Higher Accounting Investment Ratios Extra Theory

What is the main purpose of using ratios ?

• To predict the weather patterns affecting business

• To enable users of financial statements to draw conclusions about financial performance

• To create marketing strategies for new products

• To design new financial statements

Which stakeholder uses ratios to help assess performance and detect underlying trends?

• Customers

• Competitors

• Management

• Government

What action is suggested when poor performance is identified through the use of ratios?

• Ignoring the trends

• Taking action to improve performance and eliminate unfavorable trends

• Sharing the information with the media

• Changing the accounting policies

Which of the following is not a stakeholder interested in analysing financial statements?

• Suppliers

• Government

• Competitors

• Celebrities

Why might ratios be considered to have limitations when analyzing a company's performance?

• Ratios provide a complete and forward-looking perspective of a company's financial health.

• Ratios take into account external factors such as the state of the economy.

• Ratios are based on historical accounting information, which may not be relevant for future performance.

• Ratios always reflect the impact of internal factors such as staff absenteeism and motivation.

What is essential for a ratio to be meaningful?

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Which of the following is NOT considered a non-financial performance indicator?

• Employee relations

• Customer satisfaction

• Annual profit

• Market share

What does ratio analysis fail to take into account? There are two correct answers!

• Internal factors

• External factors

• The firm's profitability

• The firm's revenue

Which of the following is an example of a non-financial performance indicator related to environmental impact?

• Number of new shops opened

• Health and safety record

• Net carbon footprint

• Number of customers

What is another term for "social accounting"?

• Economic responsibility reporting

• Corporate social responsibility reporting

• Organizational environmental reporting

• Social impact communication