ACT3014 - Topic 4 - Financial Accounting Analysis (Part 2)

If current liabilities are RM100,000 and current assets are RM200,000, what is the current ratio?

• 0.50

• 1.20

• 1.50

• 2.00

• NOT IN THE CHOICES

If net sales are RM1,500,000 and accounts receivable amount to RM300,000, how long is the average collection period?

• 36.00 days

• 45.00 days

• 64.00 days

• 72.00 days

• NOT IN THE CHOICES

Which is not a quick asset?

• Cash equivalents

• Notes receivable

• Inventories

• Cash substitutes

• NOT IN THE CHOICES

Financial ratios that tell how well a company can pay off its short-term debts and meet unexpected needs for cash.

• liquidity ratios
• efficiency ratios
• leverage ratios
• profitability ratios

Identify two liquidity ratios.

• Current Ratio

• Fixed Asset Turnover

• Quick Ratio

• Debt to Equity

What is the difference between current and non current assets?

• There is no difference
• Current assets are the same as current liabilities and non current are not  
• Current assets tend to be easily converted to cash whereas non current are not 
• A company will gain more profit if they use non current only 

How does a higher times interest earned ratio impact a company's risk of default on its debt obligations?

• Increases the risk of default

• Reduces the risk of default

• Indicates lower profitability

• Implies higher financial leverage

If an SME's quick ratio is significantly lower than its current ratio, what might be a potential concern?

• Efficient inventory management

• High liquidity risk

• Strong solvency position

• Effective receivables management

What does an increase in the current ratio indicate about a company's short-term financial position?

• Improved liquidity

• Higher profitability

• Increased leverage

• Declining solvency

Financial ratios that tell how much of each RM of sales, assets, and owner's investments resulted in net profit.

• liquidity ratios
• efficiency ratios
• profitability ratios
• leverage ratios