Y11 Accounting - C22 Analysis and Interpretation

What is the formula for calculating working capital?

• Current assets - Current liabilities

• Current assets + Current liabilities

• Total funds - Current liabilities

• Owner's capital + Non-current liabilities

Which of the following is a profitability ratio?

• Current ratio

• Return On Capital Employed (ROCE)

• Acid test ratio

• Trade payables turnover

What does a higher Return On Capital Employed (ROCE) indicate?

• Lower revenue

• Higher expenses

• More efficient capital use

• Less efficient capital use

What does the profit margin measure?

• Gross profit earned for every $100 of revenue

• Net profit earned for every $100 of revenue

• Total revenue generated

• Total expenses incurred

What is the acceptable range for the current ratio?

• 0.5:1 to 1:1

• 1:1 to 1.5:1

• 1.5:1 to 2:1

• 2:1 to 3:1

Why is the acid test ratio important?

• It includes inventory as a liquid asset

• It measures total liabilities

• It measures total assets

• It excludes inventory as a liquid asset

What does the rate of inventory turnover indicate?

• The number of times inventory is sold and replaced

• The amount of cash on hand

• The total sales for the year

• The total expenses incurred

What can a decrease in trade receivables turnover indicate?

• Improved credit control

• Lower expenses

• Ineffective credit control

• Higher sales

What is a limitation of accounting statements?

• They only record past transactions

• They provide a complete picture of business performance

• They include all non-financial factors

• They reflect current market conditions

Which of the following is NOT a liquidity ratio?

• Current ratio

• Gross margin

• Acid test ratio

• Trade payables turnover