Question 1

Which of the following statements is true?

Accepted Answer

A)  A high accounts receivable turnover figure will contribute towards a high current asset ratio. 
B)  An increasing accounts receivable turnover figure signifies a reduction in the average number of days to collect accounts receivable. 
C)  If selling prices are increasing the accounts receivable turnover figure will tend to increase. 
D)  An increase in the accounts receivable balance will result in an increase in the accounts receivable turnover figure. 
E)  None of the above are true. 
A)  A high accounts receivable turnover figure will contribute towards a high current asset ratio. 
B)  An increasing accounts receivable turnover figure signifies a reduction in the average number of days to collect accounts receivable. 
C)  If selling prices are increasing the accounts receivable turnover figure will tend to increase. 
D)  An increase in the accounts receivable balance will result in an increase in the accounts receivable turnover figure. 
E)  None of the above are true.

Question 2

An appraisal of a company's long term financial stability relative to a second company's long term financial stability can be achieved by:

Accepted Answer

A)  Determining each company's EPS trend 
B)  Comparing each company's acid test ratio 
C)  Comparing each company's asset turnover ratio 
D)  Comparing each company's debt ratio. 
E)  Comparing the dividend payment trend for the two companies. 
A)  Determining each company's EPS trend 
B)  Comparing each company's acid test ratio 
C)  Comparing each company's asset turnover ratio 
D)  Comparing each company's debt ratio. 
E)  Comparing the dividend payment trend for the two companies.

Question 3

A company's financial leverage concerns:

Accepted Answer

A)  Its capacity to earn profit. 
B)  Its capacity to pay off current liabilities. 
C)  Its capacity to lever inventory to achieve a high turnover 
D)  Its capacity to pay dividends 
E)  None of the above 
A)  Its capacity to earn profit. 
B)  Its capacity to pay off current liabilities. 
C)  Its capacity to lever inventory to achieve a high turnover 
D)  Its capacity to pay dividends 
E)  None of the above

Question 4

Which of the following is consistent with a decreased operating profit margin?

Accepted Answer

A)  A decrease in fixed costs relative to variable costs 
B)  A reduction in inventory turnover 
C)  Average number of days to collect accounts receivable increasing from 20 to 25. 
D)  An increase in the times interest earned ratio. 
E)  None of the above. 
A)  A decrease in fixed costs relative to variable costs 
B)  A reduction in inventory turnover 
C)  Average number of days to collect accounts receivable increasing from 20 to 25. 
D)  An increase in the times interest earned ratio. 
E)  None of the above.

Question 5

Which ratio provides insight into a company's capacity to pay its current liabilities?

Accepted Answer

A)  Current asset ratio 
B)  Acid test ratio 
C)  Times interest earned ratio 
D)  Debt to equity ratio 
E)  Both A. and B. 
A)  Current asset ratio 
B)  Acid test ratio 
C)  Times interest earned ratio 
D)  Debt to equity ratio 
E)  Both A. and B.

Question 6

Which of the following statements is true with respect to financial stability?

Accepted Answer

A)  Financial stability ratios provide a basis for determining a company's capacity to improve sales. 
B)  Financial stability ratios provide a basis for determining the likelihood of a company's share price improving. 
C)  Financial stability ratios provide a basis for determining whether a company's earnings per share is satisfactory. 
D)  A financial stability analysis can be broken into short-term and long-term perspectives. 
E)  None of the above. 
A)  Financial stability ratios provide a basis for determining a company's capacity to improve sales. 
B)  Financial stability ratios provide a basis for determining the likelihood of a company's share price improving. 
C)  Financial stability ratios provide a basis for determining whether a company's earnings per share is satisfactory. 
D)  A financial stability analysis can be broken into short-term and long-term perspectives. 
E)  None of the above.

Question 7

A company's financial leverage concerns:

Accepted Answer

A)  Its capacity to earn profit. 
B)  Its capacity to pay off current liabilities. 
C)  Its capacity to lever inventory to achieve a high turnover 
D)  Its capacity to pay dividends 
E)  Its capacity to pay long term debt 
A)  Its capacity to earn profit. 
B)  Its capacity to pay off current liabilities. 
C)  Its capacity to lever inventory to achieve a high turnover 
D)  Its capacity to pay dividends 
E)  Its capacity to pay long term debt

Question 8

Which of the following is not an indicator of profitability?

