Question 1

Financial analysis is useful for:

Accepted Answer

A)  evaluating the performance of an entity. 
B)  evaluating the financial health of an entity. 
C)  decision making. 
D)  all of the above. 
A)  evaluating the performance of an entity. 
B)  evaluating the financial health of an entity. 
C)  decision making. 
D)  all of the above.

Question 2

Expressing each item in a financial statement as a percentage of a base amount is known as _____________ analysis.

Accepted Answer

The answer of Expressing each item in a financial statement...

Question 3

Financial analysis is more meaningful if the ratios can be compared to an appropriate benchmark such as:

Accepted Answer

A)  industry averages. 
B)  economic industry sector. 
C)  changes over time. 
D)  all of the options are appropriate benchmarks. 
A)  industry averages. 
B)  economic industry sector. 
C)  changes over time. 
D)  all of the options are appropriate benchmarks.

Question 4

Return on equity measures the profit generated compared to the _____________ investment.

Accepted Answer

The answer of Return on equity measures the profit generated...

Question 5

A financial institution contemplating giving a loan to an entity would be most interested in:

Accepted Answer

A)  the entity's ability to generate cash flows. 
B)  an entity's ability to generate profits. 
C)  an entity's ability to pay its employees. 
D)  an entity's ability to pay its suppliers. 
A)  the entity's ability to generate cash flows. 
B)  an entity's ability to generate profits. 
C)  an entity's ability to pay its employees. 
D)  an entity's ability to pay its suppliers.

Question 6

Which of the following statements concerning net tangible asset backing (NTAB)per share is not true?

Accepted Answer

A)  it determines the cash available per share if the company liquidates. 
B)  the difference between NTAB and the market share price is an indication of the market's assessment of the entity's future growth prospects. 
C)  it expresses the book value of an entity's tangible assets per ordinary share issued. 
D)  intangible assets are excluded from the calculation. 
A)  it determines the cash available per share if the company liquidates. 
B)  the difference between NTAB and the market share price is an indication of the market's assessment of the entity's future growth prospects. 
C)  it expresses the book value of an entity's tangible assets per ordinary share issued. 
D)  intangible assets are excluded from the calculation.

Question 7

Which of the following categories of ratios is only relevant to a listed company?

Accepted Answer

A)  Profitability ratios. 
B)  Liquidity ratios. 
C)  Market performance ratios. 
D)  Efficiency ratios. 
A)  Profitability ratios. 
B)  Liquidity ratios. 
C)  Market performance ratios. 
D)  Efficiency ratios.

Question 8

Explaining why the ROE (return on equity)ratio has changed requires an examination of the:

Accepted Answer

A)  asset efficiency ratios and debt ratios. 
B)  profitability ratios and the market performance ratios. 
C)  return on assets and financial risk. 
D)  profitability ratios and the asset efficiency ratios. 
A)  asset efficiency ratios and debt ratios. 
B)  profitability ratios and the market performance ratios. 
C)  return on assets and financial risk. 
D)  profitability ratios and the asset efficiency ratios.

Question 9

Delta Pty Ltd has the following balance sheet figures.The debt to equity ratio is:
$\begin{array}{|l|r|}
\hline \text{Current assets }&  \$ 300000  \
\hline\text{ Current liabilities} & 200000 \
\hline\text{ Non-current assets} & 650000 \
\hline \text{Non-current liabilities }& 150000 \
\hline
\end{array}$

Accepted Answer

A)  58.3% 
B)  36.8% 
C)  23.1% 
D)  80.0% 
A)  58.3% 
B)  36.8% 
C)  23.1% 
D)  80.0%

Question 10

Limitations of ratio analysis can be caused by:

Accepted Answer

A)  purchasing expensive machinery at the end of the financial year. 
B)  estimations of employee benefits. 
C)  different depreciation methods adopted by entities in the same industry. 
D)  all of the above. 
A)  purchasing expensive machinery at the end of the financial year. 
B)  estimations of employee benefits. 
C)  different depreciation methods adopted by entities in the same industry. 
D)  all of the above.

