Multiple Choice (Lec 4 & 5)
Questions 24, 25, 26, and 27 use the following information: The following information is from the annual report of Thunderstruck Ltd: Statement of financial position of Thunderstruck Ltd as at 31 December 2015 *Assets* *Non-current assets* ----Property plant and equipment ------------ 120 *Current Assets* ----Inventory -----------30 ----Trade receivables -40 ----Cash ----------------40 Total current assets --*110* -----------------------*230* *Equity and Liabilities* *Equity* ----Share capital -------40 ----Retained earnings -35 ------------------------*75* *Non-current liabilities* ----Long-term borrowing---------------------------110 *Current liabilities* Trade payables --------45 -----------------------*155* -----------------------*230* Income statement extract of Thunderstruck Ltd for the year ended 31 December 2015 Revenue ---------------250 Gross profit ------------75 Operating profit -------45 Profit for the period ---25 From the information provide above, calculate the Acid test ratio a) 2.44 b) 2 c) 1.48 d) 1.77
1.77
Questions 24, 25, 26, and 27 use the following information: The following information is from the annual report of Thunderstruck Ltd: Statement of financial position of Thunderstruck Ltd as at 31 December 2015 *Assets* *Non-current assets* ----Property plant and equipment ------------ 120 *Current Assets* ----Inventory -----------30 ----Trade receivables -40 ----Cash ----------------40 Total current assets --*110* -----------------------*230* *Equity and Liabilities* *Equity* ----Share capital -------40 ----Retained earnings -35 ------------------------*75* *Non-current liabilities* ----Long-term borrowing---------------------------110 *Current liabilities* Trade payables --------45 -----------------------*155* -----------------------*230* Income statement extract of Thunderstruck Ltd for the year ended 31 December 2015 Revenue ---------------250 Gross profit ------------75 Operating profit -------45 Profit for the period ---25 From the information provide above, calculate the current ratio a) 1.48 b) 2.44 c) 2 d) 1.77
2.44
Questions 24, 25, 26, and 27 use the following information: The following information is from the annual report of Thunderstruck Ltd: Statement of financial position of Thunderstruck Ltd as at 31 December 2015 *Assets* *Non-current assets* ----Property plant and equipment ------------ 120 *Current Assets* ----Inventory -----------30 ----Trade receivables -40 ----Cash ----------------40 Total current assets --*110* -----------------------*230* *Equity and Liabilities* *Equity* ----Share capital -------40 ----Retained earnings -35 ------------------------*75* *Non-current liabilities* ----Long-term borrowing---------------------------110 *Current liabilities* Trade payables --------45 -----------------------*155* -----------------------*230* Income statement extract of Thunderstruck Ltd for the year ended 31 December 2015 Revenue ---------------250 Gross profit ------------75 Operating profit -------45 Profit for the period ---25 From the information provide above, calculate the gross profit margin a) 40% b) 30% c) 10% d) 18%
30%
If a company reported a profit for the year of £800,000, share capital of £18m and a share price of £9 - what is the earnings per share (EPS)? a) 10p per share b) 40p per share c) 22.5p per share d) 20.5p per share
40p per share
Questions 24, 25, 26, and 27 use the following information: The following information is from the annual report of Thunderstruck Ltd: Statement of financial position of Thunderstruck Ltd as at 31 December 2015 *Assets* *Non-current assets* ----Property plant and equipment ------------ 120 *Current Assets* ----Inventory -----------30 ----Trade receivables -40 ----Cash ----------------40 Total current assets --*110* -----------------------*230* *Equity and Liabilities* *Equity* ----Share capital -------40 ----Retained earnings -35 ------------------------*75* *Non-current liabilities* ----Long-term borrowing---------------------------110 *Current liabilities* Trade payables --------45 -----------------------*155* -----------------------*230* Income statement extract of Thunderstruck Ltd for the year ended 31 December 2015 Revenue ---------------250 Gross profit ------------75 Operating profit -------45 Profit for the period ---25 From the information provide above, calculate the settlement period for trade receivables a) 6.25 days b) 58.4 days c) 65.7 days d) 16 days
58.4 days
Which of the following statements about the current ratio is false? a) It is determined by dividing current assets by current liabilities b) A firm with a lower current ratio is better off than one with a higher current ratio c) The higher the current ratio, the more liquid the business is considered to be. d) It is larger than the quick ratio
