A2 Analysis of accounts

The inventory (stock) turnover ratio is a:

• financial efficiency ratio

• profitability ratio

• liquidity ratio

• gearing ratio

Which ratio is referred to as the ‘primary efficiency ratio’?

• net profit margin

• acid test

• price earnings ratio

• return on capital employed

A ratio that concerns a business’s reliance on long-term debt finance is called a:

• financial efficiency ratio

• profitability ratio

• liquidity ratio

• gearing ratio

relate to the information in the following table. The RoCE is:

(net profit in this context is operating profit)

• 10.7%

• 9%

• 40.2%

• 17.9%

relate to the information in the following table. The net profit margin (other name is operating profit) is:

• 10.7%

• 9%

• 40.2%

• 17.9%

relate to the information in the following table. The current ratio is:

• 0.5

• 0.75

• 40.2%

• 1.33

relate to the information in the following table. Which of the following statements is true?

• The firm is highly geared, as its gearing ratio is 67.2%.

• The firm is low-geared, as its gearing ratio is 83%.

• The firm has a high proportion of debt finance, as its liquid assets are less than its current liabilities.

• The firm is not highly geared, as its gearing ratio is 40.2%.

Which of the following statements about gearing is true?

• A firm that is highly geared will not be able to obtain further bank loans.

• If a business issues debentures, it will reduce its gearing.

• With high gearing, there is an increased risk of being unable to service debt.

• A low gearing ratio is an indication of a risk-taking business strategy.

A high inventory (stock) turnover ratio indicates that:

• The business holds inventory for a relatively short period of time.

• The business collects debts from customers quickly.

• The business does not allow credit sales.

• High levels of inventory are held.

Which of the following statements about return on capital employed is true?

• Raising prices will always increase its value.

• The lower its value, the greater the efficiency with which assets have been used.

• It is calculated using the retained profit figure for the firm.

• It can be compared with the cost of borrowing to assess the performance of a firm.