Statement Analysis Tools and Accounting Ratios Test

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Statement Analysis Tools and Accounting Ratios Test - 38

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Weekly Quiz Competition

Question 1
1 / -0

There is a _______ way classification of ratios.

A
One

B
Two

C
Three

D
Four
Solution
There is a two way classification of ratios they are :
Traditional classification the basis for which is the financial statement to which the determinants belong. For example balance sheet ratios, profit and loss ratios etc.
Functional classification the basis for which is the purpose for which the ratios are calculated . For example liquidity ratios, solvency ratios etc.
Question 2
1 / -0

If gross profit ratio is $$25\%$$ sales, it is __________$$\%$$ on cost.

A
$$33.33\%$$

B
$$20\%$$

C
$$25\%$$

D
$$50\%$$

Solution

Assume Sale = $$200$$ and Gross profit = $$25\% $$ on sales = $$50$$
Cost + Gross profit = Sales
Cost + $$50$$ = $$200$$
Cost = $$150$$
Now, Gross profit % on Cost = Gross Profit x $$100$$
Cost
= [$$50/150$$ ] x $$100$$
= $$33.33\%$$.
Question 3
1 / -0

If gross profit ratio is $$50\%$$ on cost, it is __________$$\%$$ on sales.

A
$$33.33\%$$

B
$$20\%$$

C
$$25\%$$

D
$$50\%$$

Solution

Assume Cost = $$200$$ and Gross profit = $$50\% $$ on cost = $$100$$
Cost + Gross profit = Sales
$$200$$ + $$100$$ = Sales
Sales = $$300$$
Now, Gross profit % on Sales = Gross Profit x $$100$$
Sales
= [$$100/300$$ ] x $$100$$
= $$33.33\%$$.
Question 4
1 / -0

Sometimes the accounting information is __________.

A
biased

B
based on estimates

C
based on current replacement cost

D
both a & b

Solution

Sometimes the accounting information is biased abd based on estimates
Question 5
1 / -0

If both variables are from balance sheet, the ratios are classified as ____________ ratios.

A
Income statement

B
Balance sheet

C
Profitability

D
Liquidity

Solution

If both the variables are from the balance sheet the ratios are classified as balance sheet ratios. For example Current ratio which is the ratio of Current assets to Current liabilities, here both the figures are from balance sheet.
Question 6
1 / -0

Liquidity ratios are essentially _______-term in nature.

A
Long

B
Short

C
Medium

D
Both a and b

Solution

Liquidity refers to the ability of the business to pay off its immediate debts or short term debts. Liquidity ratios help to measure the liquidity of the business and hence are short term in nature.
Question 7
1 / -0

_________ ratio refers to the analysis of profits in relation to sales or funds (or assets) employed in the business and the ratios calculated to meet this objective.

A
Liquidity

B
Profitability

C
Activity

D
Solvency

Solution

Profitability ratios like net profit ratio, gross profit ratio, return on capital employed, etc are helpful in determining the profit earning capacity of an entity. Such ratios also assist in analyzing the performance of the company; which are helpful in decision making to the investors and other stakeholders of an entity.
Question 8
1 / -0

The __________ classification based on the purpose for which a ratio is computed, is the most commonly used classification.

A
Traditional

B
Modern

C
Functional

D
None of the above

Solution

The functional classification is based on the purpose for which a ratio is computed and is the most commonly used classification. Some examples of Functional ratios are Liquidity ratios, Solvency ratios, Activity ratios etc.
Question 9
1 / -0

Which of the following ratio is long-term in nature?

A
Liquidity

B
Solvency

C
Activity

D
Profitabiliy

Solution

Solvency refers to the ability of the business to meet its obligations to stakeholders, especially to external stakeholders and are long term in nature whereas liquidity refers to the ability of the business to meet its short term commitments.
Question 10
1 / -0

The ability of the business to pay the amount due to stakeholders as and when it is due is known as _________, and the ratios calculated to measure it are known as __________ ratios.

A
Liquidity, Profitability

B
Profitability, Liquidity

C
Activity, Liquidity

D
Liquidity,Liquidity

Solution

Liquidity is when money or money's worth is readily available to pay various stakeholders of the business as and when it is due.
Liquidity ratios are helpful in determining the liquidity position of a business.
Types of Liquidity ratios : Quick ratio, current ratio, cash ratio, etc.

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Re-Attempt Weekly Quiz Competition

Statement Analysis Tools and Accounting Ratios Test - 38

Result

Statement Analysis Tools and Accounting Ratios Test - 38

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SHARING IS CARING

Question 1

One

Two

Three

Four

Solution

Question 2

$$33.33\%$$

$$20\%$$

$$25\%$$

$$50\%$$

Solution

Question 3

$$33.33\%$$

$$20\%$$

$$25\%$$

$$50\%$$

Solution

Question 4

biased

based on estimates

based on current replacement cost

both a & b

Solution

Question 5

Income statement

Balance sheet

Profitability

Liquidity

Solution

Question 6

Long

Short

Medium

Both a and b

Solution

Question 7

Liquidity

Profitability

Activity

Solvency

Solution

Question 8

Traditional

Modern

Functional

None of the above

Solution

Question 9

Liquidity

Solvency

Activity

Profitabiliy

Solution

Question 10

Liquidity, Profitability

Profitability, Liquidity

Activity, Liquidity

Liquidity,Liquidity

Solution

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