Student Identity Number: Surname Lectureri Dr. Oxlem Saydar LAS MANS 25. FIN LANGER ALSTA ITEM MENTS ANAL YSIS m FALL 20232024 Which of the following is considered a profitability measure? (4p) Days sales in inventory b. Fixed asset turnover c. Price-earnings ratio d. Cash coverage ratio e. Return on Assets 2. The percentage analysis of the relationship of each component in a financial statement to a total within the statement is called. (4p) a) Horizontal analysis b) Vertical analysis c) Ratio analysis d) Cash flow analysis e) Trend analysis 3. The process of comparing various financial factors of a company over a period of time is known as a) Inter-firm comparison b) Ratio Analysis c)Intra-firm comparison e) Vertical analysis d) Inter-industry comparison 4.Which of the following prevents the expected benefit from horizontal analysis? (4p) a) Size of the business c) Annual preparation of financial statements b) Whether the business is a production or service business d) Preparation of financial statements on computer or manually e) Changes in the accounting policies adopted during the preparation of the financial statements In common sife income statement analysis, which is taken as 100 percent?(4p) a) Net Sales c) Purchases b) Cost of goods sold d) Total assets e) Net profit 6.Current ratio is a (4p) a) Short-term solvency ratio b) Market ratio c) Profitability ratio d)Turnover ratio e) Operating ratio 7.The primary purpose of the liquidity ratios is to determine; (4p) a) How much working capital is tied up in inventory b) The relative level of short-term debt c) How well a firm is able to pay off short-term obligations d) How is the capital structure of the company designed e) More than one of the above 8. Which of the following means that the current ratio of the business is 1.5 and the acid test ratio is 0.5? (4p) a) High ratio of liquid assets b) insufficient stock levels c) insufficient net working capital d) Sufficient liquidity level of the business e) The business is heavily dependent on inventories to pay its short-term debts 9.When an accountant compares revenues or liabilities over two different quarters, the accountant is doing a: (4p) e) Trend analysis a) Horizontal analysis b)Vertical analysis c) Ratio analysis d) Cash flow analysis 10. Quick ratio is 1.8, current ratio is 2.7 and current liabilities are 60,000 What is the firm's Net Working Capital? (10p) 11. Dec. 2024: of goods sold 400,000 Administration & office expenses 35,000 Selling & distribution expenses 45,000 Cash sales 125,000 Operating profit ratio will be ? (10p)

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Student Identity Number: Surname Lectureri Dr. Oxlem Saydar LAS MANS 25. FIN LANGER ALSTA ITEM MENTS ANAL YSIS m FALL 20232024 Which of the following is considered a profitability measure? (4p) Days sales in inventory b. Fixed asset turnover c. Price-earnings ratio d. Cash coverage ratio e. Return on Assets 2. The percentage analysis of the relationship of each component in a financial statement to a total within the statement is called. (4p) a) Horizontal analysis b) Vertical analysis c) Ratio analysis d) Cash flow analysis e) Trend analysis 3. The process of comparing various financial factors of a company over a period of time is known as a) Inter-firm comparison b) Ratio Analysis c)Intra-firm comparison e) Vertical analysis d) Inter-industry comparison 4.Which of the following prevents the expected benefit from horizontal analysis? (4p) a) Size of the business c) Annual preparation of financial statements b) Whether the business is a production or service business d) Preparation of financial statements on computer or manually e) Changes in the accounting policies adopted during the preparation of the financial statements In common sife income statement analysis, which is taken as 100 percent?(4p) a) Net Sales c) Purchases b) Cost of goods sold d) Total assets e) Net profit 6.Current ratio is a (4p) a) Short-term solvency ratio b) Market ratio c) Profitability ratio d)Turnover ratio e) Operating ratio 7.The primary purpose of the liquidity ratios is to determine; (4p) a) How much working capital is tied up in inventory b) The relative level of short-term debt c) How well a firm is able to pay off short-term obligations d) How is the capital structure of the company designed e) More than one of the above 8. Which of the following means that the current ratio of the business is 1.5 and the acid test ratio is 0.5? (4p) a) High ratio of liquid assets b) insufficient stock levels c) insufficient net working capital d) Sufficient liquidity level of the business e) The business is heavily dependent on inventories to pay its short-term debts 9.When an accountant compares revenues or liabilities over two different quarters, the accountant is doing a: (4p) e) Trend analysis a) Horizontal analysis b)Vertical analysis c) Ratio analysis d) Cash flow analysis 10. Quick ratio is 1.8, current ratio is 2.7 and current liabilities are 60,000 What is the firm's Net Working Capital? (10p) 11. Dec. 2024: of goods sold 400,000 Administration & office expenses 35,000 Selling & distribution expenses 45,000 Cash sales 125,000 Operating profit ratio will be ? (10p)

Answer 1

1. **Which of the following is considered a profitability measure?** - **Answer: e. Return on Assets** 2. **The percentage analysis of the relationship of each component in a financial statement to a total within the statement is called:** - **Answer: b. Vertical analysis** 3. **The process of comparing various financial factors of a company over a period of time is known as:** - **Answer: c. Intra-firm comparison** 4. **Which of the following prevents the expected benefit from horizontal analysis?** - **Answer: e. Changes in the accounting policies adopted during the preparation of the financial statements** 5. **In common-size income statement analysis, which is taken as 100 percent?** - **Answer: a. Net Sales** 6. **Current ratio is a:** - **Answer: a. Short-term solvency ratio** 7. **The primary purpose of the liquidity ratios is to determine:** - **Answer: c. How well a firm is able to pay off short-term obligations** 8. **Which of the following means that the current ratio of the business is 1.5 and the acid test ratio is 0.5?** - **Answer: e. The business is heavily dependent on inventories to pay its short-term debts** 9. **When an accountant compares revenues or liabilities over two different quarters, the accountant is doing a:** - **Answer: a. Horizontal analysis** 10. **Quick ratio is 1.8, current ratio is 2.7 and current liabilities are $\$60,000$. What is the firm's Net Working Capital?** - **Answer: Net Working Capital = (Current Assets - Current Liabilities)** - **Quick Ratio = (Current Assets - Inventories) / Current Liabilities** - **Current Assets = Quick Ratio * Current Liabilities + Inventories** - **Current Assets = 1.8 * 60,000 + Inventories** - **Current Assets = 108,000 + Inventories** - **Current Ratio = Current Assets / Current Liabilities** - **2.7 = (108,000 + Inventories) / 60,000** - **Inventories = 60,000 * 2.7 - 108,000 = 108,000** - **Net Working Capital = Current Assets - Current Liabilities** - **Net Working Capital = (108,000 + 108,000) - 60,000 = 156,000** 11. **Dec. 2024:** - **Cost of goods sold: $\$400,000** - **Administration & office expenses: $\$35,000** - **Selling & distribution expenses: $\$45,000** - **Cash sales: $\$125,000** - **Operating profit ratio will be:** - **Total Revenues = Cash Sales + Cost of Goods Sold** - **Total Revenues = 125,000 + 400,000 = 525,000** - **Total Expenses = Administration & Office Expenses + Selling & Distribution Expenses** - **Total Expenses = 35,000 + 45,000 = 80,000** - **Operating Profit = Total Revenues - Total Expenses** - **Operating Profit = 525,000 - 80,000 = 445,000** - **Operating Profit Ratio = (Operating Profit / Total Revenues) * 100** - **Operating Profit Ratio = (445,000 / 525,000) * 100 = 84.76%**

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