G11 Accounting Fundamentals

Which one of the following stakeholder groups is likely to be most interested in analyzing company accounts to determine liquidity?

• Shareholders

• Local Community

• Suppliers

• Governments

The most likely reason why a business has recorded an increased net profit margin is that:

• process have been reduced

• cost of sales increased

• dividends have been reduced

• overhead expenses have fallen

One of the main differences between an income statement and a balance sheet is that:

• income statements record the value of a business during the year but balance sheets record profit at one time period

• income statements record the profit made at one moment in time but balance sheets show the value of the company during the year

• income statements shows the profit made over a period, usually one year but balance sheets show the value of shareholders stake in the business

• income statements shows the profit ratios of the business but balance sheets show the ;liquidity ratios of the business

A likely decision a manager would take to improve the liquidity of a business would be:

• buy more non-current assets to expand the business

• pay staff higher wages to encourage increased production

• sell off assets not needed

• reduce the long term loans of the business

One of the possible limitations of using ratios to compare the performance of two businesses is that:

• net profit margin may be higher

• the businesses may be in completely different industries

• ratios are based on forecasts that can never be completely accurate

• some public limited companies will not publish their accounts so ratios cannot be calculated

What is the purpose of income statement?

• it tells only the costs of business

• It tells a profit or loss

• It tells liabilities and assets

• It tells cash in and cash out

What is a balance sheet?

• Records the revenue, costs and profit of a business

• It tells the net worth of the business

• It tells profit and loss

• It tells cash in and cash out

Which ONE is not the major items on an income statement?

• Sales revenue

• Cash inflows

• Cost of sales

• Gross profit

The various stakeholders in a business have differing uses for accounts, except?

• sahreholders

• Managers

• Suppliers

• Customers

How easy it is for a business to pay back its short term debts is called?

• Liability

• Insolvent

• Liquidity