acc topic 7

Who are the internal stakeholders of financial statements?

• a. Creditors and potential shareholders

• d. Inland revenue board and potential shareholders

• b. Management team and existing shareholders

• c. Public at large and employees at all levels

What is the purpose of horizontal analysis?

• a. To measure the liquidity of a business

• c. To compare financial statement items over different periods

• d. To analyze the relationship of each component in a financial statement to a total within the statement

• b. To assess the profitability of a business

What does the quick ratio measure?

• a. The ability of a company to pay its current liabilities

• d. The profitability of total assets

• c. The efficiency of sales

• b. The instant debt-paying ability of a company

What does the inventory turnover ratio reveal?

• c. The ability of a company to manage its inventory effectively

• a. The number of times a company turned over its inventory relative to its sales

• b. The length of time it takes to purchase, sell, and replace the inventory

• d. The amount of gross profit made out of every single ringgit of sales for a particular year

What does the ratio of sales to assets measure?

• d. How effectively a company uses its assets to generate sales

• c. The rate of income earned on the amount invested by the stockholders

• b. The ability of a company to generate net profit from every ringgit of sales

• a. The profitability of total assets

What does the rate earned on total assets measure?

• c. The ability of a business to generate net profit from every ringgit of sales

• b. The profitability of total assets, without considering how the assets are financed

• a. The rate of income earned on the amount invested by the stockholders

• d. The number of times a company turned over its inventory relative to its sales

What is the purpose of the ratio of liabilities to shareholders’ equity?

• a. To measure the profitability of total assets

• b. To measure the ability of a company to pay its current liabilities

• c. To measure the rate of income earned on the amount invested by the stockholders

• d. To measure how much of the company is financed by debt and equity

What does the profit margin measure?

• a. The amount of gross profit made out of every single ringgit of sales for a particular year

• b. The ability of a company to generate net profit from every ringgit of sales

• c. The rate of income earned on the amount invested by the stockholders

• d. The ability of a company to use its assets effectively

What is the purpose of the rate earned on shareholders’ equity?

• d. To measure how much of the company is financed by debt and equity

• a. To measure the profitability of total assets

• b. To measure the ability of a company to pay its current liabilities

• c. To measure the rate of income earned on the amount invested by the stockholders

What does the gross profit margin measure?

• d. The ability of a company to use its assets effectively

• a. The amount of gross profit made out of every single ringgit of sales for a particular year

• b. The ability of a company to generate net profit from every ringgit of sales

• c. The rate of income earned on the amount invested by the stockholders