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PFR 5-1

Calculating and interpretation of accounting ratios and trends
Limitations of financial statements and interpretation techniques
Specialised, not-for-profit and public sector entities
Calculating and interpretation of accounting ratios and trends

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1 / 7

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

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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?

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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?

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

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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?

6 / 7

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?

7 / 7

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

What is Write PLC’s Net profit %?

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Limitations of financial statements and interpretation techniques

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  • Please read all instructions. When you are finished click ‘Next’ to move to the next screen.

Answering Questions

  • Read each question carefully.
  • When you answer a question, your answer will automatically be saved.
  • You can revisit questions and change your answers at any time during the exam.
  • The only permitted characters for numerical answers are:
    • Numbers
    • One full stop as a decimal point if required
    • One minus symbol at the front of the figure if the answer is negative.

              For example: -10234.35

No other characters, including commas, are accepted.

Navigating between questions

  • Click Next Button to move to the next question.
  • Click Previous Button to move back to the previous question.
  • Click on a question number from the Exam Progress Details panel (see next page) to move directly to that question.
  • A message will be displayed when you click to move away from a question which has been partially attempted. You can choose to stay on the question and review your answer(s) or continue.
  • When reviewing your answer(s) for partially attempted questions ensure you read any message displayed in red text below the question in Section A or below the question
    part(s) in Section B
    .
  • Note: Where a message is displayed, the answer(s) provided will not be marked.

1 / 7

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?

2 / 7

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

3 / 7

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

4 / 7

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

5 / 7

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

6 / 7

B. ROCE

7 / 7

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?

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Specialised, not-for-profit and public sector entities

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0 votes, 0 avg

  • Please read all instructions. When you are finished click ‘Next’ to move to the next screen.

Answering Questions

  • Read each question carefully.
  • When you answer a question, your answer will automatically be saved.
  • You can revisit questions and change your answers at any time during the exam.
  • The only permitted characters for numerical answers are:
    • Numbers
    • One full stop as a decimal point if required
    • One minus symbol at the front of the figure if the answer is negative.

              For example: -10234.35

No other characters, including commas, are accepted.

Navigating between questions

  • Click Next Button to move to the next question.
  • Click Previous Button to move back to the previous question.
  • Click on a question number from the Exam Progress Details panel (see next page) to move directly to that question.
  • A message will be displayed when you click to move away from a question which has been partially attempted. You can choose to stay on the question and review your answer(s) or continue.
  • When reviewing your answer(s) for partially attempted questions ensure you read any message displayed in red text below the question in Section A or below the question
    part(s) in Section B
    .
  • Note: Where a message is displayed, the answer(s) provided will not be marked.

1 / 4

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

2 / 4

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

3 / 4

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?

4 / 4

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

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