Financial Ratios Quiz

Which of the following is not classified as an efficiency ratio?

• Creditor days ratio

• Stock turnover ratio

• Debtor days ratio

• Acid test ratio

Firm X has cost of goods sold (COGS) valued at $500,000. The company started the trading year with stock worth $150,000. At the end of the trading year, Firm X's closing stock was valued at $50,000. What is Firm X's stock turnover ratio?

• 3.33 times

• 5 times

• 10 times

• 7 times

Which of these firms is most likely to have the highest stock turnover ratio?

• Carrefour (a French multinational hypermarket)

• IKEA (the world’s largest furniture retailer)

• Hodder Education (textbook publisher)

• Rolex (luxury watch manufacturer)

Which financial ratio calculates the time taken by a business to collect money from customers who buy items on credit?

• A. Creditor days ratio

  
  

• B. Debtor days ratio

• C. Stock turnover ratio

• D. Gearing ratio

What is the correct formula for calculating the creditor days ratio?

• A. (Cost of goods sold ÷ Creditors) × 365

• B. (Gross profit ÷ Creditors) × 365

• C. (Creditors ÷ Cost of goods sold) × 365

• D. (Creditors ÷ Debtors) × 365

What does an increase in the creditor days ratio suggest is happening in the business?

• The business’s stock control has improved

• The business has delayed making payments to its suppliers

• Sales revenues are increasing at a rate faster than expected

• Customer are not paying their invoices on time

What is the correct formula for calculating the gearing ratio?

• (Loan capital ÷ Capital employed) × 100

• (Capital employed ÷ Loan capital) × 365

• (Capital employed divided ÷ Loan capital) × 100

• (Loan capital ÷ Capital employed) × 365

A business has long-term borrowings of $10 million and has capital employed of $30 million. What is the firm’s gearing ratio?

• 3.33%

• 50%

• 30%

• 33.33%

What does a fall in the creditor days ratio suggest for the business?

• A delay in payments of invoices to suppliers

• A worsening of payment terms with its suppliers

• An increase in the value of sale revenue from a major customer

• An increase in long-term borrowing

What is the correct formula used to calculate the debtor days ratio?

• A. (Sales revenue ÷ Debtors) × 365

• B. (Debtors ÷ Net profit) × 365

• C. (Debtors ÷ Sales revenue) × 365

• • D. (Gross profit ÷ Debtors) × 365