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WorksheetsFinancial Statement Analysis
Total questions: 79
Worksheet time: 52mins
Under which major head will the following be shown:
(i) Share Capital; and (ii) Money Received Against Share Warrants?
Shareholders Fund
Reserves and Surplus
Under which sub-head will the following be classified or shown:
(i) Long-term Borrowings; (ii) Deferred Tax Liabilities (Net); and (iii) Long-term Provision?
Non Current Liabilities
Other Non Current Liabilities
Under which main head and sub-head of Equity and Liabilities part of the Balance Sheet are the following item classified or shown:
(i) Bonds; (ii) Debentures
Long term borrowings & Long term provision
Non current Liabilities & other Current Liabilities
Non current liabilities and long term borrowings
Classify the following items under major head and sub-head (if any) in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013: (i) Capital Work-in-Progress: (ii) Provision for Warranties
i) Fixed Asset & ii) Non current Liabilities
i) Fixed Asset & ii)Current Assets
Under which heads the following items are classified or shown on the Assets part of the Balance Sheet of a company: (i) Loose Tools
Non current assets and Trade Receivables
Current Assets & Trade Receivables
Current assets & Inventories
Identify the major heads under which the following items will be shown in the Balance Sheet of a company as per Schedule III of Companies Act, 2013:
(i) Provision for Tax.(ii) Loan payable on demand.
Non Current Liabilities
Current Liabilities
Classify the following item under major head and sub-head in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013: i) Income received in Advance
Current Liabilities
Short term provision
Other current liabilities
Short term borrowings
Under which major head and sub-head of the Assets part of the Balance Sheet will the following be shown: Stores and Spares.
Current Investments
Current Assets
Inventories
Other Current Assets
State any two items that are included in the following major head under which liabilities of a company are shown: (i) Short term Borrowings.
Loans repayable on demand
Unpaid dividends
Current assets include only those assets which are expected to be realized within……
(A) 3 months
(B) 6 months
(C) 1 year
(D) 2 years
A Company’s liquid assets are Rs.5, 00,000 and its current liabilities are Rs.3, 00,000. Thereafter, it paid Rs.1, 00,000 to its trade payables. Quick ratio will be:
1.33:1
2.5:1
1.67:1
2:1
Assertion (A): Current ratio is computed to assess the short-term financial position of the enterprise. Reason (R): Current ratio explains the relation between long term assets and current liabilities of a business.
(A) Both (A) and (R) are correct and (R) is the correct explanation of (A)
(B) Both (A) and (R) are correct and (R) is not the correct explanation of (A)
(C) (A) is correct, but (R) is incorrect
(D) (A) is incorrect, but (R) is correct
Revenue from Operations Rs.2, 00,000; Inventory Turnover ratio 5; Gross Profit 25%. Find out the value of Closing Inventory, if Closing Inventory is Rs.8, 000 more than the Opening Inventory.
Rs.38, 000
Rs.22, 000
Rs.34, 000
Rs.26, 000
Opening Inventory Rs.1,00,000; Closing Inventory Rs.1,50,000; Purchases Rs.6,00,000; Carriage Rs.25,000; wages Rs.2,00,000. Inventory Turnover Ratio will be:
6.6 Times
7.4 Times
7 Times
6.2 Times
The quick ratio is 1.8:1, the current ratio is 2.7:1 and current liabilities are Rs 60,000. Determine the value of the stock.
Rs 54,000
Rs 60,000
Rs 1, 62,000
None of the above
Which of the following generally is the most useful in analyzing companies of different sizes?
comparative statements
common-sized financial statements
price-level accounting
profitability index
The percent of property, plant and equipment to total assets is an example of:
vertical analysis
solvency analysis
profitability analysis
horizontal analysis
The percentage analysis of increases and decreases in individual items in comparative financial statements is called:
vertical analysis
solvency analysis
profitability analysis
horizontal analysis
Horizontal analysis is also known as
linear analysis.
vertical analysis.
trend analysis.
common size analysis.
In the near term, the important ratios that provide the information critical to the short-run operation of the firm are:
liquidity, activity, and profitability
liquidity, activity, and debt
liquidity, activity, and equity
activity, debt, and profitability
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.
