IB Business Management MCQ QuizIB_Business_Management_3_6 Balanc

Identify the statement that best describes the purpose of efficiency ratios.

• To determine a firm’s ability to meet its short-term obligations

• To determine how well a firm is utilizing its resources

• To determine profit as a proportion of sales revenue

• To determine the number of times a firm sells its inventory within a year

Three of the following ratios measure efficiency. Identify the non-example.

• Creditor days

• Debtor days

• Gearing

• Return on capital employed (ROCE)

Identify the purpose to the stock (inventory) turnover ratio.

• To measure how many times a firm’s inventory is used per time period

• To measure the number of days it takes, on average, for a firm to recover money owed by its debtors

• To measure the total potential sales revenue that can be generated from selling all of a firm’s inventory

• To measure the value of all inventories sold per time period

Using the table below, calculate the stock turnover ratio (expressed in number of times per year). Sales revenue $1,275,113 Cost of sales $675,000 Opening inventory $150,000 Closing inventory $100,000 Debtors $122,300

• 4.50 times per year

• 5.40 times per year

• 5.52 times per year

• 6.75 times per year

Using the table below, calculate the stock turnover ratio (expressed in number of days). Sales revenue $3,415,216 Gross profit $565,216 Opening stock $1,415,000 Closing stock $825,000 Average inventory $1,120,000 Debtors $645,525 Creditors $315,600

• 2.54 days

• 76.20 days

• 125.00 days

• 143.44 days

Identify a strategy to help improve a firm’s stock turnover ratio.

• Convert to a just-in-case stock management system

• Divest from unpopular or obsolete items from the firm’s product line

• Hold greater stock levels

• Make larger, less frequent stock purchases

Which option is an unsuitable benchmark for comparing the stock turnover ratio?

• A general rule of thumb for the stock turnover ratio

• Direct competitor data

• Historical data

• Strategic objectives set by management

Identify the statement that best describes the purpose of the debtor days ratio.

• How long it takes a firm to receive payments from its customers who have bought products on trade credit

• How long it takes a firm to repay its suppliers

• How long it takes employees of a firm to sell the firm’s products

• How long it takes managers of a firm to pay their employees

Identify a common benchmark (rule of thumb) used for the debtor days ratio.

• 1 day

• 1 month

• 30 - 60 days

• 1 year

Using the table below, calculate the debtor days ratio. Sales revenue $6,755,000 Cost of sales $4,950,000 Opening inventory $3,245,000 Closing inventory $3,125,000 Average inventory $3,185,000 Debtors $1,125,000 Creditors $1,015,000 Capital employed $14,500,000

• 59.50 days

• 60.79 days

• 62.25 days

• 82.95 days