Accepted Answer

A)  Net profit to sales 
B)  Gross profit margin 
C)  Times interest earned 
D)  Return on capital employed 
E)  Return on ordinary shareholder's equity 
A)  Net profit to sales 
B)  Gross profit margin 
C)  Times interest earned 
D)  Return on capital employed 
E)  Return on ordinary shareholder's equity

Question 9

Which of the following statements is untrue?:

Accepted Answer

A)  Ratio analysis is most usually conducted in the context of a benchmark such as past performance, goal achievement, performance of similar organisations, industry average data, etc. 
B)  A ratio analysis can be systematically structured by investigating a company's profit performance and its financial stability. 
C)  It is common to investigate the financial stability of an organisation according to two perspectives: the short term and the long term. 
D)  Analysis of the profitability of a firm can be conducted according to two perspectives: profit margin and financial stability. 
E)  When calculating ROI, what is meant by 'return' and also 'investment' is dependent on the context in which the analysis is being made. 
A)  Ratio analysis is most usually conducted in the context of a benchmark such as past performance, goal achievement, performance of similar organisations, industry average data, etc. 
B)  A ratio analysis can be systematically structured by investigating a company's profit performance and its financial stability. 
C)  It is common to investigate the financial stability of an organisation according to two perspectives: the short term and the long term. 
D)  Analysis of the profitability of a firm can be conducted according to two perspectives: profit margin and financial stability. 
E)  When calculating ROI, what is meant by 'return' and also 'investment' is dependent on the context in which the analysis is being made.

Question 10

Which of the following statements is true?

Accepted Answer

A)  A high accounts receivable turnover figure will contribute towards a high current asset ratio. 
B)  An increasing accounts receivable turnover figure signifies an increase in the average number of days to collect accounts receivable. 
C)  If selling prices are increasing, the accounts receivable turnover figure will tend to increase. 
D)  If credit sales are constant, an increase in the accounts receivable balance will result in a decrease in the accounts receivable turnover figure. 
E)  None of the above are true. 
A)  A high accounts receivable turnover figure will contribute towards a high current asset ratio. 
B)  An increasing accounts receivable turnover figure signifies an increase in the average number of days to collect accounts receivable. 
C)  If selling prices are increasing, the accounts receivable turnover figure will tend to increase. 
D)  If credit sales are constant, an increase in the accounts receivable balance will result in a decrease in the accounts receivable turnover figure. 
E)  None of the above are true.

Question 11

Which of the following statements concerning Revpar is true?

Accepted Answer

A)  It is not as complete a measure of hotel performance as the widely-used room occupancy measure. 
B)  It represents a useful gauge of a hotel's financial stability. 
C)  It represents an amalgamation of the room rate and occupancy performance measures. 
D)  If it is increasing in a hotel, the hotel's ROI must also be increasing. 
E)  Revpar is calculated by dividing daily room letting revenue by the number of rooms sold. 
A)  It is not as complete a measure of hotel performance as the widely-used room occupancy measure. 
B)  It represents a useful gauge of a hotel's financial stability. 
C)  It represents an amalgamation of the room rate and occupancy performance measures. 
D)  If it is increasing in a hotel, the hotel's ROI must also be increasing. 
E)  Revpar is calculated by dividing daily room letting revenue by the number of rooms sold.

Question 12

Which of the following statements is true about the acid test ratio?

Accepted Answer

A)  The acid test ratio's calculation involves deducting current liabilities from a company's most liquid current assets. 
B)  Current liabilities that are due for payment in less than a year are stated as a percentage of current assets. 
C)  The acid test ratio is a useful measure of short term liquidity in a business that has slow moving inventory stock. 
D)  Current liabilities are deducted from current assets net of inventories and prepayments. 
E)  If calculated correctly, the acid test ratio will always be greater than one. 
A)  The acid test ratio's calculation involves deducting current liabilities from a company's most liquid current assets. 
B)  Current liabilities that are due for payment in less than a year are stated as a percentage of current assets. 
C)  The acid test ratio is a useful measure of short term liquidity in a business that has slow moving inventory stock. 
D)  Current liabilities are deducted from current assets net of inventories and prepayments. 
E)  If calculated correctly, the acid test ratio will always be greater than one.

