Review Questions

On a statement of financial position, there is an entry for inventories. This will appear under the heading of

• non-current assets
• non-current liabilities
• current liabilities
• current assets

An advantage of e-commerce to a business is...

• Customers could return the product by law within 7 days
• You can trade 24 hours, 7 days a week
• You need to pay for shipping
• You need to invest in a website

Which of the following financial ratios would be used to assess how a company is financed?

• Acid test ratio
• Gearing ratio
• Current ratio
• Return on capital employed (RCE)

A company has purchased 6 new vehicles which has been financed using a 50k long-term bank loan. Is it listed as a...

• Non-Current Liability
• Current Asset
• Current Liability
• Non-current asset

Which of the following accounting ratios is not influenced by the level of inventories

• Current ratio
• Return on capital employed
• Gearing ratio
• Acid test ratio

A PLC has a debenture for £100,000. This will be shown on the company's statement of financial position as a:

• Non-current assets
• Current liability
• Current asset
• Non-Current liability

Which of the following financial ratios would not help with the management of liquidity?

• Current ratio
• Days sales in trade receivables
• Gearing ratio
• Acid test ratio

Which of the following could be used to improve a business's cash flow?

• An increase in inventories
• An increase in sales
• An increase in overdraft
• An increase in trade receivables

Which of the following is most likely to be the cause of a favourable raw material budget variance?

• A short supply of raw materials
• An increase in labour turnover
• An increase in labour hours
• An increase in employee training

During the last month a business has experienced an adverse gross profit variance. This could be due to:

• An increase in labour productivity
• A decrease in raw material prices
• An increase in revenue
• A decrease in the product's price