ABC Company sold a plant asset that originally cost Rs. 50,000 for Rs. 22,000 cash. If the company correctly reports a Rs. 5,000 gain on this sale, the accumulated depreciation on the asset at the date of sale must have been:

• A) Rs. 28,000
• B) Rs. 23,000
• C) Rs. 27,000
• D) Rs. 33,000

Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in retained earnings?

• A) Net loss
• B) Dividends paid
• C) Investments by stockholders
• D) Net income

Gross profit is:

• A) Excess of sales over cost of goods sold
• B) Net profit less expenses of the period
• C) Cost of goods sold + Opening stock
• D) Sales less Purchases

Calculate Written Down Value (WDV) from following information:
Cost of fixed asset = Rs. 400,000; Accumulated depreciation= Rs. 270,000; Salvage value=70,000

• A) Rs. 200,000
• B) Rs. 270,000
• C) Rs. 60,000
• D) Rs. 130,000

A company has total current liabilities of Rs. 110,000 and total current assets of Rs. 150,000. Calculate the current ratio of the company.

• A) 0.73
• B) 1.41
• C) 1.36
• D) 1.39

The changes in the financial statement items from a base year to following years are often expressed as which of the following?

• A) Component percentages
• B) Common percentages
• C) Trend percentages
• D) Both trend and component percentages

Which of the following is formula to measure the return on assets?

• A) Operating income by average Fixed assets
• B) Operating income by average total assets
• C) Net income by average Fixed assets
• D) Net income before tax by average total assets

All of the following would be useful in assessing short-term liquidity Except?

• A) Current ratio
• B) Cash ratio
• C) Defensive interval ratio
• D) Quick ratio

Which of the following is NOT a financial ratio?

• A) Staff turnover ratio
• B) Net profit margin
• C) Receivable turnover
• D) Return on capital employed

In the vertical analysis of Balance sheet, all asset accounts are expressed as percentage of which of the following?

• A) Total liabilities
• B) Total assets
• C) Total current assets
• D) Total fixed assets

Which of the following is NOT a profitability measure?

• A) Dividend yield
• B) Return on total assets
• C) Return on sales
• D) Return on long term investment

The amount of current assets that varies with seasonal requirements is referred to as which of the following?

• A) Temporary Working Capital
• B) Gross Working Capital
• C) Net Working Capital
• D) Permanent Working Capital

What will be the effect on the day’s sales in accounts receivables of a company if it closed during peak activity?

• A) Accounts receivables will be understated for service firms
• B) Accounts receivables will have no effect
• C) Accounts receivables will be understated
• D) Accounts receivables will be overstated

If gross profit stays high, but net profit falls this implies which of the following?

• A) The expenses of the business are firmly under control
• B) The market is becoming saturated
• C) The expenses of the business may be growing too rapidly
• D) Competitive pressures are increasing

Which of the following statement best describes the operating profit margin?

• A) It shows what portion of profits are being distributed to shareholders
• B) It shows what return is being made on assets employed in the business
• C) It shows how efficiently a company is turning profits into cash
• D) It shows how well a company is controlling its costs, including overheads

Felton Farm Supplies, Inc., has 8 percent return on total assets of Rs. 300,000 and a net profit margin of 5 percent. What are its sales?

• A) Rs. 480,000
• B) Rs. 3,750,000
• C) Rs. 1,500,000
• D) Rs. 300,000

Which of the following would NOT result in an improved overall gross margin of a business?

• A) Increased selling price of existing products
• B) Introduction of new products with a higher gross profit margin
• C) Higher discounts offered to customers
• D) A fall in raw material prices resulting in a lower cost of sales

Which of the following is MOST likely to offer you the higher rate of return together with the highest risk?

• A) defence saving certificates
• B) Preference shares
• C) Government bonds
• D) Ordinary shares

The suppliers of your company are more concerned to which of the following ratios?

• A) Long term solvency ratios
• B) Coverage ratios
• C) Liquidity ratios
• D) Leverage ratios

Who is internal user of the financial statements?

• A) Media and the general public
• B) Shareholders
• C) Financial institutions
• D) Prospective investors