WorksheetsADM-Practice Test 2
Total questions: 60
Worksheet time: 15hrs 0mins
Name
Class
Date
1.
Which of the following formulas correctly calculates Earning Before Interest and Tax (EBIT)?
a)
Net profit before tax + Interest + Tax
b)
Revenue - Cost of Goods Sold - Operating Expenses
c)
Gross Profit - Operating Expenses - Interest
d)
Revenue - Cost of Goods Sold - Operating Expenses - Interest
2.
What is the formula for calculating Net Profit Before Tax (NPBT)?
a)
Revenue - Cost of Goods Sold - Operating Expenses - Interest - Tax
b)
Gross Profit - Operating Expenses + Interest
c)
Net Profit After Tax (NPAT) + Tax
d)
EBIT - Interest
3.
Which of the following statements is true regarding Net Profit After Tax (NPAT)?
a)
NPAT is the profit earned by a company after deducting all expenses including taxes.
b)
NPAT is calculated as Revenue - Cost of Goods Sold - Operating Expenses - Interest.
c)
NPAT is calculated by subtracting taxes from EBIT.
d)
NPAT is also known as the company's bottom line.
4.
A company has the following financial information for the year:
Cost of Goods Sold: $150,000
Income Tax Expense: $20,000
Interest Expense: $10,000
Operating Expenses: $100,000
Revenue: $500,000
Calculate the Earnings Before Interest and Tax (EBIT).
a)
$250,000
b)
$230,000
c)
$140,000
d)
$90,000
5.
A company has the following financial information for the year:
Cost of Goods Sold: $600,000
Depreciation Expense: $100,000
Interest Expense: $50,000
Operating Expenses: $300,000
Revenue: $1,500,000
Income Tax Rate: 30%
Calculate the Net Profit After Tax (NPAT).
a)
$315,000
b)
$234,000
c)
$201,000
d)
$180,000
6.
A company has the following financial information for the year:
Revenue: $1,000,000
Cost of Goods Sold: $400,000
Operating Expenses: $200,000
Interest Expense: $50,000
Income Tax Expense: $100,000
Calculate the Net Profit Before Tax (NPBT).
a)
$350,000
b)
$300,000
c)
250,000
d)
$200,000
7.
ABC Corporation has the following information for the year ended December 31, 2022:
Sales: $500,000
Cost of Goods Sold: $250,000
Gross Profit: $250,000
Total Assets: $750,000
Calculate the Gross Profit Margin.
a)
50%
b)
40%
c)
35%
d)
25%
8.
DEF Corporation has the following information for the year ended December 31, 2022:
Net Income: $120,000
Total Assets: $800,000
Total Equity: $400,000
Calculate the Return on Assets.
a)
14%
b)
15%
c)
30%
d)
10%
9.
GHI Corporation has the following information for the year ended December 31, 2022:
Net Income: $80,000
Sales: $100,000
Total Equity: $400,000
Calculate the Return on Equity.
a)
16%
b)
20%
c)
25%
d)
30%
10.
JKL Corporation has the following information for the year ended December 31, 2022:
Revenue: $1,000,000
Cost of Goods Sold: $500,000
Operating Expenses: $250,000
Depreciation Expense: $50,000
Interest expense:$20,000
Tax Rate: 30%
Calculate the Profit Margin using EBIT.
a)
10%
b)
15%
c)
20%
d)
25%
11.
MNO Corporation has the following information for the year ended December 31, 2022:
Gross profit:$300,000
Cost of Goods Sold: $500,000
Operating Expenses: $100,000
Total Assets: $2,000,000
Calculate the Return on Assets using EBIT.
a)
8%
b)
10%
c)
12%
d)
14%
12.
PQR Corporation has the following information for the year ended December 31, 2022:
Interest expense: $10,000
Net Income: $70,000
Total Equity: $300,000
Tax Rate: 30%
Calculate the Return on Equity using NPAT.
a)
16%
b)
18%
c)
14%
d)
22%
13.
