Question

1-A= assets, X=Expenses ,L= liabilities, I= income ,E=owners' equity, which of the following is correct?

A)I=A-L

B)I-L=A-X+E

C)A+X+E=I+L

D)I+L+E=A+X

E)I-X=A+E-L

2-A company with a high price/earning ratio

A)has a high return on capital

B)is a good investment

C)may be a less risky investment

D)is a bad investment

3-which of the following would be indicated by a steadily increasing Acid test ratio?

A)improved liquidity

B)increased difficulty in paying creditors

C)improved profitability

D)difficulties in selling old stock

4-A company with gross profit ratio that is steadily increasing

A)could be increasing selling prices

B)is making more profit

C)is increasing profit by increasing sales

D)is making the wrong kind of profit as it is only net profit which matter

5-Return on capital employed can be used to:

A)compare the return on assets with the interest that could be earned on the same money.

B)compare this year's performance with last

C)compare the results of two different companies

6-A company gives 30 days credit on sales and has an (age of debt) of 107 days

A)this is good –it has a large debtors balance

B)it takes more than three months-on average –to collect its debts

C)it taked 30 days to collect its debts

D)it takes 107 days to pay its debts.

7-A company which turns its stocks of finished goods over 10timess per annum:

A)Has too much stock

B)has more than a month's stock on hand –on average

C)hasn't got enough stock

D)has 10times as much stock as needs

8- I must pay yearly insurance before the start of the year it applies to but I always pay it as late as I can. If I pay 600$ in December what is my insurance pre-payment at the end of January?

9- My year end balance sheet shows fixed assets of 5000$ and total liabilities of 1000$. My total reserves (owner's equity ) were 4500$ at the beginning of the year and I had made 2000$ profit by the year end. What are my current assets at the year end?

10- accountants say that a business whose books balance is one that is breaking even (making neither a profit nor a loss)

A)true

B)false

11- debits are a bad thing to have in your accounts?

A)true

B)false

12-the going concern concept allows you to put a higher value on manufacturing stock than you could get for it if you had to sell it on the open market

A)true

B)false

13-the double entry formlism does not distinguish between a receipt from a customer(as a result of a sale)and a receipt from a lender (whom you have to repay)

A)true

B)false

14)I have sold 100$ worth of goods this week but bought no stock for sale. This means I have a profit of 100$

A)true

B)false

Answer 1

1. The answer is D

Has the income is added to equity and liabilities. While expense is added to assets.

2. High price earnings ratio means it is a good investment has it expects growth in future. Answer:B

3. Answer: A

The steadily increasing lquidity ratio shows that there is increase in liquid current assets. It shows liquidity in firm.

4. Answer: A

The increase in GP shows that the company is saving more which indicates either the selling price is going up or production cost is coming down.

5. Answer : B

The return on capital employed indicates the year performance with last