Month: December 2021

The following information has been calculated from the accounts of a business.

• days taken to pay creditors – 36 days
• days taken by debtors to pay – 65 days
• stock turnover in days – 14 days

What is the cash operating cycle?

Select ONE answer:

1. 15 days
2. 29 days
3. 43 days
4. 79 days

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct ==> 65 + 14 – 35
4. Not correct

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Which statement correctly expresses the relationship between return on capital employed, net asset turnover and profit margin?

Select ONE answer:

1. net asset turnover = return on capital employed – profit margin
2. profit margin / net asset turnover = return on capital employed
3. profit margin + net asset turnover = return on capital employed
4. return on capital employed = net asset turnover x profit margin

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

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A company has revalued its fixed assets upwards during the most recent accounting period.

What will be the effect of this?

Select ONE answer:

1. to increase capital employed and increase profits
2. to increase capital employed and reduce profits
3. to reduce capital employed and reduce profits
4. to reduce capital employed and no effect on profits

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company has a high liquidity ratio.

Which of the following will reduce liquidity?

Select ONE answer:

1. doubling the annual rates of depreciation
2. making a bonus issue to existing shareholders
3. converting loan stock into shares
4. replacing machinery earlier than planned

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

The table shows information from a company’s accounts.

• Turnover – £135k
• Gross profit – £34k
• Profit before interest and tax – £11k
• Profit after tax – £8k
• Fixed assets – £59k
• Current assets – £50k
• Debentures – £12k
• Current liabilities – £40k

What is the return on total capital employed?

Select ONE answer:

1. 8.1%
2. 11.3%
3. 14.0%
4. 15.9%

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct ==> A=L+C ==> £59k + £50k – £12k – £40k = £57k + £12k ==> Capital Employed ==> PBIT / CE ==> £11k / £69k = 15.9%

This work is licensed under a Creative Commons Attribution 4.0 International License.