FR Ch-22 (Interpretation of financial statements)

Charlton co has an average operating profit margin of 23% of which depreciation of plant

and machinery accounts for 33% of the costs, as well as including 78% of the

salaries cost within cost of It has an average asset turnover of 0.8, which is similar to

the averages for the industry.

The entity is most likely to be:

• An architectural practice

• A supermarket

• An estate agent

• A manufacturer

Using the pull-down list provided, select the correct option to complete the following

statement.

Reducing the ............ will increase the length Of a company's cycle.

• Inventory holding

• Payables payment period

• Receivables collection period

• Time taken to produce

The finance director of Sandbag plc is worried about its current ratio. He is considering a

number Of actions that he hopes will improve Sandbag plc's current ratio.

Which Of the following would increase Sandbag plc's current ratio?

• Offer a settlement discount to customers

• Make a issue of ordinary shares

• Make a rights issue of ordinary shares

• Sell current asset investments at the carrying amount

What is Sandbag plc's acid test (quick) ratio at 31 December 20XL+? (Enter your answer to

two decimal places)

• $4.2

• $4.1

• $4.3

• $5.1

Sandbag plc is a manufacturing Which Of the following ratios would best assess

the efficiency of sandbag plc?

• Price/earnings ratio

• Gearing ratio

• Non-current asset turnover

• Current ratio

Which of the following statements provides a plausible reason for the movement in the

working capital balances of Woolf Co during the year?

(1) A decrease in inventories due to a successful year end warehouse sale

(2) A decrease in trade receivables due to the recruitment of an experienced credit

controller

(3) A decrease in trade payables due to Woolf Co seeking prompt discounts

instead of utilising the full credit terms.

• (1) only

• (2) only

• (1) and (2)

• (3) only