Instruction: Answer all questions in Microsoft Words and submit the answers

Tutorial - Financial Ratios Analysis

1. The formula for Statement of Financial Position or Balance Sheet is ........

a. Assets Equity + Liabilities

b. Assets Equity + Current Liabilities

c. Current Assets = Equity + Liabilities

d. Non-Current Assets = Equity + Liabilities

2. If the company's current ratio declining which its quick ratio improved, which of the following is the most likely explanation?

a. Inventory is increasing

b. Inventory is declining

c. Receivables are being collected more rapidly than in the past

d. Receivables are being collected more slowly than in the past

3. The ratio that explains how efficiently companies use their assets to generate revenue.

a. Revenue Asset Ratio

b. Receivable Turnover Ratio

c. Income Ratio

d. Asset Turnover Ratio

4. What does the accounts receivable (A/R) turnover ratio tell us?

a. how often A/R is received

b. how many times average A/R is collected

c. A/R balance is at the end of a period

d. bad debt balances at year end

5. Which two of the following would be preferable to the bondholders of a company?

i. A debt ratio of 50% rather than 20%

ii. A debt ratio of 20% rather than 50%

iii. A times-interest-earned of 2.0 rather than 5.0 iv. A times-interest-earned 5.0 rather than 2.0

a. i and iii

b. i and iv

c. ii and iii

d. ii and iv

6. All else being equal, which of the following will increase a company's current ratio?

a. An increase in accounts receivable

b. An increase in accounts payable

c. An increase in net fixed assets

d. A decrease in long-term debt

7. X Co. Has made plans for the next year. It is estimated that the company will employ total assets of RM800,000; 50 percent of the assets being financed by borrowed capital at an interest cost of 8 percent per year. The direct costs for the year are estimated at RM480,000 and all other operating expenses are estimated at RM80,000. The goods will be sold to customers at 150 percent of the direct costs. Tax rate is assumed to be 50 percent. You are required to calculate:

(i) Net Profit Margin (ii) Return on Assets (iii) Asset Turnover

(iv) Return on Owners' Equity

1. Shine Limited has a current ratio 4.5: 1 and quick ratio 3: 1; if the inventory is RM36,000, calculate Current Liabilities and Current Assets.

1. Why would the inventory turnover ratio be more important when analysing a grocery store than an insurance company?