question 12

The following information is from the annual report of Thunderstruck Ltd:
Statement of financial position of Thunderstruck Ltd as at 31 December 201X
 
Income statement extract of Thunderstruck Ltd for the year ended 31 December 201X
$$\begin{array} { l r } 
\text { Revenue } & 250 \
\text { Gross profit } & 75 \
\text { Operating profit } & 45 \
\text { Profit for the period } & 25
\end{array}$$
From the information provide above,calculate return on long term capital employed

Accepted Answer

A)  24.3% 
B)  30% 
C)  13.5% 
D)  19.5% 
A)  24.3% 
B)  30% 
C)  13.5% 
D)  19.5%

Question 13

A high price/earnings (P/E)ratio suggests:

Accepted Answer

A)  Shareholders are pessimistic about future growth prospects 
B)  Shareholders are optimistic about future growth prospects 
C)  Earnings per share is high relative to the share price 
D)  Statements B and C are correct 
A)  Shareholders are pessimistic about future growth prospects 
B)  Shareholders are optimistic about future growth prospects 
C)  Earnings per share is high relative to the share price 
D)  Statements B and C are correct

Question 14

The gearing ratio relates long-term borrowing to equity

Accepted Answer

A) True 
 B)False

Question 15

If dividend per share remained the same but the share price increased,what effect would this have on dividend yield?

Accepted Answer

A)  The earnings per share (EPS) component of dividend yield would increase 
B)  Dividend yield would not be effected 
C)  Dividend yield would increase 
D)  Dividend yield would decrease 
A)  The earnings per share (EPS) component of dividend yield would increase 
B)  Dividend yield would not be effected 
C)  Dividend yield would increase 
D)  Dividend yield would decrease

Question 16

The return on capital employed (ROCE)shows how "solvent" a company is

Accepted Answer

A) True 
 B)False

Question 17

The following information is from the annual report of Thunderstruck Ltd:
Statement of financial position of Thunderstruck Ltd as at 31 December 201X
 
Income statement extract of Thunderstruck Ltd for the year ended 31 December 201X
$$\begin{array} { l r } 
\text { Revenue } & 250 \
\text { Gross profit } & 75 \
\text { Operating profit } & 45 \
\text { Profit for the period } & 25
\end{array}$$
From the information provide above,calculate the current ratio

Accepted Answer

A)  1.48:1 
B)  2.44:1 
C)  2:1 
D)  1.77:1 
A)  1.48:1 
B)  2.44:1 
C)  2:1 
D)  1.77:1

Question 18

Financial strength/solvency ratios include:

Accepted Answer

A)  Return on shareholders funds, asset turnover and gross profit ratio 
B)  Stock turnover ratio, debtor ratio and creditor ratio 
C)  Price earnings ratio, dividend cover and dividend yield 
D)  Current ratio, quick ratio and capital gearing ratio 
A)  Return on shareholders funds, asset turnover and gross profit ratio 
B)  Stock turnover ratio, debtor ratio and creditor ratio 
C)  Price earnings ratio, dividend cover and dividend yield 
D)  Current ratio, quick ratio and capital gearing ratio

Question 19

One way of assessing if debt is too high is to compare it with equity

Accepted Answer

A) True 
 B)False

Question 20

If a company reported a profit for the year of £90m,share capital of £200m and a share price of £9.00 - what is the earnings per share (EPS)?

Accepted Answer

A)  20p per share 
B)  10p per share 
C)  45p per share 
D)  22p per share 
A)  20p per share 
B)  10p per share 
C)  45p per share 
D)  22p per share

Which of the following rations considers the relationship between equity and long-term borrowing?

If a company was interested in calculating how long it takes to receive payment from customers,which of the calculations would they make?

A gearing ratio of above 50% suggests:

Which of the following rations considers the relationship between current assets and current liabilities?

Which of the following ratios considers the relationship between inventory and cost of sales?

One way to improve return on capital employed (ROCE)is to reduce costs and increase sales

If a supplier was interested in whether or not they will be paid on time,which of the calculations would they make?

Which of the following rations considers the relationship between profit,equity and long-term borrowing?

If a company reported a profit for the year of £90m,share capital of £200m and a share price of £9.00 - what is the price/earnings (P/E)ratio?

A high price/earnings (P/E)ratio suggests:

The gearing ratio relates long-term borrowing to equity

If dividend per share remained the same but the share price increased,what effect would this have on dividend yield?

The return on capital employed (ROCE)shows how "solvent" a company is

Financial strength/solvency ratios include:

One way of assessing if debt is too high is to compare it with equity

If a company reported a profit for the year of £90m,share capital of £200m and a share price of £9.00 - what is the earnings per share (EPS)?

The Statement of Financial Position Balance Sheetand What It Tells Us

The Income Statement Profit and Loss Account

The Development of Financial Reporting

How the Stock Market Assesses Company Performance

Cash Flow Statements: Understanding and Preparation

Advanced Interpretation of Company and Group Accounts

Current Issues in Financial Reporting

Bookkeeping to Trial Balance

Trial Balance to Final Accounts

Financing a Business

Management of Working Capital

Introduction to Management Accounting

Investment Appraisal

Budgetary Planning and Control

Absorption Costing

Marginal Costing and Decision-Making

Standard Costing and Variance Analysis

Incomplete Records

Filters

Exam 4: Ratios and Interpretation: a Straightforward Introduction

Which of the following rations considers the relationship between equity and long-term borrowing?

If a company was interested in calculating how long it takes to receive payment from customers,which of the calculations would they make?

A gearing ratio of above 50% suggests:

Which of the following rations considers the relationship between current assets and current liabilities?

Which of the following ratios considers the relationship between inventory and cost of sales?

One way to improve return on capital employed (ROCE)is to reduce costs and increase sales

If a supplier was interested in whether or not they will be paid on time,which of the calculations would they make?

Which of the following rations considers the relationship between profit,equity and long-term borrowing?

If a company reported a profit for the year of £90m,share capital of £200m and a share price of £9.00 - what is the price/earnings (P/E)ratio?

A high price/earnings (P/E)ratio suggests:

The gearing ratio relates long-term borrowing to equity

If dividend per share remained the same but the share price increased,what effect would this have on dividend yield?

The return on capital employed (ROCE)shows how "solvent" a company is

Financial strength/solvency ratios include:

One way of assessing if debt is too high is to compare it with equity

If a company reported a profit for the year of £90m,share capital of £200m and a share price of £9.00 - what is the earnings per share (EPS)?

The Statement of Financial Position Balance Sheetand What It Tells Us

The Income Statement Profit and Loss Account

The Development of Financial Reporting

How the Stock Market Assesses Company Performance

Cash Flow Statements: Understanding and Preparation

Advanced Interpretation of Company and Group Accounts

Current Issues in Financial Reporting

Bookkeeping to Trial Balance

Trial Balance to Final Accounts

Financing a Business

Management of Working Capital

Introduction to Management Accounting

Investment Appraisal

Budgetary Planning and Control

Absorption Costing

Marginal Costing and Decision-Making

Standard Costing and Variance Analysis

Incomplete Records

Filters