QUESTION 20

Which of the following statements relating to financial statement analysis is NOT true?

1. Based on the DuPont System applied to the reformulated financial statements, there are four drivers of a firms ROCE, profit margin, asset turnover, financial leverage, and the net cost of borrowing

2. One of the shortcomings to the DuPont System based on AASB / IFRS financial statements is that the income figure includes both operating and financial income

3. A given level of RNOA can be achieved from various combinations of the operating profit margin after tax and the asset turnover ratio

4. Operating leverage (OLEV) and operating liability leverage (OLLEV) both refer to the use of operating liabilities as a source of financing

QUESTION 18

A company has sales of $10 million and a gross profit margin of 65%. It has $1.2 million in current assets, its current ratio is 1.50 and its quick ratio is 1.10. What is its inventory turnover ratio based on end-of-year balances?

1. 3.977

2. 7.386

3. 20.313

4. 10.938