Ratio Analysis and Auditing
Twenty random questions from a hard bank of thirty on liquidity, profitability and gearing ratios and on audit opinions.
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Current assets are ₦300,000 and current liabilities are ₦150,000. What is the current ratio?
- 1 : 2
- 4.5 : 1
- 0.5 : 1
- 2 : 1
The quick (acid test) ratio is calculated as:
- Cash ÷ sales
- Current assets ÷ current liabilities
- (Current assets − inventory) ÷ current liabilities
- Inventory ÷ current liabilities
The net profit margin is:
- Net profit ÷ sales × 100
- Gross profit ÷ sales × 100
- Sales ÷ net profit
- Net profit ÷ capital × 100
Return on capital employed (ROCE) is:
- Dividends ÷ share price
- Operating profit ÷ capital employed × 100
- Sales ÷ capital
- Net profit ÷ sales
Inventory turnover is calculated as:
- Sales ÷ closing inventory
- Purchases ÷ sales
- Inventory ÷ cost of sales
- Cost of sales ÷ average inventory
Trade receivables collection period (days) is:
- Sales ÷ receivables
- Payables ÷ purchases × 365
- Trade receivables ÷ credit sales × 365
- Inventory ÷ cost of sales × 365
Trade payables payment period (days) is:
- Receivables ÷ sales × 365
- Sales ÷ payables
- Trade payables ÷ credit purchases × 365
- Cash ÷ purchases
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