Business Quiz (3.6 & 3.7)

Which of the following doesn't fall within the category of an efficiency ratio?

• Creditor days ratio
• Stock turnover ratio
• Debtor days ratio
• Acid test ratio

Cost of goods sold for Company X is $500,000. At the beginning of the trading year, Firm X had shares worth $150,000. Firm X closed off the trading year with a $50000 market value for its stock. What is the stock turnover ratio for Company X? Answer: ___ times (2 d.p.)

Which of these companies has the greatest likelihood of having the highest stock turnover ratio?

• Carrefour (a French multinational hypermarket)
• IKEA (the world’s largest furniture retailer)
• Hodder Education (textbook publisher)
• Rolex (luxury watch manufacturer)

Which financial ratio determines how long it takes a company to get payment from clients who make credit purchases?

• Creditor days ratio
• Debtor days ratio
• Stock turnover ratio
• Gearing ratio

How should the creditor days ratio be calculated correctly?

• (Cost of goods sold ÷ Creditors) × 365
• (Gross profit ÷ Creditors) × 365
• (Creditors ÷ Cost of goods sold) × 365
• (Creditors ÷ Debtors) × 365

What changes in the business are suggested by a rise in the creditor days ratio?

• The business’s stock control has improved
• The business has delayed making payments to its suppliers
• Sales revenues are increasing at a rate faster than expected
• Customer are not paying their invoices on time

Which formula should be used to determine the gearing ratio?

• (Capital employed ÷ Loan capital) × 365

• (Loan capital ÷ Capital employed) × 100

• (Capital employed divided ÷ Loan capital) × 100

• (Loan capital ÷ Capital employed) × 365

What is the correct formula for calculating the gearing ratio?

• (Loan capital ÷ Capital employed) × 100
• (Capital employed ÷ Loan capital) × 365
• (Capital employed divided ÷ Loan capital) × 100
• (Loan capital ÷ Capital employed) × 365

A business has long-term borrowings of $10 million and has capital employed of $30 million. What is the firm’s gearing ratio in percent (%) to 2 d.p.?

How should the debtor days ratio be calculated correctly?

• (Sales revenue ÷ Debtors) × 365
• (Debtors ÷ Net profit) × 365
• (Debtors ÷ Sales revenue) × 365
• (Gross profit ÷ Debtors) × 365