Current assets include all assets such as cash that are expected to be sold between one and 5 years.
True
False
Non-current liabilities are business obligations that are due within one year of a company's normal operating cycle.
True
False
Calculate the Return on Equity if the Net income is $7,009 and the shareholder’s equity is $20,316.
27.44%
41.72%
34.5%
39.42%
30.2%
Businesses are generally involved in three different kinds of activities, and one of them is financing activities. What does the activity relate to?
Relate to a company's main business: selling products or services to earn net income
Relate to the need for investing in property, plant, and equipment or expanding by making investments in other companies
Largest expense item, which reports the wholesale costs of inventory sold during the accounting period
Relate to how a company finances its assets with debt or stockholders' equity
Relate to the operating activities of a company
The gross profit margin is unchanged, but the net profit margin declined over the same period. This could have happened when
cost of goods sold increased relative to sales
The government has increased the tax rate
dividends were decreased
sales increased relative to expenses
All of above
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
Management is a user of financial analysis. Which of the following comments does not represent a fair statement as to the management perspective?
Management is always interested in maximum profitability.
Management is interested in the view of investors.
Management is interested in the financial structure of the entity.
Management is interested in the asset structure of the entity.
Which of the following generally is the most useful in analyzing companies of different sizes?
comparative statements
common-sized financial statements
price-level accounting
profitability index
The percent of property, plant and equipment to total assets is an example of:
vertical analysis
solvency analysis
profitability analysis
horizontal analysis
In performing a vertical analysis, the base for prepaid expenses is
total current assets.
total assets.
total liabilities.
prepaid expenses in a previous year.
The percentage analysis of increases and decreases in individual items in comparative financial statements is called:
vertical analysis
solvency analysis
profitability analysis
horizontal analysis
Horizontal analysis is also known as
linear analysis.
vertical analysis.
trend analysis.
common size analysis.
Which suppliers of funds bear the greatest risk and should therefore earn the greatest return?
common stockholders
general creditors such as banks
preferred shareholders
bondholders
Ratios are used as tools in financial analysis
instead of horizontal and vertical analyses.
because they can provide information that may not be apparent from inspection of the individual components of a particular ratio.
because even single ratios by themselves are quite meaningful.
because they are prescribed by GAAP.
In the near term, the important ratios that provide the information critical to the short-run operation of the firm are:
liquidity, activity, and profitability
liquidity, activity, and debt
liquidity, activity, and equity
activity, debt, and profitability
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
The ratios that are used to determine a company’s short-term debt paying ability are
asset turnover, times interest earned, current ratio, and receivables turnover.
times interest earned, inventory turnover, current ratio, and receivables turnover.
times interest earned, acid-test ratio, current ratio, and inventory turnover.
current ratio, acid-test ratio, receivables turnover, and inventory turnover.
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.
The set of ratios that is most useful in evaluating solvency is
debt ratio, current ratio, and times interest earned
debt ratio, times interest earned, and return on assets
debt ratio, times interest earned, and quick ratio
debt ratio, times interest earned, and cash flow to debt
Stockholders are most interested in evaluating
liquidity.
solvency.
profitability.
marketability.
Which of the following ratios represents dividends per common share in relation to market price per common share?
dividend payout
dividend yield
price/earnings
book value per share
The gross profit margin ratio is calculated by dividing:
Profit by sales
Profit by shareholders’ equity
Gross profit by sales
Sales by cost of sales
What is the formula for Gross Profit Margin
Profit / Net sales revenue X 100
Gross profit / Net sales revenue X 100
Gross profit / Sales revenue X 100
Profit / Cost of sales X 100
The current ratio is also known as the:
Quick ratio
Working capital ratio
Cash flow ratio
Capital structure ratio
If at year end Cash is $5,460, Accounts Receivable is $3,505, Current Assets are $18,475, and Current Liabilities are $18,860; what is the current ratio?
0.48:1
0.98:1
0.45:1
1.45:1
What does PPE stand for?
Payable, Property, and Equipment
Prepaid, Property, and Expenses
Prepaid, Property, and Equipment
Plant, Property and Equipment
What does a current ratio tell us?
A higher current ratio indicates better liquidity.
