Question 1

Opening stock + purchases + direct expenses - closing stock =

Accepted Answer

The formula represents the calculation for the Cost of Goods Sold (COGS), which is the total cost of acquiring or manufacturing the products that a company sells during a period, including the costs associated with the opening stock, purchases, and direct expenses, minus the closing stock.

Question 2

Which ratio measures the number of times the receivables are rotated in a year in terms of sales?

Accepted Answer

The debtors turnover ratio measures the number of times receivables are rotated in a year in terms of sales, indicating how efficiently a company collects its receivables.

Question 3

Debtors turnover ratio is also called .

Accepted Answer

Debtors turnover ratio is also referred to as the debtors velocity ratio, which measures how quickly a business collects cash from its credit sales.

Question 4

Creditors turnover ratio is also called

Accepted Answer

The creditors turnover ratio, which measures how quickly a business pays its suppliers, is also referred to as the accounts payables ratio. This ratio indicates the efficiency with which a company manages its short-term liabilities.

Question 5

Debt-equity ratio is a sub-part of

Accepted Answer

The answer of Debt-equity ratio is a sub-part of
...

Question 6

The most precise test of liquidity is

Accepted Answer

The absolute liquid ratio, also known as the super quick ratio, is the most precise test of liquidity because it only considers the most liquid assets (cash, marketable securities, and accounts receivable) against current liabilities, providing a stringent measure of a company's ability to meet its short-term obligations.

Question 7

Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs 60,000. Determine value of stock.

Accepted Answer

The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities = 1.8. Given the current liabilities of Rs 60,000, we can calculate the quick assets as 1.8 * 60,000 = Rs 108,000. The current ratio is calculated as Current Assets / Current Liabilities = 2.7. Given the current liabilities of Rs 60,000, we can calculate the current assets as 2.7 * 60,000 = Rs 162,000. The difference between current assets and quick assets gives us the value of stock, which is Rs 162,000 - Rs 108,000 = Rs 54,000.

Question 8

The purchase value of assets over its serviceable life is categorised as

Accepted Answer

The purchase value of assets over its serviceable life is categorized as depreciation, which is the process of allocating the cost of a tangible asset over its useful life.

Question 9

The basic financial statements include

Accepted Answer

The basic financial statements include the statement of cash flows, income statement, and balance sheet, making "all of the above" the correct answer.

Question 10

Cash flow example from a financing activity is

Accepted Answer

Payment of dividends is an example of a cash flow from financing activities, as it involves the distribution of profits to shareholders, which is a financing activity.

Question 11

Cash flow example from an investing activity is

Accepted Answer

Sale of investment by a non-financial enterprise is an example of a cash flow from investing activities. This includes transactions involving the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Question 12

Cash flow example from an operating activity is

Accepted Answer

Interest paid on term-deposits by a bank is considered an operating activity because it relates to the primary revenue-generating activities of a bank, which involve receiving deposits and providing loans.

Question 13

Which item comes under financial activities in cash flow?

Accepted Answer

Financial activities in cash flow include transactions that involve changes in the size and composition of the equity capital and borrowings of the entity. This encompasses the redemption of preference shares (which is a way to return capital to shareholders), the issue of preference shares (which is a method of raising new capital), and interest paid (as it relates to the cost of borrowing funds). Therefore, all the options listed are considered financial activities.

Question 14

As per Accounting Standard-3, Cash Flow is classified into

Accepted Answer

Accounting Standard-3 classifies cash flows into three categories: operating activities, investing activities, and financing activities.

Question 15

Cash Flow Statement is based upon

Accepted Answer

The Cash Flow Statement is based upon the cash basis of accounting, focusing on the inflows and outflows of cash and cash equivalents over a period.

Question 16

Which of the following statements are true?

Accepted Answer

Cash flow statements and funds flow statements serve different purposes and provide insights into different aspects of a company's financial health. The cash flow statement focuses on the inflow and outflow of cash, while the funds flow statement provides information on the sources and uses of funds over a period. This distinction means that one cannot replace the other.

Quiz 5: Financial Ratios and Cash Flow Statements