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Financial Statements and Analysis Test - 11

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Financial Statements and Analysis Test - 11
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  • Question 1
    1 / -0

    Where operating cycle cannot be identified it is assumed to be a period of

    Solution

    Operating cycle is the number of days a company takes in realizing its inventories in cash. It equals the time taken in selling inventories plus the time taken in recovering cash from trade receivables. It is called operating cycle because this process of producing/purchasing inventories, selling them, recovering cash from customers, using that cash to purchase/produce inventories and so on is repeated as long as the company is in operations. 

  • Question 2
    1 / -0

    Name the items under  Shareholder’s Fund is comprised of  company’s balance sheet.

    Solution

    Shareholders fund is divided into the following parts:
    Share Capital
    Reserves and Surplus
    Money received against share warrant

  • Question 3
    1 / -0

    Inventories include the following except

    Solution

    Inventories include the following items except Patents:
    Work-in-progress
    Goods acquired for trading
    Stores and spares

    A patent is a government license that gives the holder exclusive rights to a process, design or new invention for a designated period of time. 

  • Question 4
    1 / -0

    Bank overdraft is shown in the balance sheet under the ……….

    Solution

    Because it is a liability repayable normally within 12 months. 

  • Question 5
    1 / -0

    Cash Credit is shown in the balance sheet under the ……….

    Solution

    Because it is in the form of a short term loan from bank repayable within 12 months. 

  • Question 6
    1 / -0

    ___________ is conducted by the management

    Solution

    Internal Analysis is conducted by the management and analysis conducted by the creditors, bankers and government agencies is called external analysis.

  • Question 7
    1 / -0

    It helps in ascertaining change in the items of income statement and Position Statement of different years in terms of figures and percentage.

    Solution

    A comparative statement is a document that compares a particular financial statement with prior period statements or with the same financial report generated by another company. Analyst and business managers use the income statement, balance sheet and cash flow statement for comparative purposes. 

  • Question 8
    1 / -0

    These may become liabilities in future but at present they are not liabilities. What we are talking about……….

    Solution

    Contingent liabilities are those liabilities which are not actual liabilities of the business today but may become liabilities of the business in future.

    Contingent liabilities are those which may or may not arise as they are dependen on happening in future.

  • Question 9
    1 / -0

    Income Statement represents:

    Solution

    It records all income and expenses of the business relating to the same accounting period,  normally one year,  and show the result of the business in the form of profit or loss. 

  • Question 10
    1 / -0

    Loose Tools, Stock-in-Trade, Stores and Spare Parts comes under the

    Solution

    These are the short term assets held by the company for a short period,  less than one year. These assets keep rotating throughout the year.  Present asset gets consumed or gets converted into cash and new assets comes into business.  Unlike fixed assets,  its balances keep changing several times in a year. 

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