Statement Analysis Tools and Accounting Ratios Test

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Statement Analysis Tools and Accounting Ratios Test - 14

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Weekly Quiz Competition

Question 1
1 / -0

Which ratio is very important from the lender's point of view?

A
Fixed charges coverage

B
Operating ratio

C
Net Profit Ratio

D
Gross profit ratio

Solution

Fixed charges coverage ratio is a ratio that indicates a firm's ability to satisfy fixed financing expenses such as interest and leases. since leases are fixed charge, the calculation for determining company's fixed charge coverage includes earnings before interest and taxes, interest expense, lease expense.etc. Hence, it is very important from the lender's point of view.
Question 2
1 / -0

Overall profitability ratio is also called as __________.

A
Productivity of the total assets

B
Return on investments

C
Return on capital employed

D
Either (B) or (C)

Solution

Overall profitability ratio is also called as return on investment. It indicates the percentage of return on the total capital employed in the business. It is also called as return on investments, return on capital employed.
Question 3
1 / -0

If the holding of C. Ltd. in D. Ltd. is $$90$$% calculate the Holding - Minority ratio.

A
$$1 : 9$$

B
$$1 : 1$$

C
$$9 : 1$$

D
$$2 : 1$$

Solution

If the holding of C.Ltd. in D.Ltd. is $$90$$% then the Holding Minority ratio would be calculated as follows:
Percentage of shares held by holding company(major shareholder)
Percentage of shares held by minority shareholders
= $$90$$% / $$10$$%
= $$9 :1 $$.
Question 4
1 / -0

Interpretation is usually done through ________.

A
Ratio and flow statements

B
Ratio statements

C
Flow statements

D
None of the above

Solution

Accounting cycle consists of various steps such as recording,summarising,analysing and interpretation. After carrying out all the steps of recording and summmarising interpretation of financial statements takes place. It is carried out so that managers can make important decisions regarding company welfare. Ratio and flow statements makes it effective to carry out interpretation easily. Hence, interpretation is usually done through ratio and flow statements.
Question 5
1 / -0

Operating ratio is a complementary of ____________.

A
Net profit ratio

B
Price earning ratio

C
Gross profit ratio

D
Pay out ratio

Solution

Operating ratio shows the efficiency of a company's management by comparing company's operating expense to net sales. The smaller the ratio the greater the organisation generate profit. Thus, we can say that it is complementary to net profit ratio as they both are similar.
Question 6
1 / -0

80% of sales of 10,00,000 of a firm are on credit. It has a receivable turnover of 8. What is the average collection period (360 days a year) and average debtors of the firm?

A
45 days and 1,00,000

B
360 days and 1,00,000

C
45 days and 8,00,000

D
360 days and 1,25,000

Solution

Debtors turnover ratios is an activity ratio measuring how efficiently a firm uses it assets. This can be calculated as:
Debtors Turnover Ratio=Credit sales/Average accounts receivables

In the given information:
Total Sales Rs.1000000
Credit Sales Rs.800000 (80% of sales)
Debtors T/O ratio- 8
Therefore
8=800000/Average receivables
Average Receivables are Rs.100000

Average Collection period=No of days in a year/debtors turnover ratio
=360/8
Average collection period is 45 days.
Question 7
1 / -0

The term 'Operating profit' means ____________.

A
Interest on long-term borrowings

B
Profit before Interest and Tax

C
Profit after Interest and Tax

D
Net operating profit before interest and tax

Solution

Operating profit is the profit earned by a business during its normal business operations. It is calculated by using the following formula:
Operating profit is equal to operating revenue - COGS - demortization expenses. It does not include tax. Hence, it means profit before interest and tax.
Question 8
1 / -0

If the average balance of debtors has increased, which of the following might not show a change in general?

A
Total Sales

B
Average Payables

C
Current Ratio

D
Bad Debt loss

Solution

Change in average balance of debtors does not have any relation with average payable.
Question 9
1 / -0

If the sales of the firm are Rs. 60,00,000 and the average debtors are Rs. 15,00,000 then the receivables turnover is:

A
4 times

B
25%

C
400%

D
0.25 times

Solution

Receivable turnover ratio $$= $$Credit sales/Average debtors
$$4 = 6000000/1500000$$
Question 10
1 / -0

Capital denotes _____________________.

A
the funds provided by the owners of the business

B
the funds provided by the outsiders

C
increase the stock of real physical asset

D
All of the above.

Solution

Capital is the amount invested by businessman to start his business. Hence, capital denotes the funds provided by the owners of the business.

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Re-Attempt Weekly Quiz Competition

Statement Analysis Tools and Accounting Ratios Test - 14

Result

Statement Analysis Tools and Accounting Ratios Test - 14

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Rank

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SHARING IS CARING

Question 1

Fixed charges coverage

Operating ratio

Net Profit Ratio

Gross profit ratio

Solution

Question 2

Productivity of the total assets

Return on investments

Return on capital employed

Either (B) or (C)

Solution

Question 3

$$1 : 9$$

$$1 : 1$$

$$9 : 1$$

$$2 : 1$$

Solution

Question 4

Ratio and flow statements

Ratio statements

Flow statements

None of the above

Solution

Question 5

Net profit ratio

Price earning ratio

Gross profit ratio

Pay out ratio

Solution

Question 6

45 days and 1,00,000

360 days and 1,00,000

45 days and 8,00,000

360 days and 1,25,000

Solution

Question 7

Interest on long-term borrowings

Profit before Interest and Tax

Profit after Interest and Tax

Net operating profit before interest and tax

Solution

Question 8

Total Sales

Average Payables

Current Ratio

Bad Debt loss

Solution

Question 9

4 times

25%

400%

0.25 times

Solution

Question 10

the funds provided by the owners of the business

the funds provided by the outsiders

increase the stock of real physical asset

All of the above.

Solution

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