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16 Financial Ratios Analysis.

This quiz contains 15 MCQs on profitability, liquidity and efficency
and will take about 15 minutes to complete.
You have one attempt to complete it and have the option
to send the final results to your email.
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1%
What does a higher gross profit margin percentage indicate?

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The business is generating more profit from its sales
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The business is facing challenges in managing its expenses
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The business is not generating any profit from its sales
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The business is generating less profit from its sales
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What is the formula for calculating the profit margin?

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Gross Profit / Net Sales Revenue
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Profit for the period / Net Sales Revenue
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Net Sales Revenue / Profit for the period
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Net Sales Revenue / Gross Profit
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How would an increase in the return on equity (ROE) affect a business’s performance?

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It would have no impact on the business’s performance
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It would indicate an improvement in the business’s profitability
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It would make the business’s performance difficult to assess
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It would indicate a decrease in the business’s profitability
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What is the significance of the mark-up on cost percentage in profitability analysis?

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It indicates the percentage of sales revenue retained as profit
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It indicates the percentage of gross profit relative to the cost of sales
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It indicates the percentage increase in the cost of sales
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It indicates the percentage increase in the selling price of goods
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What does a rising profit margin typically indicate for a company?

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The company’s expenses are increasing at a higher rate than sales.
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The company is borrowing more money to finance its operations.
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The company is becoming more efficient in managing its costs relative to its sales revenue.
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The company’s sales are declining.
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Current ratio
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Quick ratio
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Trade receivable turnover ratio
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Working capital ratio
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How would an increase in the trade receivables collection period affect a business’s liquidity position?


It would improve the liquidity position
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It would have no impact on the liquidity position
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It would weaken the liquidity position
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It would make the liquidity position difficult to assess
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The business is collecting debts from its credit customers on a less timely basis
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The business is collecting debts from its credit customers on a more timely basis
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The business is facing challenges in managing its trade receivables
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The business is not collecting any debts from its credit customers
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The business has $2 of current assets to pay for every $1 of current debts
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The business has $1 of current assets to pay for every $2 of current debts
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The business has $1 of current assets to pay for every $1 of current debts
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The business has $2 of current assets to pay for every $2 of current debts
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The business has $1 of quick assets to pay for every $1 of current debts
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The business has $2 of quick assets to pay for every $1 of current debts
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The business has $1 of current assets to pay for every $1 of current debts
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The business has $2 of current assets to pay for every $1 of current debts
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The business may not be able to take advantage of good business opportunities
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The business has excessive idle cash which cannot generate productive returns
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The business has insufficient funds to repay current liabilities
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The business is able to take advantage of cash discounts from suppliers
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The business is selling its inventory at a slower pace
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The business is selling its inventory at a faster pace
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The business is facing challenges in managing its inventory
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The business is not selling any inventory
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What does the rate of trade receivables turnover measure in the context of trade receivable management?


The interest rate charged on overdue payments
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The number of times a business collects payments from its credit customers in a year
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The total value of credit sales made by the business
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The average amount of time that inventory is held before being sold
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What does a shorter trade receivable collection period indicate about a company’s trade receivables management efficiency?


The company has increased its credit sales significantly
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The company has a poor liquidity position
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The company is less efficient at collecting trade receivables
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The company is more efficient at collecting trade receivables
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Extending longer credit terms to all customers indiscriminately
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Reducing the amount of credit sales to avoid having trade receivables altogether
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Increasing debt collection efforts, such as making regular calls to remind customers to pay
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Waiting passively for customers to pay their dues without sending any reminders
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