What is ratio analysis?
a)
A technique that measures the performance of a company by analyzing its financial statements
b)
A technique that evaluates the efficiency of a company's operations by analyzing its production processes
c)
A technique that compares all subsequent periods with a base period
d)
A technique that measures the quality of a company's products by analyzing customer reviews
14.
What is trend analysis?
a)
A technique that measures the performance of a company by analyzing its financial statements
b)
A technique that evaluates the efficiency of a company's operations by analyzing its production processes
c)
A technique that compares all subsequent periods with a base period
d)
A technique that measures the quality of a company's products by analyzing customer reviews
15.
Which financial statement analysis tool compares historical data over multiple periods to identify trends and changes over time?
a)
Ratio analysis
b)
Horizontal analysis
c)
Vertical analysis
d)
Trend analysis
16.
What financial statement analysis tool compares line items on a financial statement to a total amount on the same statement?
a)
Ratio analysis
b)
Horizontal analysis
c)
Vertical analysis
d)
Trend analysis
17.
Which financial analysis technique is used to detect patterns or trends over time in a particular data set?
a)
Ratio analysis
b)
Horizontal analysis
c)
Vertical analysis
d)
Trend analysis
18.
What technique expresses each item of the Income Statement and Balance Sheet as a % of Revenue and Total Asset respectively:
a)
Ratio analysis
b)
Horizontal analysis
c)
Vertical analysis
d)
Trend analysis
19.
What type of profit measure will provide a lower profitability ratio:
a)
NPBT
b)
NPAT
c)
EBIT
d)
Gross Profit
20.
What is the formula for calculating the accounts receivable collection period?
a)
365 / Accounts Receivable Turnover
b)
Accounts Receivable Turnover / 365
c)
Accounts Receivable / Revenue
d)
Revenue / Accounts Receivable
21.
What is the formula for calculating the inventory turnover ratio?
a)
Cost of Goods Sold / Inventory
b)
Inventory / Cost of Goods Sold
c)
Gross Profit / Revenue
d)
Revenue / Inventory
22.
What is the formula for calculating the working capital cycle?
a)
Accounts Receivable Turnover + Inventory Turnover
b)
Accounts Payable Turnover + Inventory Turnover
c)
Accounts Receivable Turnover - Inventory Turnover
d)
Accounts Payable Turnover - Inventory Turnover
23.
What is the average collection period for the following figures?
Accounts Payable: $60,000
Accounts Receivable: $100,000
Inventory: $80,000
Net Sales: $750,000
a)
30 days
b)
48 days
c)
60 days
d)
75 days
24.
What is the working capital cycle for the following figures?
Accounts Receivable: $80,000
Credit sales: $400,000
Inventory: $100,000
COGS: $250,000
a)
219 days
b)
146 days
c)
73 days
d)
80 days
25.
Which of the following best describes the Du Pont formula?
a)
account receivable turnover and profit margin are not related in the Du Pont formula.
b)
Asset turnover and inventory turnover are inversely related in the Du Pont formula.
c)
Asset turnover and profit margin are directly related in the Du Pont formula
d)
Asset turnover affects gross profit margin
26.
Why is Return on Asset important?
a)
it shows how much profit a company is generating per dollar of assets.
b)
it shows how much sales a company is needed to generate a certain amount of profit.
c)
it shows how much profit a company is generating per dollar of equity.
d)
it shows how much debt a company is carrying to generate a certain amount of sales
27.
Which of the following best describes marketable securities?
a)
Long-term investments held for strategic purposes
b)
Short-term investments held for liquidity management
c)
Assets held for use in the production of goods or services
d)
Assets that are not expected to be converted into cash within one year
28.
What is the interest coverage ratio and what does it measure
a)
measures a company's ability to generate profit from its assets
b)
measures a company's ability to pay its debts with its operating income.
c)
measures a company's ability to generate revenue from its total assets.
d)
measures a company's ability to repay its long-term debt obligations.
29.
What is the current ratio?
a)
measures a company's ability to generate cash from its operations.
b)
measures a company's ability to pay its short-term debts with its current assets.
c)
measures a company's ability to generate profit from its total assets
d)
measures a company's ability to pay its short-term debts immediate with its current assets.
