Statement Analysis Tools and Accounting Ratios Test

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Statement Analysis Tools and Accounting Ratios Test - 1

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Weekly Quiz Competition

Question 1
1 / -0

If we deduct current liabilities from current assets, we get_________

A
Working Capital

B
Reserves and surplus

C
Fixed Assets

D
Actual profit

Solution

Formula of Calculating Working Capital: Working Capital = Current Assets – Current Liabilities
Question 2
1 / -0

The formula of Debt equity ratio is -------

A
Debt/Equity

B
Liquid Assets/ Current Liabilities

C
Shareholders’ Funds/Total Assets

D
Current Assets/ Current Liabilities

Solution

Formula of Debt Equity Ratio is:
Formula: Debt/Equity
D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders equity
Question 3
1 / -0

Return on investment ratio is calculated by

A
Profit before Interest,Tax Capitalemployed × 100

B
Profit before Interest, Tax and DividendCapitalemployed × 100

C
Profit before Interest,Tax and DividendCapitalemployed × 100

D
Gross Profit Capitalemployed × 100

Solution

ROI measures the amount of return on an investment relative to the investment's cost.
Question 4
1 / -0

The main purpose of activities ratios is --------

A
To meet short,term liabilities

B
To know how effectively the resources have been used

C
To know the solvency

D
To know the profitability

Solution

Activity ratios measure the relative efficiency of a firm based on its assets, leverage or other such balance sheet items and are important in determining whether a company's management is doing a good enough job of generating revenues and cash from its resources.
Question 5
1 / -0

While preparing Statement of P/L, Salaries and wages are shown under:

A
Other Expenses

B
Employee benefit expense

C
Finance Cost

D
Cost of material consumed

Solution

Companys can disclose information regarding aggregate expenditure and income on this items.
Question 6
1 / -0

Ideal Liquid ratio is

A
3 : 1

B
1: 1

C
2: 1

D
1: 2

Solution

Ideal liquid ratio is 1:1 i.e. Liquid assets should be equal to the current liabilities. In other words it represents a more stringent test for the liquidity of a company in comparison to the current ratio
Question 7
1 / -0

Which of the following is not part of shareholders’ funds?

A
Balance i.e. Surplus in Statement of P/L

B
General Reserve

C
Share Capital

D
Proposed Dividend

Solution

Proposed dividend is an important source of financing temporary working capital, and not the part of shareholders funds.
Question 8
1 / -0

Identify the following formula used for:

Cost of Revenue from operations + Operating Expenses/ Revenue from operations × 100

A
Gross profit ratio

B
Working Capital Turnover Ratio

C
Proprietary Ratio

D
Operating Ratio

Solution

This financial ratio is most commonly used for industries which require a large percentage of revenues to maintain operations.
Question 9
1 / -0

External analysis is concerned with __________

A
Creditors

B
Financial Institutions

C
Government

D
All of these

Solution

External analysis is done on the basis of published financial statements by those who do not have access to the accounting information, such as stock holders, banks, creditors, and the general public.
Question 10
1 / -0

Which Ratio shows the relationship between current assets with current liabilities

A
Current ratio

B
Gross profit ratio

C
Debt ratio

D
Quick ratio

Solution

Current Ratio shows relationship between current assets and current liabilities.

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Re-Attempt Weekly Quiz Competition

Statement Analysis Tools and Accounting Ratios Test - 1

Result

Statement Analysis Tools and Accounting Ratios Test - 1

Score

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Rank

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SHARING IS CARING

Question 1

Working Capital

Reserves and surplus

Fixed Assets

Actual profit

Solution

Question 2

Debt/Equity

Liquid Assets/ Current Liabilities

Shareholders’ Funds/Total Assets

Current Assets/ Current Liabilities

Solution

Question 3

Profit before Interest,Tax Capitalemployed × 100

Profit before Interest, Tax and DividendCapitalemployed × 100

Profit before Interest,Tax and DividendCapitalemployed × 100

Gross Profit Capitalemployed × 100

Solution

Question 4

To meet short,term liabilities

To know how effectively the resources have been used

To know the solvency

To know the profitability

Solution

Question 5

Other Expenses

Employee benefit expense

Finance Cost

Cost of material consumed

Solution

Question 6

3 : 1

1: 1

2: 1

1: 2

Solution

Question 7

Balance i.e. Surplus in Statement of P/L

General Reserve

Share Capital

Proposed Dividend

Solution

Question 8

Gross profit ratio

Working Capital Turnover Ratio

Proprietary Ratio

Operating Ratio

Solution

Question 9

Creditors

Financial Institutions

Government

All of these

Solution

Question 10

Current ratio

Gross profit ratio

Debt ratio

Quick ratio

Solution

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