Problem 8. So get preparation for the MBA Finance job interview . Ratio analysis is effective only where same accounting principles and policies are adopted by other concerns too, otherwise inter-company comparison will not exhibit a real picture at all. 1843, Depreciation                                        63, Interest Expenses (Non- operating     456, Operating Ratio = (Cost of Goods Sold + Operating Expenses * 100) / Sales. questions are followed by the purpose of this thesis. 1.1. Here Get quiz on the Learn Commarce Quiz Quiz of questions that can be used for self-study, homework. Financial analysis is the selection, evaluation, and interpretation of financial data, ... And we show how to interpret financial ratio analysis, warning you of the pitfalls that occur when it's not used properly. Calculate stock turnover ratio from the following information : Opening stock 5                                  8,000, Purchases                                            4,84,000, Sales                                                    6,40,000, Stock Turnover Ratio = Cost of Goods Sold / Average Stock. A low inventory turnover ratio is dangerous. On the other hand, low Turnover Ratio and long collection period reflects that payments by debtors are delayed. 5% of the sales is net profit and are available for the proprietors. The following is the Trading and Profit and loss account of Mathan Bros Private Limited for the year ended June 30,2001. 4.07; Jimma University; Download file PDF Read file. It will adversely affect the ability of a firm to meet customers’ demand. Comment on the financial position of the Company i. e., Debt – Equity Ratio, Fixed Assets Ratio, Current Ratio, and Liquidity. Cash coverage ratio. 10, 00,000; its turnover is 3 times the capital and the margin on sales is 6%. Home >> Category >> Finance (MCQ) Questions and answers >> Ratio Analysis; 1) Determine Debtors turnover ratio if, closing debtors is Rs 40,000, Cash sales is 25% of credit sales and excess of closing debtors over opening debtors is Rs 20,000. a. CBSE Class 12 Accountancy Ratio Analysis. Terms of Service 7. They seemed to reflect poor preparation and equally poor understanding of the practical nature of the assessment. From the data calculate : (i) Gross Profit Ratio (ii) Net Profit Ratio (iii) Return on Total Assets (iv) Inventory Turnover (v) Working Capital Turnover (vi) Net worth to Debt Sales 25,20,000 Other Current Assets 7,60,000. Ram & Company supplies you the following information regarding the year ended 31st December: A high Inventory turnover ratio is better than a low ratio. BBA quiz multiple choice questions test for BBA MCQ exams, educational questions with answer BBA MCQ GK explaination. Cost of sale 19,20,000 Fixed Assets 14, 40,000. Financial Analysis Questions, Answers and Examiners’ Comments LEVEL 5 DIPLOMA IN CREDIT MANAGEMENT JANUARY 2013 Instructions to candidates Answer all questions Time allowed: 3 hours The answers to this examination were disappointing. Question. Financial ratio analysis is one of the best tools of performance evaluation of any company. The following is the Profit and Loss Account of Burn Ltd. Cost of Goods sold = Op. Problem 3. Explain ‘financial modelling’. It means operating expenses are higher. Debt – Equity Ratio =  Debt – Equity Ratio / Long – Term Debt, Shareholder’s Fund = Equity + Preference + Retained Earnings, Fixed Assets Ratio= Fixed Assets / Proprietor’s Fund= -1,80,000, Proprietor’s Fund=Equity Share Capital + Preference Share Capital+ Retained Earnings, Fixed Assets Ratio = 1,80,000 / 1,70,000= 1.05, Current Ratio = Current Assets / Current Liabilities, Current Assets = Stores + Debtors + BR + Bank= 25,000 + 55,000 + 3,000 + 2,000 = 85,000, Liquid Liabilities = Debtors + Bill Receivable + Cash=55,000 + 3,000 + 2,000 = 60,000. A lower ratio reflects dull business and suggests that some steps should be taken to push up sales. Here are the answers to some of the most frequently asked Financial Analyst interview questions for the position of a financial analyst: Download PDF. The position is satisfactory. