Statement Analysis Tools and Accounting Ratios Test

Result

Statement Analysis Tools and Accounting Ratios Test - 19

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Weekly Quiz Competition

Question 1
1 / -0

'Kamal & Associates' provides following information:
Profit margin = $$10\%$$
Asset turnover = 3 times
What is the Return on Investment (ROI) of the Company?

A
$$10\%$$

B
$$30\%$$

C
$$20\%$$

D
$$25\%$$

Solution

R.O.I = Return x Sales
Sales Asset
Now,
Return = Profit margin and Sales = Asset turnover
Sales Asset
Therefore R.O.I = Profit margin x Asset turnover
= $$10\%$$ x $$3$$
= $$30\%$$
Question 2
1 / -0

The ideal level of current ratio is _________.

A
4:2

B
2:1

C
Both (a) and (b)

D
None of the above

Solution

Ideal level of current ratio is 2:1. High ratio indicates under trading and over capitalization. Low ratio indicates over trading and under capitalization. It is most widely used of all analytical devices based on the balance sheet.
Question 3
1 / -0

Liquidity ratio is also known as :-
a. Quick ratio
b. Acid test ratio
c. Working capital ratio
d. Stock turnover ratio

A
A and B

B
A and C

C
B and C

D
C and D

Solution

A liquidity ratio is an indicator of whether a company's current assets will be sufficient to meet the company's obligations when they become due. The liquidity ratios include the current ratio and the acid test or quick ratio. The current ratio and quick ratio are also referred to as solvency ratios.
Question 4
1 / -0

If the inventory turnover is high, the working capital requirements will be ___________.

A
High

B
Low

C
Equal

D
None of the above

Solution

Inventory Turnover = [Cost of goods sold/Sales] / Average inventory.
A high inventory turnover is good from the point of liquidity position and vice versa. If the inventory turnover is high it means that the inventory is being used or sold in a short time, which means that the funds of the company are not being blocked and so the working capital requirements would be low.
Question 5
1 / -0

Debt-equity ratio is sub-part of ____________.

A
Short-term solvency ratio

B
Long-term solvency ratio

C
Debtors turnover ratio

D
None of the above

Solution

The debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage.
Question 6
1 / -0

The appropriate ratio for indicating liquidity crisis is_________.

A
Operating ratio

B
Sales turnover ratio

C
Current ratio

D
Acid test ratio

Solution

Acid test ratio or Quick ratio = Quick Assets/ Current Liabilities
= [Current Assets minus Inventory]/Current Liabilities
The Quick ratio is a much more conservative measure of short term liquidity than the Current ratio. We reduce the amount of funds held up in inventory form the current assets ,so that we can get a clear picture of how much fund can we mobilize for payment of dues in case of a cash crunch or a liquidity crisis.
Question 7
1 / -0

Which ratio is considered as safe margin of solvency?

A
Liquid ratio

B
Quick ratio

C
Current ratio

D
None of the above

Solution

The current ratio measures company's ability to pay short-term and long-term obligations. To gauge this ability. the current ratio considers the current total assets of a company relative to that company's current total liabilities.
Question 8
1 / -0

Which ratio is known as a complementary of Net Profit Ratio?

A
Gross profit ratio

B
Operating profit ratio

C
Operating ratio

D
None of the above
Question 9
1 / -0

The ideal level of liquid ratio is _______.

A
1:1

B
2:1

C
3:1

D
All of the above

Solution

Ideal level of quick ratio or acid test ratio is 1:1. Usually, a high acid-test ratio is an indication that the firm is liquid has ability to meet its current or liquid liabilities in time and on the other hand a low quick ratio represents that the firm's liquidity position is not good.
Question 10
1 / -0

Which of the following items is not taken into account while computing current ratio?

A
Sundry Creditors

B
Sundry debtors

C
Contingent liabilities

D
Bank overdraft

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Re-Attempt Weekly Quiz Competition

Statement Analysis Tools and Accounting Ratios Test - 19

Result

Statement Analysis Tools and Accounting Ratios Test - 19

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SHARING IS CARING

Question 1

$$10\%$$

$$30\%$$

$$20\%$$

$$25\%$$

Solution

Question 2

4:2

2:1

Both (a) and (b)

None of the above

Solution

Question 3

A and B

A and C

B and C

C and D

Solution

Question 4

High

Low

Equal

None of the above

Solution

Question 5

Short-term solvency ratio

Long-term solvency ratio

Debtors turnover ratio

None of the above

Solution

Question 6

Operating ratio

Sales turnover ratio

Current ratio

Acid test ratio

Solution

Question 7

Liquid ratio

Quick ratio

Current ratio

None of the above

Solution

Question 8

Gross profit ratio

Operating profit ratio

Operating ratio

None of the above

Question 9

1:1

2:1

3:1

All of the above

Solution

Question 10

Sundry Creditors

Sundry debtors

Contingent liabilities

Bank overdraft

User

Question Analysis

My Perfomance

Score

-

Rank

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