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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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Add RecommendationAdd TagsView All Assigned TagsThe business is facing challenges in managing its expenses
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Add RecommendationAdd TagsView All Assigned TagsThe business is not generating any profit from its sales
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Add RecommendationAdd TagsView All Assigned TagsThe 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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Add RecommendationAdd TagsView All Assigned TagsProfit for the period / Net Sales Revenue
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Add RecommendationAdd TagsView All Assigned TagsNet Sales Revenue / Profit for the period
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Add RecommendationAdd TagsView All Assigned TagsNet 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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Add RecommendationAdd TagsView All Assigned TagsIt would indicate an improvement in the business’s profitability
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Add RecommendationAdd TagsView All Assigned TagsIt would make the business’s performance difficult to assess
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Add RecommendationAdd TagsView All Assigned TagsIt 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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Add RecommendationAdd TagsView All Assigned TagsIt indicates the percentage of gross profit relative to the cost of sales
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Add RecommendationAdd TagsView All Assigned TagsIt indicates the percentage increase in the cost of sales
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Add RecommendationAdd TagsView All Assigned TagsIt 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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Add RecommendationAdd TagsView All Assigned TagsThe company is borrowing more money to finance its operations.
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Add RecommendationAdd TagsView All Assigned TagsThe company is becoming more efficient in managing its costs relative to its sales revenue.
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Add RecommendationAdd TagsView All Assigned TagsThe company’s sales are declining.
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Current ratio
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Add RecommendationAdd TagsView All Assigned TagsQuick ratio
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Add RecommendationAdd TagsView All Assigned TagsTrade 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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Add RecommendationAdd TagsView All Assigned TagsIt would have no impact on the liquidity position
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Add RecommendationAdd TagsView All Assigned TagsIt would weaken the liquidity position
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Add RecommendationAdd TagsView All Assigned TagsIt 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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Add RecommendationAdd TagsView All Assigned TagsThe business is collecting debts from its credit customers on a more timely basis
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Add RecommendationAdd TagsView All Assigned TagsThe business is facing challenges in managing its trade receivables
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Add RecommendationAdd TagsView All Assigned TagsThe 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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Add RecommendationAdd TagsView All Assigned TagsThe business has $1 of current assets to pay for every $2 of current debts
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Add RecommendationAdd TagsView All Assigned TagsThe business has $1 of current assets to pay for every $1 of current debts
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Add RecommendationAdd TagsView All Assigned TagsThe 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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Add RecommendationAdd TagsView All Assigned TagsThe business has $2 of quick assets to pay for every $1 of current debts
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Add RecommendationAdd TagsView All Assigned TagsThe business has $1 of current assets to pay for every $1 of current debts
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Add RecommendationAdd TagsView All Assigned TagsThe 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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Add RecommendationAdd TagsView All Assigned TagsThe business has excessive idle cash which cannot generate productive returns
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Add RecommendationAdd TagsView All Assigned TagsThe business has insufficient funds to repay current liabilities
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Add RecommendationAdd TagsView All Assigned TagsThe 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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Add RecommendationAdd TagsView All Assigned TagsThe business is selling its inventory at a faster pace
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Add RecommendationAdd TagsView All Assigned TagsThe business is facing challenges in managing its inventory
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Add RecommendationAdd TagsView All Assigned TagsThe 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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Add RecommendationAdd TagsView All Assigned TagsThe number of times a business collects payments from its credit customers in a year
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Add RecommendationAdd TagsView All Assigned TagsThe total value of credit sales made by the business
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Add RecommendationAdd TagsView All Assigned TagsThe 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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Add RecommendationAdd TagsView All Assigned TagsThe company has a poor liquidity position
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Add RecommendationAdd TagsView All Assigned TagsThe company is less efficient at collecting trade receivables
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Add RecommendationAdd TagsView All Assigned TagsThe company is more efficient at collecting trade receivables
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Extending longer credit terms to all customers indiscriminately
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Add RecommendationAdd TagsView All Assigned TagsReducing the amount of credit sales to avoid having trade receivables altogether
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Add RecommendationAdd TagsView All Assigned TagsIncreasing debt collection efforts, such as making regular calls to remind customers to pay
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Add RecommendationAdd TagsView All Assigned TagsWaiting passively for customers to pay their dues without sending any reminders
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