Statement Analysis Tools and Accounting Ratios Test

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Statement Analysis Tools and Accounting Ratios Test - 25

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Weekly Quiz Competition

Question 1
1 / -0

Which among these is not a component of International Liquidity?

A
SDRs

B
Gold held by Central Bank

C
Foreign currencies held by the Central Bank

D
None of the above
Question 2
1 / -0

Which of the following is an example of short-term solvency Ratio?

A
Debt-equity ratio

B
Interest coverage ratio

C
Current ratio

D
Fixed assets turnover ratio
Question 3
1 / -0

Pay out ratio means ___________________.

A
Ratio of debtors to creditors

B
Ratio of earning that are distributed through dividend

C
Ratio of profit distributed to profit retained

D
None of the above
Question 4
1 / -0

Which of the following is not a correct statement ?

A
Overhead and indirect expenses are not the same

B
When profit is 20% of total cost, it is equal to 25% of selling price of a product

C
In Halsey Premium Plan, time wages are guaranteed

D
Wages sheet is prepared by payroll department

Solution

B is an incorrect statement. If the profit on cost is 20%, then profit on sales should be less i.e. 16.67%.
Following is the example:

Sales is Rs.10000
Profit on Cost is 20%
i.e. Cost + Profit= Sales
= 100+20=120
Therefore on sales of Rs.10000 the profit will be Rs.10000/120*20= Rs.1667
Profit on sales = Rs.1667/Rs.10000 i.e. 16.67%.
Question 5
1 / -0

Current ratio may be increased by ____________.

A
Overstating current assets

B
Overstating Current Liabilities

C
Understating current assets

D
B & C
Question 6
1 / -0

Current ratio is increased by :-
1. cash received from debtors
2. issue of redeemable debentures
3. selling the old machine for cash
4. converting debentures into equity share

A
1,2,3

B
2 and 3

C
1 and 3

D
3 and 4
Question 7
1 / -0

Leverage implies that _______________.

A
The return on equity share capital exceeds the interest on borrowed capital

B
The return on borrowed capital exceeds the return on equity share capital

C
Both (A) & (B)

D
None of the above
Question 8
1 / -0

The most rigorous test of liquidity is ___________.

A
Current ratio

B
Acid ratio test

C
Absolute measure

D
Stock turnover ratio

Solution

Absolute measure ratio = absolute cash/current liabilities
Absolute cash = cash + Bank + Marketable Securities
Question 9
1 / -0

The immediate solvency ratio is ____________.

A
Quick ratio

B
Current ratio

C
Stocks turns ratio

D
Debtors turnover ratio
Question 10
1 / -0

Current ratio is chiefly used to assess the .

A
effective utilization of capital

B
application of debt

C
liquidity position

D
levels of inventory piled up in different forms.

E
prompt payment of long-term liabilities.

Solution

Current ratio is chiefly used to assess the liquidity position of a company. Let us look at the following example.

Let Current asset = $$Rs.100000$$ and Current liability = $$Rs. 50000$$
Current ratio = Current asset/Current liability
= $$100000/50000$$
= $$2$$
So, if at any given point of time if there is a liquidity crisis then the company has twice the amount of assets to liquidate and pay off the dues.

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Re-Attempt Weekly Quiz Competition

Statement Analysis Tools and Accounting Ratios Test - 25

Result

Statement Analysis Tools and Accounting Ratios Test - 25

Score

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Rank

-

SHARING IS CARING

Question 1

SDRs

Gold held by Central Bank

Foreign currencies held by the Central Bank

None of the above

Question 2

Debt-equity ratio

Interest coverage ratio

Current ratio

Fixed assets turnover ratio

Question 3

Ratio of debtors to creditors

Ratio of earning that are distributed through dividend

Ratio of profit distributed to profit retained

None of the above

Question 4

Overhead and indirect expenses are not the same

When profit is 20% of total cost, it is equal to 25% of selling price of a product

In Halsey Premium Plan, time wages are guaranteed

Wages sheet is prepared by payroll department

Solution

Question 5

Overstating current assets

Overstating Current Liabilities

Understating current assets

B & C

Question 6

1,2,3

2 and 3

1 and 3

3 and 4

Question 7

The return on equity share capital exceeds the interest on borrowed capital

The return on borrowed capital exceeds the return on equity share capital

Both (A) & (B)

None of the above

Question 8

Current ratio

Acid ratio test

Absolute measure

Stock turnover ratio

Solution

Question 9

Quick ratio

Current ratio

Stocks turns ratio

Debtors turnover ratio

Question 10

effective utilization of capital

application of debt

liquidity position

levels of inventory piled up in different forms.

prompt payment of long-term liabilities.

Solution

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