Question 13

Financial ratio analysis is used:

Accepted Answer

A)  By stock brokers to analyse company performance. 
B)  By shareholders to gauge profitability and liquidity. 
C)  By managers to support decision making. 
D)  By creditors to appraise short term financial stability of a company. 
E)  All of the above. 
A)  By stock brokers to analyse company performance. 
B)  By shareholders to gauge profitability and liquidity. 
C)  By managers to support decision making. 
D)  By creditors to appraise short term financial stability of a company. 
E)  All of the above.

Question 14

The souvenir shop in a hotel foyer incurred $60,000 in cost of sales when generating sales of $140,000 last year. Its inventory account balance was $2,500 at the start of the year and $3,500 at the end of the year.
The merchandise sold was held in the shop's inventory for how many days on average during the year (assume a 360-day year)?

Accepted Answer

A)  18 days 
B)  16 days 
C)  12 days 
D)  8 days 
E)  None of the above 
A)  18 days 
B)  16 days 
C)  12 days 
D)  8 days 
E)  None of the above

Question 15

An appraisal of a company's long term financial stability relative to a second company's long term financial stability can be achieved by:

Accepted Answer

A)  Determining each company's trend in paying dividends 
B)  Comparing each company's times interest earned ratio 
C)  Comparing each company's current asset ratio 
D)  Comparing each company's earnings per share. 
E)  Comparing the total asset turnover for the two companies. 
A)  Determining each company's trend in paying dividends 
B)  Comparing each company's times interest earned ratio 
C)  Comparing each company's current asset ratio 
D)  Comparing each company's earnings per share. 
E)  Comparing the total asset turnover for the two companies.

Question 16

In the most recent year, the Decadent Hotel earned $150,000 of profit before tax, after the deduction of $30,000 in interest expense. The Hotel's liabilities are $600,000 and its owner's equity is $900,000. What is the hotel's return on total assets, before interest and tax?

Accepted Answer

A)  13% 
B)  12% 
C)  11% 
D)  10.6% 
E)  9% 
A)  13% 
B)  12% 
C)  11% 
D)  10.6% 
E)  9%

Question 17

ROI can be seen to comprise two elements:

Accepted Answer

A)  Profit margin and owners equity return. 
B)  Gross profit and asset revenue. 
C)  Profit margin and asset turnover. 
D)  Return on equity and asset turnover. 
E)  None of the above. 
A)  Profit margin and owners equity return. 
B)  Gross profit and asset revenue. 
C)  Profit margin and asset turnover. 
D)  Return on equity and asset turnover. 
E)  None of the above.

Question 18

Which of the following statements concerning revenue yield per restaurant seat is true?

Accepted Answer

A)  It represents an amalgamation of the seat turnover and average spend per head performance measures. 
B)  If it is increasing in a restaurant, the restaurant's ROI must also be increasing. 
C)  Revenue yield per seat can be calculated by dividing daily restaurant revenue by the number of customers served. 
D)  It is not as complete a measure of restaurant performance as the widely-used seat turnover measure. 
E)  It represents a useful gauge of a restaurant's financial stability. 
A)  It represents an amalgamation of the seat turnover and average spend per head performance measures. 
B)  If it is increasing in a restaurant, the restaurant's ROI must also be increasing. 
C)  Revenue yield per seat can be calculated by dividing daily restaurant revenue by the number of customers served. 
D)  It is not as complete a measure of restaurant performance as the widely-used seat turnover measure. 
E)  It represents a useful gauge of a restaurant's financial stability.

