Financial Statements Analysis

Mark-up on cost (%) =

• (Cost of sales / Net Sales Revenue) x 100

• (Profit for the year / Net Sales revenue) x 100

• (Gross profit / Net sales revenue) x 100

• (Gross profit / Cost of sales) x 100

Profit margin (%) =

• (Gross profit / Net sales revenue) x 100

• (Profit for the year / Net sales revenue) x 100

• (Profit for the year / Cost of sales) x 100

• (Gross profit / Cost of sales) x 100

Return on equity (%) =

• (Gross profit / Average equity) x 100

• (Profit for the year / Net sales revenue) x 100

• (Profit for the year / Average equity) x 100

• (Gross profit / Net sales revenue) x 100

Current ratio =

• Total current assets - Total current liabilities

• Total assets / Total liabilities

• Total current assets / Total liabilities

• Total current assets / Total current liabilities

Working capital =

• Total assets - Total liabilities

• Total assets - Total current liabilities

• Total current assets - Total current liabilities

• Total current assets - Total liabilities

Quick ratio =

• [Total CA - (Inventory - Prepayments)] / Total CL

• Total CA / Total CL

• (Total CA - Inventory - Prepayments) / Total CL

• (Total CA + Inventory + Prepayments) / Total CL

What might cause the difference between a business' current ratio and quick ratio? (Choose 2)

• Large amount of inventory

• Large amount of cash at bank

• Large amount of prepayments

• Large amount of trade receivables

Which of the following will not improve quick ratio?

• Giving trade discount to sell off inventory

• Sell off surplus NCA to raise cash

• Better sales forecast to prevent the need to hold too much inventory

• Repaying trade payables using owner's personal fund

• Giving cash discount to trade receivables to encourage fast repayments

Which of the following will least improve current ratio?

• Sell off surplus NCA to raise cash

• Pay trade payables earlier to enjoy cash discount

• Taking a bank loan to raise cash

• Selling off inventory to raise cash

Which of the following will not improve profit margin?

• Giving trade discount to encourage customers to buy more

• Better control over operating expenses

• Exploring other sources of income

• Finding cheaper suppliers for inventory