Financial statements

Which two components make up the first part of the statement of comprehensive income?

• Equity and dividends

• Gross profit and net profit

• Assets and liabilities

• Revenue and expenses

Using the straight-line method, what is the annual depreciation for each of the 20 laptops purchased for £11,500, expected to last for 3 years?

• £383.33

• £766.67

• £575

• £1,150

What is the markup on the sourdough bread when it is sold for £1.25?

• 47%

• 32%

• 10%

• 15%

What is the markup on the sourdough bread when it is sold for £1.50?

• 45%

• 60%

• 30%

• 20%

What is the calculation for the gross profit margin ratio?

• Gross profit/cost of sales

• Gross profit/revenue

• Net profit/capital employed

• Net profit/revenue

What does the current ratio measure?

• The average amount of time an item of stock is held by a business

• How long it takes debtors to pay

• How long a business takes to pay for goods and services bought on credit

• The relationship between current assets and current liabilities

What is the formula for the trade payable days ratio?

• Current assets / current liabilities

• Trade payables / credit purchases x 365

• Trade receivables / credit sales x 365

• Average inventory / cost of sales x 365

What is the calculation for the inventory turnover ratio?

• Current assets/current liabilities

• (Trade payables/credit purchases) x 365

• (Trade receivables/credit sales) x 365

• (Average inventory/cost of sales) x 365

What is a limitation of financial ratios?

• They identify the cause of a problem.

• They do not consider qualitative factors.

• They are not based on misleading data.

• They are calculated on future data.

Why can interfirm comparisons be difficult?

• Firms generate their accounts in different ways

• Firms report their performance in the same way

• The statement of financial position is a snapshot at a point in time

• Ratios report on financial performance at a specific point in time