A lower current ratio indicates better liquidity
A higher current ratio indicates what portion of assets are tied up in slow moving inventory
A lowercurrent ratio indicates what portion of assets are tied up in slow moving inventory
How do you find Working Capital?
Assets - Liabilities
Current Assets - Owner's Capital
Current Assets - Current Liabilities
Long Term Assets - Long Term Liabilities
What does liquidity mean?
The company's ability to pay its obligations.
The company's ability to collect its receivables.
The company's ability to increase financing
The company's ability to obtain a new loan
Which is not a quick asset?
Cash equivalents
Notes receivable
Inventories
Cash substitutes
NOT IN THE CHOICES
Inventory turnover
Short-term Solvency and Liquidity
Asset Liquidity and Management Efficiency
Long-term Financial Position or Stability
Profitability and Returns to Investors
NOT IN THE CHOICES
Capital intensity ratio
Total capital divided by total assets
Total assets divided by total liabilities
Net sales divided by total capital
Total assets divided by net sales
NOT IN THE CHOICES
Total equity divided by total assets
Equity ratio
Debt ratio
Debt-to-equity ratio
Equity-to-debt ratio
NOT IN THE CHOICES
Net income after taxes divided by net sales
Net profit margin
Net sales margin
Net profit and sales margin
Profit-sales ratio
NOT IN THE CHOICES
If current liabilities are P100,000 and current assets are P200,000, what is the current ratio?
0.50
1.20
1.50
2.00
NOT IN THE CHOICES
Which is not a profitability ratio?
Earnings per share
Dividend yield
Price/earnings ratio
Rate of return on net sales
NOT IN THE CHOICES
Cost of goods sold divided by average inventory
Inventory turnover
Cost of goods sold margin
Inventory margin
Days sales in receivables
NOT IN THE CHOICES
If net sales is P200,000 and cost of sales is P150,000, how much is the gross profit margin in percent?
25.00%
50.00%
75.00%
133.33%
NOT IN THE CHOICES
Rate of return on assets
Short-term Solvency and Liquidity
Asset Liquidity and Management Efficiency
Long-term Financial Position or Stability
Profitability and Returns to Investors
NOT IN THE CHOICES
If total assets are P1,000,000 and total equity is P650,000, how much is the debt ratio?
35.00%
45.00%
55.00%
65.00%
NOT IN THE CHOICES
Which of the following is not a liquidity ratio?
Defensive interval ratio
Cash ratio
Rate of return on equity
Quick ratio
NOT IN THE CHOICES
Below are all the components of financial statements except:
Statement of comprehensive income
Statement of financial position
Statement of debt
Statement of cash flow
If net sales are P1,500,000 and accounts receivable amount to P300,000, how long is the average collection period?
36.00 days
45.00 days
64.00 days
72.00 days
NOT IN THE CHOICES
Competitive ratio is comparing ratio of the firm with the another firm within the same industry.
True
False
How does net loss affect owner's equity?
increases
decreases
no change
indirectly
A more recent issue that is causing major problems in the business community is
the privatization of ownership.
short-term versus long-term financial goals of
management.
ethical problems.
If Nico Corporation has annual purchases of RM300,000 and accounts payable of RM30,000, then average purchases per day are ________ and the average payment period is ________.
36.5; 821.9
36.0; 833.3
821.9; 36.5
833.3; 36.0
The ________ is useful in evaluating credit and collection policies.
average payment period
current ratio
average collection period
current asset turnover
Below are all the advantages of financial ratio except:
Simplifies the comprehension of financial statements
Help in planning and forecasting
Adjusting cost of capital for different risk
Help in investment decision
If Nico Corporation has cost of goods sold of RM300,000 and inventory of RM30,000, then the inventory turnover is ________ and the average age of inventory is ________.
36.5; 10
10; 36.5
36.0; 10
10; 36.0
The trade receivables balance is £19,100. A debt of £400 is considered to be irrecoverable and is to be written off. The balance on the allowance for doubtful debts is currently £735 and the allowance is to be revised to 5% of trade receivables. The amount to be charged to the statement of profit or loss for the change in the doubtful debt allowance is:
935
735
200
220
If you want to assess the profitability of a business, which ratio is the most appropriate?
Net profit margin
Return on assets
Return on equity
Return on capital
