Statement Analysis Tools and Accounting Ratios Test

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Statement Analysis Tools and Accounting Ratios Test - 26

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Weekly Quiz Competition

Question 1
1 / -0

If the expected price earnings ratio and earnings per share are 33.3 and Rs. 7.5 respectively and the required rate of return and current dividend are $$15\%$$ and Rs. 20, the growth rate of the stock is ____________.

A
$$3.75\%$$

B
$$4.25\%$$

C
$$6.48\%$$

D
$$8\%$$

E
$$8.2\%$$
Question 2
1 / -0

Given current ratio $$2$$ : $$1$$
Net working capital = Rs.$$60,000$$
What is the amount of Current Liabilities?

A
Rs.$$30,000$$

B
Rs.$$60,000$$

C
Rs,$$1,20,000$$

D
Rs.$$90,000$$
Question 3
1 / -0

Given current ratio $$2$$ : $$1$$
Net working capital = Rs.$$60,000$$
With the information given above. what is the amount of current assets?

A
Rs.$$30,000$$

B
Rs.$$60,000$$

C
Rs.$$1,20,000$$

D
Rs.$$90,000$$
Question 4
1 / -0

The capacity Utilization Ratio can be calculated as __________________.

A
$$\frac {Normal Capacity}{Standard Hours of Actual output}$$

B
$$\frac {Standard Hours of Actual output}{Normal Capacity}$$

C
$$\frac {Budgeted Capacity}{Normal Capacity}$$

D
$$\frac{Normal Capacity} {Budgeted Capacity}$$

Solution

Capacity utilization ratio is an important operational metric for business. A company with less than 100% utilization can theoretically increase production without incurring expensive overhead cost.
Capacity Utilization Ratio can be measured by :

Standard hours of Actual output/Normal Capacity.
Question 5
1 / -0

Given the equity multiplier is 4.55. The debt-asset ratio of a firm, according to DuPont analysis will be _________.

A
0.22

B
0.78

C
1.28

D
1.56

E
Data insufficient

Solution

The equity multiplier is a financial leverage ratio that measures the amount of a firm's assets that are financed by its shareholders by comparing total assets with total shareholder's equity.

Equity multiplier = Total assets / Total equity = 4.55

Equity / Assets = 1 / 4.55 = 0.2197

Hence, Debt / Assets = 1 - 0.2197 = 0.7802.
Question 6
1 / -0

A high pay out ratio indicates that ___________________.

A
Management is ploughing back profits

B
Management is not reinvesting profits

C
Company is earning high profits

D
Earning per share is high
Question 7
1 / -0

Which of the following is not a correct statement?

A
Debt equity is a solvency ratio

B
'Acid Test' denotes liquidity

C
Ratio analysis is a technique of co-ordination

D
Composite ratios are known as Inter-statement Ratios
Question 8
1 / -0

ROE (Return on Equity) is computed as ______________.

A
Net profit / sales

B
Cost of sales / capital employed

C
Net profit after tax and pref. dividend / share holders fund

D
Operating net profit / share holder's funds
Question 9
1 / -0

If the current yield on a bond is $$9\%$$ and its face value is Rs. 1,000 with a coupon rate of $$7\%$$ its current market price is ___________.

A
Rs. 700

B
Rs. 778

C
Rs. 845

D
Rs. 1175

E
Rs. 1285
Question 10
1 / -0

Which of the following liabilities are taken into account for acid test ratio?
(i) Trade creditors
(ii) Bank overdraft
(iii) Cash credit
(iv) Outstanding expenses

A
i & ii

B
i & iv

C
i, ii, iii & iv

D
ii, iii & iv

Solution

Acid test ratio = quick assets / current liabilities. All current liabilities are considered while calculating acid test ratio.

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Statement Analysis Tools and Accounting Ratios Test - 26

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Statement Analysis Tools and Accounting Ratios Test - 26

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SHARING IS CARING

Question 1

$$3.75\%$$

$$4.25\%$$

$$6.48\%$$

$$8\%$$

$$8.2\%$$

Question 2

Rs.$$30,000$$

Rs.$$60,000$$

Rs,$$1,20,000$$

Rs.$$90,000$$

Question 3

Rs.$$30,000$$

Rs.$$60,000$$

Rs.$$1,20,000$$

Rs.$$90,000$$

Question 4

$$\frac {Normal Capacity}{Standard Hours of Actual output}$$

$$\frac {Standard Hours of Actual output}{Normal Capacity}$$

$$\frac {Budgeted Capacity}{Normal Capacity}$$

$$\frac{Normal Capacity} {Budgeted Capacity}$$

Solution

Question 5

0.22

0.78

1.28

1.56

Data insufficient

Solution

Question 6

Management is ploughing back profits

Management is not reinvesting profits

Company is earning high profits

Earning per share is high

Question 7

Debt equity is a solvency ratio

'Acid Test' denotes liquidity

Ratio analysis is a technique of co-ordination

Composite ratios are known as Inter-statement Ratios

Question 8

Net profit / sales

Cost of sales / capital employed

Net profit after tax and pref. dividend / share holders fund

Operating net profit / share holder's funds

Question 9

Rs. 700

Rs. 778

Rs. 845

Rs. 1175

Rs. 1285

Question 10

i & ii

i & iv

i, ii, iii & iv

ii, iii & iv

Solution

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