Question 19

The Gold Coast Professional Conference Organisation company took an average of 32 days to collect its accounts receivable in 2010. In 2011, it incurred $70,000 in expenses when generating sales of $250,000. Its accounts receivable balance was $25,000 at the start of 2011 and $31,250 at the end of the year.
Compared to 2010, during 2011 has the company been faster or slower in collecting its accounts receivable? (Assume a 360-day year).

Accepted Answer

A)  4 days slower 
B) 4 days faster 
C)  8.5 days slower 
D) 13 days slower 
E) 13 days faster 
A)  4 days slower 
B) 4 days faster 
C)  8.5 days slower 
D) 13 days slower 
E) 13 days faster

Question 20

The Supremo Hotel's pizzeria incurred $40,000 in cost of sales when generating sales of $100,000 last year. Its food inventory account was $750 at the start of the year and $1,250 at the end of the year.
Food stocks were held in inventory for how many days on average during the year (assume a 360-day year)?

Accepted Answer

A)  3.6 days 
B)  4.5 days 
C)  9.0 days 
D)  40 days 
E)  None of the above 
A)  3.6 days 
B)  4.5 days 
C)  9.0 days 
D)  40 days 
E)  None of the above

Which of the following statements is true?

An appraisal of a company's long term financial stability relative to a second company's long term financial stability can be achieved by:

A company's financial leverage concerns:

Which of the following is consistent with a decreased operating profit margin?

Which ratio provides insight into a company's capacity to pay its current liabilities?

Which of the following statements is true with respect to financial stability?

A company's financial leverage concerns:

Which of the following is not an indicator of profitability?

Which of the following statements is untrue?:

Which of the following statements is true?

Which of the following statements concerning Revpar is true?

Which of the following statements is true about the acid test ratio?

Financial ratio analysis is used:

An appraisal of a company's long term financial stability relative to a second company's long term financial stability can be achieved by:

In the most recent year, the Decadent Hotel earned $150,000 of profit before tax, after the deduction of $30,000 in interest expense. The Hotel's liabilities are $600,000 and its owner's equity is $900,000. What is the hotel's return on total assets, before interest and tax?

ROI can be seen to comprise two elements:

Which of the following statements concerning revenue yield per restaurant seat is true?

Introduction: Hospitality Decision Makers Use of Accounting

Analysing Transactions and Preparing Year End Financial Statements

Double Entry Accounting

Adjusting and Closing Entries

Internal Control

Cost Management Issues

Cost-Volume-Profit Analysis

Budgeting and Responsibility Accounting

Flexible Budgeting and Variance Analysis

Performance Measurement

Cost Information and Pricing

Working Capital Management

Investment Decision Making

Other Managerial Finance Issues

Revenue Management

Filters

Exam 5: Financial Statement Analysis

Which of the following statements is true?

An appraisal of a company's long term financial stability relative to a second company's long term financial stability can be achieved by:

A company's financial leverage concerns:

Which of the following is consistent with a decreased operating profit margin?

Which ratio provides insight into a company's capacity to pay its current liabilities?

Which of the following statements is true with respect to financial stability?

A company's financial leverage concerns:

Which of the following is not an indicator of profitability?

Which of the following statements is untrue?:

Which of the following statements is true?

Which of the following statements concerning Revpar is true?

Which of the following statements is true about the acid test ratio?

Financial ratio analysis is used:

An appraisal of a company's long term financial stability relative to a second company's long term financial stability can be achieved by:

In the most recent year, the Decadent Hotel earned $150,000 of profit before tax, after the deduction of $30,000 in interest expense. The Hotel's liabilities are $600,000 and its owner's equity is $900,000. What is the hotel's return on total assets, before interest and tax?

ROI can be seen to comprise two elements:

Which of the following statements concerning revenue yield per restaurant seat is true?

Introduction: Hospitality Decision Makers Use of Accounting

Analysing Transactions and Preparing Year End Financial Statements

Double Entry Accounting

Adjusting and Closing Entries

Internal Control

Cost Management Issues

Cost-Volume-Profit Analysis

Budgeting and Responsibility Accounting

Flexible Budgeting and Variance Analysis

Performance Measurement

Cost Information and Pricing

Working Capital Management

Investment Decision Making

Other Managerial Finance Issues

Revenue Management

Filters