Statement Analysis Tools and Accounting Ratios Test

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Statement Analysis Tools and Accounting Ratios Test - 40

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Weekly Quiz Competition

Question 1
1 / -0

Accounting information is dependent on the __________________.

A
Person who is making it

B
Data that has been taken

C
Both a & b

D
None of the above
Question 2
1 / -0

Current liabilities of a company were Rs. 1,75,000 and its current ratio was 2: 1. It paid Rs. 30,000 to a creditor. Calculate current ratio after payment :

A
2: 1

B
1: 1

C
1: 5: 1

D
2.21: 1

Solution

Given,
Current liabilities = Rs-1,75,000
Current Ratio = 2:1

If 30,000 is paid to a creditor it will reduce both current assets as well as current liabilities as cash is being paid and creditors are reduced. Hence, new ratio will be:-

Current Ratio = Current Assets
   -------------------------
Current liabilities
= 3,50,000 (WN 1) - 30,000
   --------------------------------------
   1,75,000 - 30,000
= 3,20,000
                      --------------
1,45,000
   = 2.2 : 1

Working note 1) = Current assets
Current Ratio = Current Assets
   -------------------------
Current liabilities
Current Assets = Current liabilities x current ratio
   = 1,75,000 x 2
   = 3,50,000.
Question 3
1 / -0

Revenue from operations (Net Sales) Rs 4,50,000; Cost of good sold Rs 3,60,000: Operating expenses Rs 22,500. What will be Operating Profit Ratio?

A
16%

B
15%

C
20%

D
18%

Solution

Operating profit Ratio = Sales - Cost of goods sold
   - Operating Expenses
---------------------------------------- x 100
   Sales
   = 4,50,000 - 3,60,000 - 22500
   ---------------------------------------------- x 100
   4,50,000
   = 67,500
--------------- x 100
4,50,000
   = 15%.
Question 4
1 / -0

Credit Revenue from Operations, i.e.,
Net credit sales for the year - 1,20,000
Debtors - 12,000
Bills Receivable - 8,000
Calculate Trade Receivable or Debtors' Turnover Ratio.

A
4 times

B
3 times

C
6 times

D
5 times

Solution

Debtor's turnover ratio = Credit sales
-------------------------------
Average receivables

= 1,20,000
-----------------
20,000
= 6 times.
Question 5
1 / -0

Collection of sundry debtors would _______________.

A
Increase current ratio

B
Decrease current ratio

C
Have no effect on current ratio

D
Increase debtors turnover

Solution

Current ratio measures the liquidity of the firm and also checks the ability of an organisation to repay to current debts. The ratio is calculated by comparing the current assets with current liabilities.
Collection of sundry debtors would increase cash inflow and reduce the amount of debtors and hence there is nil affect or say no change in the Current assets. Thereby, having no effect on the current ratio.
Question 6
1 / -0

Consider the following statements :
A low inventory turnover may be the result of
1. Obsolescence of some of the stock
2. Slow moving inventory
3. Frequent stock-outs
4. Fast-moving inventory
Which of the above statement(s) is/are correct?

A
1 and 2

B
4 alone

C
2 alone

D
2 and 3

Solution

Low inventory turnover implies a situation where the company is holding too much of inventory compared to sales. A low inventory turnover may be the result of
1. Obsolescence of some of the stock
2. Slow moving inventory
Question 7
1 / -0

From the following data, calculate Inventory Turnover Ratio:
Total Sales Rs. 5,00,000; Sales Return Rs. 50,000;
Gross Profit Rs. 90,000; Closing Inventory Rs. 1,00,000; Excess of Closing Inventory over opening inventory Rs. 20,000.

A
6 times

B
3 times

C
4 times

D
5 times

Solution

Inventory turnover ratio = Cost of goods sold ( WN 1)
----------------------------------------
   Average inventory (WN 2)
= 3,60,000
   -----------------
   90,000
   = 4 Times

Working notes:-
1) Cost of goods sold = Gross sales - (Sales return + gross profit)
= 5,00,000 - (50,000 + 90,000)
= 3,60,000.
2) Average Inventory = 1,00,000 + 80,000
-------------------------------
2
= 90,000.
Closing inventory is 20,000 more than opening inventory hence opening inventory is 1,00,000 - 20,000 = 80,000.
Question 8
1 / -0

The stock turnover ratio is a/an _______ ratio.

A
Insolvency

B
Activity Ratio

C
Liquidity

D
Total Investment

Solution

Stock turnover ratio indicates how efficiently the firm’s investment in inventories is converted to sales and thus depicts the inventory management skills of the organization. It is considered an activity ratio as it measures the efficiency of the company in using its resources. So, the correct option is 'Activity ratio'.
Question 9
1 / -0

Payment ratio means the ratio of ___________ .

A
debtors to creditors

B
profit distributed to profit retained

C
earning that are distributed through dividends

D
interest payment to dividends

Solution

Payment Ratio is the ratio that determines the sustainability of a company's dividend payments. It is that proportion of profit that is paid out as dividends. It is calculated as :
(Dividend paid/ Net income) * 100.
Question 10
1 / -0

A Piece Rate System written by ___________.

A
Harold Koontz

B
Taylor

C
Louis Allan

D
Hendry Fayol

Solution

Differential Piece Rate System was introduced by Taylor, the father of scientific management.

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Re-Attempt Weekly Quiz Competition

Statement Analysis Tools and Accounting Ratios Test - 40

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Statement Analysis Tools and Accounting Ratios Test - 40

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SHARING IS CARING

Question 1

Person who is making it

Data that has been taken

Both a & b

None of the above

Question 2

2: 1

1: 1

1: 5: 1

2.21: 1

Solution

Question 3

16%

15%

20%

18%

Solution

Question 4

4 times

3 times

6 times

5 times

Solution

Question 5

Increase current ratio

Decrease current ratio

Have no effect on current ratio

Increase debtors turnover

Solution

Question 6

1 and 2

4 alone

2 alone

2 and 3

Solution

Question 7

6 times

3 times

4 times

5 times

Solution

Question 8

Insolvency

Activity Ratio

Liquidity

Total Investment

Solution

Question 9

debtors to creditors

profit distributed to profit retained

earning that are distributed through dividends

interest payment to dividends

Solution

Question 10

Harold Koontz

Taylor

Louis Allan

Hendry Fayol

Solution

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