CCE3 Quiz 3

"Debt service ratio" is an indicator of the company's:

• capacity to repay its debts

• gearing

• liquidity

• profitability

The total revenue of a company is RM200,000, cost of good sold is RM150,000 and total purchases amount is RM135,000. The average trade creditors' balance is RM45,000. What is the trade creditor average payment period assuming there are 365 days in a year?

• 81 days

• 122 days

• 120 days

• 145 days

How would understanding the borrower's business assist the credit officer in analysing its financial statements?

• It will allow him/her to match the company's plans with projected cash flow statements.

• It will enable him/her to ascertain the accuracy of the financial statements and the possibility of creative accounting

• It will enable him/her to relate the operating and capital investment cycles to the financial statements.

• It will enable him/her to understand the objectives and vision of the shareholders/management towards business.

Which of the following provide short-term financing to borrower?

*more than 1 answer*

• term loan

• trade creditor

• overdraft

• mortgage

A high current ratio may indicate:

• good collection

• slow moving stock

• strict credit policy

• low fixed assets level

Which of the following liquidity ratios measures the borrower's ability to meet short-term obligations?

• Debt-equity ratio

• Equity ratio

• Debt-asset ratio

• Acid test ratio

In assesssing the credit application of Co.A, Bank Cameron noticed a gearing ratio of 0.5 times.

What would Bank Cameron next MOST appropriate course of action be?

• Submit application for approval on basis of low risk.

• Decline loan application

• Conclude it is an excellent credit proposition

• Analyse debt-service ratio

What is the interest coverage ratio?

• 3.00

• 4.00

• 4.33

• 5.33

DOLLY Bhd paid half-yearly dividend per share of 5 cents each time, to ordinary shareholders. As at 31 Dec 202X, the market price was RM3.85 per share.

Calculate the annual dividend yield.

• 1.2%

• 1.3%

• 2.4%

• 2.6%

There is a temptation for companies in trouble to adopt window dressing techniques to show a better position with the hope that matters will soon improve. Which of the following are the example of creative accounting?

*more than 1 answer*

• capitalization of expenses

• inclusion of cash sales as revenue

• higher gross profit due to higher closing inventory value

• lower cost of good sold due to higher closing inventory