Financial Statements and Analysis Quiz

What is another name for the Income Statement?

• Statement of Cash Flows

• Balance Sheet

• Cash Flow Statement

• Trading, profit and loss account

Why do businesses prepare an income statement?

• To set product prices

• To determine employee salaries

• To calculate taxes

• To assess financial performance

What is the purpose of a statement of financial position?

• To calculate annual revenue

• To set future goals

• To determine market share

• To establish what the business is worth

What do not-for-profit organizations use an income statement for?

• To determine employee bonuses

• To calculate taxes

• To set membership fees

• To show performance over the year

Why is depreciation recorded in financial statements?

• To recognize the reduction in value of fixed assets

• To increase asset value

• To improve cash flow

• To decrease liabilities

What would happen if depreciation was not recorded?

• Assets would decrease

• Liabilities would increase

• Net profit would be understated

• Net profit would be overstated

What are net assets?

• Total revenue minus expenses

• Cash on hand

• What the organization is worth before liabilities

• Total liabilities minus assets

What is the formula for Return on Capital Employed?

• Net Profit before interest x 100 / Capital Employed

• Net Profit after tax x 100 / Total Assets

• Gross Profit x 100 / Total Liabilities

• Operating Profit x 100 / Shareholder Equity

What is the significance of a 36.56% return on capital employed?

• It is poor compared to a loan cost of 5%

• It is below average compared to a loan cost of 20%

• It is excellent compared to a loan cost of 10%

• It is average compared to a loan cost of 15%

What is the alternative name for a Balance Sheet?

• Cash Flow Statement

• Income Statement

• Statement of Financial Position

• Profit and Loss Account