Question 11

The days debtors ratio indicates:

Accepted Answer

A)  the average length of time it takes an entity to pay its account payable. 
B)  the average length of time it takes an entity to collect its accounts receivable. 
C)  an entity's efficiency in paying back its borrowings. 
D)  an entity's efficiency in raising capital. 
A)  the average length of time it takes an entity to pay its account payable. 
B)  the average length of time it takes an entity to collect its accounts receivable. 
C)  an entity's efficiency in paying back its borrowings. 
D)  an entity's efficiency in raising capital.

Question 12

Assuming an entity sells inventory only on credit terms,use the following information to calculate the length of the entity's activity cycle and cash cycle.
Days inventory is 60 days.
Days debtors is 35 days.
Days creditors is 30 days.

Accepted Answer

A)  Activity cycle is 95 days; cash cycle is 65 days. 
B)  Activity cycle is 65 days; cash cycle is 95 days. 
C)  Activity cycle is 65 days; cash cycle is 30 days. 
D)  Activity cycle is 95 days; cash cycle is 30 days. 
A)  Activity cycle is 95 days; cash cycle is 65 days. 
B)  Activity cycle is 65 days; cash cycle is 95 days. 
C)  Activity cycle is 65 days; cash cycle is 30 days. 
D)  Activity cycle is 95 days; cash cycle is 30 days.

Question 13

'Net cash flows from operating activities divided by current liabilities' is the formula for the:

Accepted Answer

A)  quick ratio. 
B)  operating ratio. 
C)  debt coverage ratio. 
D)  cash flow ratio 
A)  quick ratio. 
B)  operating ratio. 
C)  debt coverage ratio. 
D)  cash flow ratio

Question 14

If an entity has increased its profit from $25 000 last year to $40 000 this year,have they become more profitable?

Accepted Answer

A)  Maybe. 
B)  Same both years. 
C)  Yes. 
D)  No. 
A)  Maybe. 
B)  Same both years. 
C)  Yes. 
D)  No.

Question 15

_________________ analysis involves reviewing the industry in which an entity operates.

Accepted Answer

The answer of _________________ analysis involves reviewing the industry in...

Question 16

Which of these is a market performance ratio?

Accepted Answer

A)  Earnings per share. 
B)  Dividends per share. 
C)  Price earnings ratio. 
D)  All of these options are market performance ratios. 
A)  Earnings per share. 
B)  Dividends per share. 
C)  Price earnings ratio. 
D)  All of these options are market performance ratios.

Question 17

Fernvale Pty Ltd has a current ratio of 2:1 with total current liabilities of $30 000.If Fernvale Pty Ltd's inventory is $7 500,the quick ratio is:

Accepted Answer

A)  2.67:1 
B)  1.75:1 
C)  2.25:1 
D)  1.6:1 
A)  2.67:1 
B)  1.75:1 
C)  2.25:1 
D)  1.6:1

Question 18

Greenacres Ltd has a quick ratio of 1.5:1 with total current liabilities of $50 000.If Greenacres Ltd has inventory of $25 000,the total current assets is:

Accepted Answer

A)  $25 000 
B)  $75 000 
C)  $100 000 
D)  $50 000 
A)  $25 000 
B)  $75 000 
C)  $100 000 
D)  $50 000

Question 19

The dividend pay-out ratio represents:

Accepted Answer

A)  the proportion of the current period's profits that are distributed to shareholders. 
B)  the amount of dividends that have been paid as a proportion of the number of shares issued. 
C)  the earnings available to be paid out per share. 
D)  the amount of dividends paid out as a proportion of the operating cash flows. 
A)  the proportion of the current period's profits that are distributed to shareholders. 
B)  the amount of dividends that have been paid as a proportion of the number of shares issued. 
C)  the earnings available to be paid out per share. 
D)  the amount of dividends paid out as a proportion of the operating cash flows.

Question 20

If the ____________________ ratio is less than 50%,the entity relies more on debt funding than equity funding.

Accepted Answer

The answer of If the ____________________ ratio is less than...

Financial analysis is useful for:

Expressing each item in a financial statement as a percentage of a base amount is known as _____________ analysis.

