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Finance Review: Financial Statements (3.4-3.7) Flashcards | StudBud
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Finance Review: Financial Statements (3.4-3.7)
Finance Review: Financial Statements (3.4-3.7)
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This is a review of key terms and concepts from IB Business Management units 3.4 - 3.7
Flashcards
22 cards
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Answers
1
'Equity' appears on the balance sheet as...
loan capital + share capital
share capital + retained profit
working capital + retained profit
working capital + loan capital
2
A pharmaceutical company wanting to protect the results of its R&D should seek a...
brand
trademark
patent
copyright
3
current assets - current liabilities =
fixed assets
long-term liabilities
working capital
equity
4
Net Profit is calculated as...
Gross Profit - Liabilities
Gross Profit - Expenses
Gross Profit + Expenses
Gross Profit + Liablities
5
All of the following are principles and ethics for accounting EXCEPT...
Integrity
Scarcity
Objectivity
Confidentiality
6
This statement is the first place to find the business' sales and costs of goods sold (COGS)
Cash Flow Statement
Balance Statement
Profit & Loss Account
Sales Statement
7
A general benchmark for the ROCE ratio would be...
50%
5%
20%
10%
8
A good benchmark for the current ratio would be...
0.5 - 1.0
1.5 to 2.0
2.5 to 3.0
1.0 to 1.5
9
The ROCE ratio is calculated as...
net profit / capital employed
net profit / COGS
gross profit / COGS
gross profit / capital employed
10
Why is Net Profit Margin more accurate than Gross Profit Margin for assessing profitability?
GPM takes into account COGS and expenses (overhead)
NPM takes into account only the expenses of the business
GPM takes into account only the expenses of the business
NPM takes into account COGS and expenses (overhead)
11
All of the following are reasons why cash flow forecasting is important EXCEPT...
They help to anticipate and plan for liquidity problems
They can be compared with actual cash flow to aid planning
Banks and investors often require them
They provide methods for increasing the firm's net profit
12
The return on capital employed (ROCE) or
key ratio
is so called because it measures...
the firm's key financial indicators
the ability for firm to cover its liabilities quickly
how quickly capital comes back to the firm
how well a firm is able to generate profits from its capital
13
Liquidity ratios are so called because they measure...
the firm's ability to pay off its long-term liabilities
the firm's ability to pay off its short-term liabilities
14
'Stock' on a balance sheet refers to...
the share capital raised through issuing shares
the liquid cash available to the business
the account of total assets
the excess inventory that will be sold later
15
Which of the following is a method for
lowering cash outflows
to deal with a cash flow problem?
debt factoring
changing the pricing policy
switching to a cash payments only policy with customers
seeking alternative suppliers
16
Current Assets include all of the following EXCEPT...
cash
stock
debtors
creditors
17
The difference between the Current Ratio and the Acid Test Ratio is...
The acid test ratio does not include stock
the acid test ratio is more accurate
the current ratio does not include stock
the current ratio is more accurate
18
The best place to look for a company's total assets would be the...
appropriations account
profit & loss account
cash flow statement
balance sheet
19
In order to give more accurate measure of performance from year to year...
gross profit is calculated before interest and taxes
fixed costs are held constant
net profit is calculated before interest and taxes
variable costs are held constant
20
Which of the following is a method for
raising cash inflows
to deal with a cash flow problem?
seeking preferential credit terms with creditors
leasing or renting production equipment
selling fixed assets
maintaining tighter credit control with debtors
21
A company is
insolvent
when...
its not solvent
it is holding on to too much cash and/or stock
it cannot solve its profitability problems
working capital is insufficient to meet current liabilities
22
True or false: "A company with positive cash flow indicates that it is a profitable business."
True
False