A firm with a lower current ratio is better off than one with a higher current ratio
The acid test ratio is normally defined as current assets (excluding inventory) divided by which one of the following? a) Non-current assets b) Working capital c) Non-current liabilities d) Current liabilities
Current liabilities
Which of the following ratios considers the relationship between current assets and current liabilities? a) Quick ratio b) Current ratio c) Gearing ratio d) ROCE
Current ratio
A measure of a corporation's profitability that is required to be reported as part of the income statement is the: a) Earnings per share b) Sales revenue per employee c) ROCE d) Gross profit margin
Earnings per share
Inventory is an example of a quick asset. a) True b) False
False
Non-current liabilities are used in the calculation of the current ratio a) True b) False
False
The lower the current ratio, the more liquid the company appears. a) True b) False
False
The return on capital employed (ROCE) shows how "solvent" a company is a) True b) False
False
The gross profit margin ratio is calculated according to which one of the following formulae? a) Gross profit divided by share capital (as a percentage) b) Gross profit divided by purchases (as a percentage) c) Gross profit divided by cost of sales (as a percentage) d) Gross profit divided by sales revenue (as a percentage)
Gross profit divided by sales revenue (as a percentage)
Short-term creditors are most likely to use the quick ratio instead of the current ratio in evaluating the solvency of a company with large, slow-moving: a) Plant and equipment. b) Receivables. c) Inventories. d) Employees
Inventories
Which of the following ratios considers the relationship between inventory and cost of sales? a) Average settlement period for payables b) Sales revenue to capital employed c) Inventory turnover ratio d) Average settlement period for receivables
Inventory turnover ratio
The price earnings ratio, dividend per share and dividend yield provide information on: a) Investment b) Liquidity c) Profitability d) Utilization of assets
Investment
A high price-earnings (PE) ratio reflects which one of the following comments? a) The company's expenses have been increasing at a greater rate than its share price b) Many more investors are selling shares rather than buying shares in the company c) Investors are confident about the future earnings of the business d) Investors are lacking confidence about the future earnings of business
Investors are confident about the future earnings of the business
Return on ordinary shareholders' funds(ROSF) is within which one of the following groups of ratios? a) Liquidity b) Profitability c) Investment d) Efficiency
Profitability
A gearing ratio of above 50% suggests: a) The company is profitable b) The company is over-reliant on borrowing c) The company is financed mostly by equity d) The company is almost bankrupt
The company is over-reliant on borrowing
If you are informed that the company's earnings per share have tripled in the current year, which one of the following is correct? a) The company's profitability relating to each share has definitely improved in the year b) The company has definitely not issued more shares in the year c) The company's profitability relating to each share has definitely declined in the year d) The company has definitely issued more shares in the year
The company's profitability relating to each share has definitely improved in the year
If a supplier was interested in whether or not they will be paid on time, which of the calculations would they make? a) Trade receivables / credit sales revenue x 365 b) Credit sales revenue / Trade receivables x 365 c) Trade payables / Cost of sales x 365 d) Cost of sales / Trade payables x 365
Trade payables / Cost of sales x 365
If a company was interested in calculating how long it takes to receive money from customers, which of the calculations would they make? a) Trade receivables / credit sales revenue x 365 b) Credit sales revenue / Trade receivables x 365 c) Trade payables / Cost of sales x 365 d) Cost of sales / Trade payables x 365
Trade receivables / credit sales revenue x 365
One way to improve return on capital employed (ROCE) is to reduce costs and increase sales a) True b) False
True
The inventory turnover ratio indicates how quickly inventory sells. a) True b) False
True
The current ratio will be ------------------------- the quick ratio. a) less than b) greater than or equal to c) the same as d) always different than
greater than or equal to
Fishing Lures Inc. reported a net profit for the year equal to £15,000. The dividends declared & paid to the common shareholders equalled £5,000. Fishing Lures Inc. had 10,000 ordinary shares outstanding all year long. What is earnings per share? a) £.50 b) £1.00 c) £1.50 d) £2.00
£1.50