PFR 5-1

149. Which of the following ratios is likely to be most relevant for a local charity?

150. Miranda Ltd has a current ratio of 1.5, a quick ratio of 0.4 and a positive cash balance. If it purchases inventory on credit, what is the effect on these ratios?

151. The following information has been taken from Preston’s financial statements:

Preston has inventory turnover of six times.

The year‐end receivables collection period is 49 days.

Cost of sales for the year was $1,690,000 Credit purchases for the year were $2,150,000.

Preston’s cash cycle at 31 December 20X7 was 73 days

All calculations should be made to the nearest full day, and the trading year has 365 days.

What is Preston’s trade payables collection period as at 31 December 20X7?

152. Which TWO of the following explanations are unlikely to lead to an increase in receivables collection period?

153. Beta Co is a listed company with four million 50c ordinary shares in issue. The following extract is from its financial statements for the year ended 30 September 20X4.

STATEMENT OF PROFIT OR LOSS

$’000

Profit before tax                                              900

Income tax expense                                      (100)

Profit for the year                                            800

At 30 September 20X4 the market price of Beta Co’s shares was $1.50. What was the P/E ratio on that date?

154. Analysis of the financial statements of Cumberland Co at 31 December 2020 yields the following information:

Gross profit margin                          42%

Current ratio                                    2.14

ROCE                                                  16.3%

Asset turnover                                   4.19

Inventory turnover                           11.4

What is the profit margin?

155. Write had a ROCE of 24% and an asset/turnover ratio of 4.5X.

What is Write PLC’s Net profit %?

156. If a company wished to maintain the carrying amount in the financial statements of its non-current assets, which of the following would it be unlikely to do?

157. Which of the following is a possible reason why a company’s inventory holding period increases from one year to the next?

158. Which of the following items is unlikely to be considered a ‘one‐off’ item which would impact the comparability of ratios?

159. Which of the following is not a valid reason for a decrease in gross profit margin?

160. Hat Haven Co has an asset turnover of 2.0 and an operating profit margin of 10%. It is launching a new product which is expected to generate additional sales of $1.6 million and additional profit of $120,000. It will require additional assets of $500,000.

Assuming there are no other changes to current operations, how will the new product affect these ratios?

Select the impact on the ratios below using the drag and drop options

A. Operating profit margin

B. ROCE

161. Use of historical cost accounting means asset values can be reliably verified but it has a number of shortcomings which need to be considered when analysing financial statements.

Which of these is a possible result of the use of historical cost accounting during a period of inflation?

162. Which of the following is NOT true of entities in the charity sector?

163. Public sector entities have performance measures laid down by government, based on Key Performance Indicators. Which FOUR of the following are likely to be financial KPIs for a local council?

1             Interest cover

2          Financial actuals against budget

3          Rent receipts outstanding

4             Dividend cover

5             Return on capital employed

164. Although the objectives of not-for-profit entities are different from those of commercial entities, the accounting requirements of not-for-profit entities are moving closer to those entities to which IFRSs apply

Which of the following IFRS requirements would NOT be relevant to a not-for-profit entity?

165. Which TWO of the following statements about a not-for-profit entity are valid?