Financial analysis is more meaningful if the ratios can be compared to an appropriate benchmark such as:

Return on equity measures the profit generated compared to the _____________ investment.

A financial institution contemplating giving a loan to an entity would be most interested in:

Which of the following statements concerning net tangible asset backing (NTAB)per share is not true?

Which of the following categories of ratios is only relevant to a listed company?

Explaining why the ROE (return on equity)ratio has changed requires an examination of the:

Delta Pty Ltd has the following balance sheet figures.The debt to equity ratio is: Current assets \ 300000 Current liabilities 200000 Non-current assets 650000 Non-current liabilities 150000

Limitations of ratio analysis can be caused by:

The days debtors ratio indicates:

Assuming an entity sells inventory only on credit terms,use the following information to calculate the length of the entity's activity cycle and cash cycle. Days inventory is 60 days. Days debtors is 35 days. Days creditors is 30 days.

'Net cash flows from operating activities divided by current liabilities' is the formula for the:

If an entity has increased its profit from $25 000 last year to $40 000 this year,have they become more profitable?

_________________ analysis involves reviewing the industry in which an entity operates.

Which of these is a market performance ratio?

Fernvale Pty Ltd has a current ratio of 2:1 with total current liabilities of $30 000.If Fernvale Pty Ltd's inventory is $7 500,the quick ratio is:

Greenacres Ltd has a quick ratio of 1.5:1 with total current liabilities of $50 000.If Greenacres Ltd has inventory of $25 000,the total current assets is:

The dividend pay-out ratio represents:

If the ____________________ ratio is less than 50%,the entity relies more on debt funding than equity funding.

Introduction to Accounting and Business Decision Making

Accounting in Society

Business Structures

Business Transactions

Balance Sheet

Statement of Profit or Loss and Statement of Changes in Equity

Statement of Cash Flows

Budgeting

Costvolumeprofit Analysis

Costing and Pricing in an Entity

Capital Investment

Financing the Business

Performance Measurement

Filters

Exam 8: Analysis and Interpretation of Financial Statements

Financial analysis is useful for:

Expressing each item in a financial statement as a percentage of a base amount is known as _____________ analysis.

Financial analysis is more meaningful if the ratios can be compared to an appropriate benchmark such as:

Return on equity measures the profit generated compared to the _____________ investment.

A financial institution contemplating giving a loan to an entity would be most interested in:

Which of the following statements concerning net tangible asset backing (NTAB)per share is not true?

Which of the following categories of ratios is only relevant to a listed company?

Explaining why the ROE (return on equity)ratio has changed requires an examination of the:

Delta Pty Ltd has the following balance sheet figures.The debt to equity ratio is: Current assets \ 300000 Current liabilities 200000 Non-current assets 650000 Non-current liabilities 150000

Limitations of ratio analysis can be caused by:

The days debtors ratio indicates:

Assuming an entity sells inventory only on credit terms,use the following information to calculate the length of the entity's activity cycle and cash cycle. Days inventory is 60 days. Days debtors is 35 days. Days creditors is 30 days.

'Net cash flows from operating activities divided by current liabilities' is the formula for the:

If an entity has increased its profit from $25 000 last year to $40 000 this year,have they become more profitable?

_________________ analysis involves reviewing the industry in which an entity operates.

Which of these is a market performance ratio?

Fernvale Pty Ltd has a current ratio of 2:1 with total current liabilities of $30 000.If Fernvale Pty Ltd's inventory is $7 500,the quick ratio is:

Greenacres Ltd has a quick ratio of 1.5:1 with total current liabilities of $50 000.If Greenacres Ltd has inventory of $25 000,the total current assets is:

The dividend pay-out ratio represents:

If the ____________________ ratio is less than 50%,the entity relies more on debt funding than equity funding.

Introduction to Accounting and Business Decision Making

Accounting in Society

Business Structures

Business Transactions

Balance Sheet

Statement of Profit or Loss and Statement of Changes in Equity

Statement of Cash Flows

Budgeting

Costvolumeprofit Analysis

Costing and Pricing in an Entity

Capital Investment

Financing the Business

Performance Measurement

Filters