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CA Final Analysis of Financial Statements — practice questions — page 2

Explore 61 free Analysis of Financial Statements questions in CA Final Financialreporting. Open each question or exercise to read its content, reference answers and available explanation.

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Analysis of Financial Statements questions and exercises with answers

Showing questions 31–60 of 61.

Which sector relies on high leverage to generate acceptable ROE?Read the answer and worked solution →Return on equity measures profitability in relation to what?Read the answer and worked solution →What range of ROE is generally considered good?Read the answer and worked solution →ROE is especially used to compare which companies?Read the answer and worked solution →A current ratio below 1 suggests what about the company?Read the answer and worked solution →A very high current ratio may indicate what?Read the answer and worked solution →Which ratio is a more conservative test of liquidity than the current ratio?Read the answer and worked solution →The quick ratio is also known by which name?Read the answer and worked solution →A normal liquid (quick) ratio is considered to be what?Read the answer and worked solution →Which item is excluded when computing quick assets?Read the answer and worked solution →The times interest earned ratio equals EBIT or EBITDA divided by what?Read the answer and worked solution →An interest coverage ratio below one means what?Read the answer and worked solution →Inventory turnover equals cost of goods sold divided by what?Read the answer and worked solution →A very high inventory turnover may signal what problem?Read the answer and worked solution →Which cost is reduced by increasing inventory turns?Read the answer and worked solution →Why is comparing supermarket and car dealer stock turns unfair?Read the answer and worked solution →Which numerator gives a more realistic inventory turnover ratio?Read the answer and worked solution →For cumulative preferred shares, EPS deducts the annual dividend in which case?Read the answer and worked solution →Current assets are Rs 6,00,000 and current liabilities are Rs 4,00,000. What is the current ratio?Read the answer and worked solution →COGS Rs 12,00,000; opening stock Rs 3,00,000, closing Rs 5,00,000. Inventory turnover?Read the answer and worked solution →A firm turns its inventory over 4 times a year. Using a 365-day year, average days to sell stock?Read the answer and worked solution →EBIT is Rs 9,00,000 and interest expense is Rs 3,00,000. Times interest earned?Read the answer and worked solution →A firm has profit margin 5%, asset turnover 2 and equity multiplier 1.5. Its ROE is?Read the answer and worked solution →Net income is Rs 90,000 and average shareholders' equity is Rs 6,00,000. ROE?Read the answer and worked solution →Debt is Rs 6,00,000 and equity is Rs 3,00,000. What is the debt-to-equity ratio?Read the answer and worked solution →A firm's D/E ratio is 1.5. Its debt-to-capital ratio is?Read the answer and worked solution →Gross profit is Rs 3,00,000 on revenue of Rs 12,00,000. Gross profit ratio?Read the answer and worked solution →In a common-size income statement, net profit is Rs 2,00,000 and gross sales Rs 10,00,000. Net profit is what share of sales?Read the answer and worked solution →Average total assets are Rs 12,00,000 and average equity is Rs 4,00,000. Equity multiplier?Read the answer and worked solution →Sales are Rs 15,00,000 and average total assets Rs 5,00,000. Asset turnover?Read the answer and worked solution →

Worked practice questions

Which sector relies on high leverage to generate acceptable ROE?

  1. Fashion brands
  2. Grocery retail
  3. Financial sector
  4. Farm equipment
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Correct answer: C. Financial sector

Banks and similar firms run high leverage, which other industries would see as unacceptably risky.

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Return on equity measures profitability in relation to what?

  1. Total sales
  2. Total assets
  3. Total debt
  4. Equity
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Correct answer: D. Equity

ROE compares profit with the owners' equity invested in the business.

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What range of ROE is generally considered good?

  1. 1-5%
  2. 15–20%
  3. 40-50%
  4. 60-70%
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Correct answer: B. 15–20%

A return of 15 to 20 percent on equity is the usual benchmark of a good result.

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More Financialreporting topics

Ind AS 116 LeasesInd AS 36 Impairment of Assets and Ind AS 38 Intangible AssetsInd AS 24 Related Party Disclosures and Ind AS 108 Operating SegmentsInd AS 1 Presentation of Financial StatementsInd AS 12 Income TaxesInd AS 113 Fair Value MeasurementInd AS 109 Financial InstrumentsInd AS 23 Borrowing Costs and Ind AS 40 Investment Property