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    SEBI Grade A 2020 Live Quiz Ratio Analysis Part 1

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    anjali
    The document contains a quiz on ratio analysis concepts with 7 multiple choice questions and explanations. Some of the ratios calculated in the questions include acid test ratio, operating ratio, working capital turnover ratio, gross profit ratio, and inventory turnover ratio. The questions and explanations provide examples of how to calculate various financial ratios from income statements, balance sheets, and other financial data.

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    SEBI Grade A 2020 Live Quiz Ratio Analysis Part 1

    Uploaded by

    anjali
    43 views15 pages
    The document contains a quiz on ratio analysis concepts with 7 multiple choice questions and explanations. Some of the ratios calculated in the questions include acid test ratio, operating ratio, working capital turnover ratio, gross profit ratio, and inventory turnover ratio. The questions and explanations provide examples of how to calculate various financial ratios from income statements, balance sheets, and other financial data.

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    SEBI-Grade-A-2020-Live-Quiz-Ratio-Analysis-part-1

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    The document contains a quiz on ratio analysis concepts with 7 multiple choice questions and explanations. Some of the ratios calculated in the questions include acid test ratio, operating ratio, working capital turnover ratio, gross profit ratio, and inventory turnover ratio. The questions and explanations provide examples of how to calculate various financial ratios from income statements, balance sheets, and other financial data.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    43 views15 pages

    SEBI Grade A 2020 Live Quiz Ratio Analysis Part 1

    Uploaded by

    anjali
    The document contains a quiz on ratio analysis concepts with 7 multiple choice questions and explanations. Some of the ratios calculated in the questions include acid test ratio, operating ratio, working capital turnover ratio, gross profit ratio, and inventory turnover ratio. The questions and explanations provide examples of how to calculate various financial ratios from income statements, balance sheets, and other financial data.

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    SEBI Grade A 2020 Live Quiz

    Ratio Analysis
    Ques 1. Which of the following items is not included in calculating the acid
    test ratio
    a) 6-month treasury bill
    b) Accounts Receivable
    c) 60-day Certificate of Deposit
    d) Prepaid Insurance
    Answer: (D) Prepaid Insurance

    Explanation: Acid Test Ratio= Quick Assets (Marketable Securities, Cash, etc.)/
    Current Liabilities Quick Assets include all the current assets that can be
    converted into liquid assets quickly. Although Prepaid Insurance is a short
    term current asset, it is not a liquid asset. Therefore, it will not be included in
    the calculation of the acid test ratio.
    Ques 2. Calculate the Operating Ratio. Operating Expense= Rs. 50,000, Sales=
    Rs. 9,00,000, Sales Return= Rs. 60,000, Cost of Goods Sold= 5,00,000
    a) 65.48%
    b) 70.00%
    c) 62.54%
    d) 68.20%
    Answer: (A) 65.48%

    Explanation: Operating Ratio= (Operating Expenses/ Net Sales) x 100


    Total Operating Expense= Operating Expense + Cost of Goods Sold=
    50,000+5,00,000= 5,50,5000
    Net Sales= Sales- Sales Return= 9,00,000-60,000= 8,40,000
    Therefore, Operating Ratio= (5,50,000/ 8,40,000) x 100= 65.48%
    Ques 3. Debtors Turnover Ratio is also called
    i. Receivables Turnover Ratio
    ii. Stock Velocity
    iii. Payable Turnover Ratio
    iv. Debtors Velocity
    a) 1. and 4.
    b) 2. and 3.
    c) 3. and 4.
    d) 1. and 3.
    Answer: (A) 1. and 4.

    Explanation: Debtors Turnover Ratio measures how fast credit sales turn into
    cash and it also provides an estimate of a company’s efficiency in managing
    the credit the company gives to its customers.
    Ques 4. Calculate the working capital turnover ratio: Current Assets= Rs.
    2,50,000, Current Liabilities= Rs. 2,00,000, Cost of Goods Sold= Rs. 5,00,000
    a) 11 times
    b) 8 times
    c) 10 times
    d) 5 times
    Answer: (C) 10 times

    Explanation: Working Capital Turnover Ratio= Cost of Goods Sold/ Working


    Capital
    Working Capital= Current Assets- Current Liabilities
    = 2,50,000 - 2,00,000
    = 50,000
    Therefore, Working Capital Turnover Ratio= 5,00,000/ 50,000= 10 times
    Ques 5. A higher asset turnover ratio than the industry average means that
    a) The company is efficiently utilising its assets better than all other
    companies in the industry
    b) The P/E ratio of the company is better than all other companies in
    the industry
    c) The profits of the company are better than all other companies in
    the industry
    d) The company has the highest spending on fixed assets than all other
    companies in the industry
    Answer: (A) The company is efficiently utilising its assets better than all other
    companies in the industry

    Explanation: Asset Turnover Ratio basically tells us that company is utilising


    its assets more efficiently to generate sales. When the ratio is higher than the
    industry average it means that the company is efficiently utilising its assets to
    generate sales when compared to other companies in the same industry.
    Ques 6. Calculate Gross Profit Ratio, Total Sales= Rs. 3,60,000, Cost of Goods
    Sold= Rs. 3,00,000, Sales Return= Rs. 20,000
    a) 13.87%
    b) 12.00%
    c) 14.52%
    d) 11.76%
    Answer: (D) 11.76%

    Explanation: Net Sales= 3,60,000- 20,000= 3,40,000


    Gross Profit= Net Sales- Cost of Goods Sold
    = 3,40,000- 3,00,000
    = 40,000
    Gross Profit Ratio= (Gross Profit/ Net Sales) x 100
    = (40,000/ 3,40,000) x 100
    = 11.76%
    Ques 7. Calculate Inventory Turnover Ratio, Opening Stock= Rs. 40,000,
    Closing Stock= Rs. 20,000, Sales= Rs. 4,00,000, Gross Profit Ratio= 25% on
    sales.
    a) 6 times
    b) 10 times
    c) 8 times
    d) 7 times
    Answer: (B) 10 times

    Explanation: Inventory Turnover Ratio= Cost of Goods Sold/ Average


    Inventory
    Gross Profit on sales= 25%. Therefore, Gross Profit= 1,00,000
    Cost of Goods Sold= Sales- Gross Profit
    = 4,00,000- 1,00,000
    = 3,00,000
    Average Inventory= (Opening+ Closing Stock)/ 2
    = (40,000+ 20,000)/ 2
    = 30,000
    Inventory Turnover Ratio= 3,00,000/ 30,000
    = 10 times

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