Module 4 ANA

Multiple Choice

What is the difference between accrued expenses and prepaid expenses?

• Accrued expenses are paid before they are incurred, while prepaid expenses are paid after they are incurred

• Accrued expenses are recorded as liabilities, while prepaid expenses are recorded as assets

• There is no difference; both terms can be used interchangeably

• Accrued expenses increase revenue, while prepaid expenses decrease revenue

Multiple Choice

Expenses that are paid in advance.

• Accrued Expense
• Advances to Employees
• Prepaid Expense
• Advances from Customers
• None of the choices are correct

Multiple Choice

What is accrued income?

• Income earned from services that have been performed but not billed

• Income that has been billed but not collected

• Income that is recorded as a liability

• Income earned from investments

Multiple Choice

What are the three adjustments related to account receivables?

• Bad debts

• Allowance for doubtful debts

• Bad debt recovered

• All of the above

Multiple Choice

What is the process of allocating the cost of a non-current asset as an expense in accounting called?

• Depreciation

• Amortization

• Capitalization

• Accrual

Multiple Choice

What is the significance of financial analysis in business decision-making?

• To assess profitability

• To evaluate employee performance

• To determine product pricing

• To analyze customer satisfaction

Multiple Select

What are the five financial statements for a company listed in the image?

• Statement of Comprehensive Income

• Statement of Financial Position

• Statement of Changes in Equity

• Statement of Cash Flow

• Notes to the Accounts

Multiple Choice

Who are the primary users of financial statements?

• Investors

• Consumers

• Government

• Stock Exchange

Multiple Choice

What does the acid-test (quick) ratio measure?

• A company's ability to generate profit

• A company's ability to pay dividends

• A company's efficiency in managing inventory

• A company's ability to meet its short-term obligations with its most liquid assets

Multiple Select

What are the advantages of ratio analysis?

• Useful in financial position analysis

• Useful in simplifying accounting figures

• Useful in assessing operational efficiency

• Useful in forecasting purposes

Multiple Choice

The two basic measures of liquidity are:

• inventory turnover and current ratio

• current ratio and acid test ratio

• gross profit Ratio and operating ratio

• current ratio and average collection period

Multiple Choice

Why might a company with a high current ratio still face liquidity issues?

• It has too much cash on hand.

• Its inventory is not easily convertible to cash.

• It has no long-term liabilities.

• It has a high gross profit margin.

Multiple Choice

Which of the following best describes Return on Equity (ROE)?

• A measure of a company's profitability relative to its total assets.

• A measure of a company's profitability relative to its shareholder's equity.

• A measure of a company's efficiency in using its assets.

• A measure of a company's liquidity.

Multiple Choice

Calculate the Gross Profit Margin if the Gross Profit is £200,000 and the total sales are £800,000.

• 25%

• 50%

• 75%

• 100%

Multiple Choice

What is the Days Sales Outstanding (DSO) calculated in the image?

• 73 days

• 146 days

• 100 days

• 200 days

Multiple Choice

How many days does it take to turn over the inventory based on the calculation shown?

• 73 days

• 146 days

• 365 days

• 200 days

Multiple Select

What are the limitations of ratio analysis?

• Inflationary effects

• Operational changes

• Manipulation of FS

• Seasonal effects