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WorksheetsC2.1: FSA General Questions
Total questions: 30
Worksheet time: 3600secs
Among the C’s of credit, _________ is considered the most important in that it has to do with the individual’s responsibility in meeting his financial obligations.
Character
Capacity
Condition
Collateral
Which of the following credit terms best describe a short-term credit according to its maturity?
Payable in 10 years
Payable in a year
Payable in 2 years
Payable in 5 years
None of the given answers
Horizontal analysis is also known as
linear analysis.
vertical analysis.
trend analysis.
common size analysis.
The primary concern of short-term creditors when assessing the strength of a firm is the entity’s
short-term liquidity
profitability
market price of stock
leverage
All of the following are asset utilization ratios except:
average collection period
inventory turnover
receivables turnover
return on assets
Asset turnover measures
how often a company replaces its assets.
how efficiently a company uses its assets to generate sales.
the portion of the assets that have been financed by creditors.
the overall rate of return on assets.
IMT Industries has a debt-to-equity ratio of 1.6 compared with the industry average of 1.4. This indicates that the company…
has less liquidity than other firms in the industry
will not experience any difficulty with its creditors
has greater than average financial risk compared to other firms in its industry
will be viewed as having high creditworthiness
None of above
Which of the basic financial statements is best used to answer the question, "How profitable is the business?"
Balance sheet
Statement of shareholder's equity
Income statement
Accounts receivable aging schedule
Which of the basic financial statements is best used to answer the questions "What does the company own and how is it financed?"
Balance sheet
Statement of shareholder's equity
Income statement
Cash flow statement
Which of the basic financial statements is best used to answer the questions "Where did the company's money come from and how was it spent over the preceding year?"
Balance sheet
Statement of shareholder's equity
Income statement
Cash flow statement
On the income statement, sales revenue, minus cost of goods sold and operating expenses, equals which of the following?
Net profit
Retained earnings
Net income available to preferred shareholders
Earning Before Interest and Tax
Which of the following streams of income is not affected by how a firm is financed (whether with debt or equity)?
Net profit after tax but before dividends
Net working capital
Operating income
Income before tax
Which of the following is not included in computing EBT (earnings before taxes)?
Marketing expenses
Depreciation expense
Cost of goods sold
Dividends
If you were given the components of current assets and of current liabilities, what ratio(s) could you compute?
(A) Quick ratio or Acid test ratio
(B) Average collection period
(C) Current ratio
(D) Both A and C
(E) All of the above
The debt ratio is a measure of a firm's ....
leverage.
profitability.
liquidity.
efficiency.
The question "Did the common stockholders receive an adequate return on their investment?" is answered through the use of
liquidity ratios.
profitability ratios.
asset management ratios.
leverage ratios.
Projecting profit margins into the future on the basis of past results would be most reliable when the company
is in the commodities business
operates in a single business segment
is a large, diversified company operating in mature industries
Credit analysts are likely to consider a company’s credit quality to be improving if the company reduces its:
scale and diversification
margin stability
leverage
The probability that a borrower fails to make full and timely payments of principal and interest, according to the terms of the debt security involved is called
Default risk
Credit risk
Business risk
Financial risk
What is the purpose of credit analysis?
i. Give the best loan to customer according to their needs
ii. Ensure compliance with regulations and bank policy
iii. Keep the goodwill (value) of the customer
iv. Ensure the level of risk is acceptable
i and iii
i, ii and iv
All of the above
If working capital of a company is nil, what will be the current ratio?
1:1
0:1
1:0
2:1
Liquid Assets= ?
CA- Prepaid expenses
CA- Inventory- Prepaid expenses
CA + Inventory- Prepaid expenses
CA- Inventory + Prepaid expenses
If COGS is $4,50,000
G.P. is 25% on sales
What will be the sales?
$5,00,000
$8,00,000
$3,00,000
$6,00,000
If current ratio is 3:1, liquid ratio is 2:1 stock is $50,000 . What will be the value of current assets ?
$200,000
Incomplete information
$50,000
$150,000
Efficiency ratios highlights:
How well assets and liabilities are managed
Measures how quickly assets can be converted to cash
Share of ownership in a company
A comparison of two amounts
The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory is called the:
Inventory period
Operating cycle
Accounts receivable period
Accounts payable period
Cash cycle
Which one of the following increases cash?
Accepting credit from a supplier
Purchasing inventory
Making a payment on a bank loan.
Purchasing new machinery.
Granting credit to a customer
Company A has sales of $387,000, average accounts receivable of $28,600 and average accounts payable of $32,800. The cost of goods sold is equivalent to 79 percent of sales. How long does it take The Company A to pay its suppliers?
30.94 days
32.38 days
39.16 days
35.89 days
26.97 days
Money market securities have which of the following characteristics?
Short maturity, low risk, low liquidity.
Low default risk, low liquidity, low return.
High return, high liquidity, low risk.
High liquidity, low risk, low return.
Long maturity, low risk, high return