30.
how does quick ratio differ from the current ratio?
a)
The quick ratio measures a company's ability to pay its short-term debts with its current assets after excluding its inventory; it provides a more conservative measure of liquidity than the current ratio.
b)
The quick ratio measures a company's ability to generate profit from its total assets.
c)
The quick ratio measures a company's ability to generate cash from its operations.
d)
The quick ratio measures a company's ability to pay its long-term debt obligations.
31.
Which of the following ratios measures the amount of dividends a company pays out to its shareholders relative to its share price?
a)
Debt Ratio
b)
Gearing Ratio
c)
Investment Ratio
d)
Dividend Yield
32.
Which of the following ratios measures the level of a company's debt in relation to its total assets?
a)
Debt Ratio
b)
Gearing Ratio
c)
Investment Ratio
d)
Dividend Yield
33.
What is asset turnover, and what does it measure?
a)
Asset turnover measures a company's ability to repay its short-term debt obligations
b)
Asset turnover measures a company's ability to generate revenue from its total assets
c)
Asset turnover measures a company's ability to generate profit from its total assets
d)
Asset turnover measures a company's ability to generate revenue from its long-term investment.
34.
What is the average settlement period?
a)
The average settlement period is the time it takes a company to pay its bills
b)
The average settlement period is the time it takes a company to receive payment from its customers
c)
The average settlement period is the time it takes a company to pay its debts
d)
The average settlement period is the time it takes a company to receive payment from its suppliers
35.
Which one is correct about the limitation of using financial analysis to evaluate a company's financial health?
a)
Financial statements can be manipulated or misrepresented, making the analysis unreliable.
b)
Financial analysis cannot be used to compare a company's performance to its competitors.
c)
Financial analysis only takes into account a company's past performance and cannot predict future performance.
d)
Financial analysis does not provide a complete understanding of the company's overall value.
36.
Company XYZ had a sales of 5,000,000, net income of $1,000,000, paid dividends of $200,000, and has 500,000 common shares outstanding. The market price per share is $50.
What is the earnings per share (EPS) for Company XYZ?
a)
$2.00
b)
$2.50
c)
$5.00
d)
$10.00
37.
Company XYZ had a sales of 5,000,000, net income of $1,000,000, paid dividends of $200,000, and has 500,000 common shares outstanding. The market price per share is $50.
What is the dividend per share (DPS) for Company XYZ?
a)
$0.10
b)
$0.20
c)
$0.40
d)
$0.50
38.
Company XYZ had a sales of 5,000,000, net income of $1,000,000, paid dividends of $200,000, and has 500,000 common shares outstanding. The market price per share is $50.
What is the dividend payout ratio for Company XYZ?
a)
20%
b)
40%
c)
50%
d)
80%
39.
Company XYZ had a sales of 5,000,000, net income of $1,000,000, paid dividends of $200,000, and has 500,000 common shares outstanding. The market price per share is $50.
What is the price-earnings ratio (P/E ratio) for Company XYZ?
a)
10 times
b)
20 times
c)
25 times
d)
50 times
40.
A consultation company receives a total cash of $10,000 from a customer which included of $2,000 deposit of consultation service in next month. What is the balance day adjustment?
a)
Decrease in revenue and increase in liabilities
b)
Increase in revenue and decrease in assets
c)
Increase in revenue and increase in liabilities
d)
Decrease in revenue and decrease in assets
41.
A consultation company receives a total cash of $10,000 from a customer which included of $2,000 deposit of consultation service in next month. What is the revenue to be recognised in this month?
a)
$10,000
b)
$2,000
c)
$12,000
d)
$8,000
42.
A consultation company receives a total cash of $10,000 from a customer which included of $2,000 deposit of consultation service in next month. What is the unearned revenue in this month?
a)
Asset $10,000
b)
Asset $2,000
c)
Liability $10,000
d)
Liability $2,000
43.
A company paid rent $3,000 in advance for a one-quarter? What is the balance day adjustment?
a)
Increase in expenses and decrease in assets
b)
Increase in expenses and increase in liabilities
c)
Increase in assets and decrease in liabilities
d)
Increase in assets and decrease in expenses
44.
A company paid rent $3,000 in advance for a one-quarter? Last payment was made on the 31 May 2023, how much is the rent expense as at 30 June 2023?
a)
$3,000
b)
$1,000
c)
$2,000
d)
$6,000
45.
A company paid rent $3,000 in advance for a one-quarter? Last payment was made on the 31 May 2023, how much is the prepaid rent as at 30 June 2023?
a)
$3,000
b)
$1,000
c)
$2,000
d)
$6,000
46.
A company has paid $100,000 salary but still have an accrual salary of $15,000 at the end of the month. What is the effect of this accrual on the financial statements in the current period?
a)
Increase in expenses and increase in liabilities
b)
Increase in expenses and decrease in assets
c)
Increase in assets and decrease in liabilities
d)
Increase in assets and increase in expenses
47.
A company has paid $100,000 salary but still have an accrual salary of $15,000 at the end of the month. How much is the salary payable at the year end?
a)
$100,000
b)
$15,000
c)
$115,000
d)
$85,000
48.
A company has paid $100,000 salary but still have an accrual salary of $15,000 at the end of the month. How much is the salary expense at the year end?
a)
$100,000
b)
$15,000
c)
$115,000
d)
$85,000
49.
A company has received 20,000 cash from the tenants for the current month, however still have $8,000 rent to be collected at the end of the month. What is the balance day adjustment?
a)
Increase in revenue and increase in assets
b)
Increase in revenue and increase in liabilities
c)
Decrease in revenue and decrease in liabilities
d)
Decrease in revenue and increase in assets
50.
A company has received 20,000 cash from the tenants for the current month, however still have $8,000 rent to be collected at the end of the month. How much revenue should be recognised.
a)
$20,000
b)
$8,000
c)
$28,000
d)
$22,000
51.
A company has received 20,000 cash from the tenants for the current month, however still have $8,000 rent to be collected at the end of the month. What is the rent receivable should be recognised.
a)
Asset $20,000
b)
Asset $8,000
c)
Liability $28,000
d)
Liability $22,000
52.
A company purchased a machine for $100,000 with an estimated useful life of 10 years and a salvage value of $5,000. Using the straight-line method, what is the annual depreciation expense for the machine?
a)
$10,500
b)
$9,500
c)
$8,500
d)
$7,500
53.
What is depreciation?
a)
The process of increasing the value of an asset over time
b)
The process of decreasing the value of an asset over time
c)
The process of maintaining the value of an asset over time
d)
The process of transferring ownership of an asset to a new owner
54.
What is written down value?
a)
The original cost of an asset
b)
The current market value of an asset
c)
The value of an asset after deducting its accumulated depreciation
d)
The value of an asset after adding its accumulated depreciation
55.
What is accumulated depreciation?
a)
The amount of depreciation expense recognized in the current period
b)
The amount of depreciation expense recognized since the asset was acquired
c)
The amount of depreciation expense recognized since the last impairment test
d)
The amount of depreciation expense recognized since the last revaluation
56.
What is residual value?
a)
The value of an asset after deducting its accumulated depreciation
b)
The original cost of an asset
c)
The estimated value of an asset at the end of its useful life
d)
The estimated value of an asset at the end of the current period
57.
What is an intangible asset?
a)
An asset that has physical substance and can be touched
b)
An asset that does not have physical substance and cannot be touched
c)
An asset that is used in the production of goods or services
d)
An asset that is acquired for the purpose of generating rental income
58.
Which of the following best defines retained earnings?
a)
The portion of a company's profits that are reinvested back into the business
b)
The amount of cash and cash equivalents a company has on hand
c)
The total amount of debt a company owes to its creditors
d)
The portion of a company's net income that is paid out as dividends to shareholders
59.
Which of the following best defines reserve?
a)
A portion of profits set aside for future investments or contingencies
b)
The portion of a company's profits that are reinvested back into the business
c)
The total amount of debt a company owes to its creditors
d)
The portion of a company's net income that is paid out as dividends to shareholders
60.
Which financial statement will record the reserve?
a)
Income Statement
b)
Balance Sheet
c)
Cash Flow Statement
d)
all of above
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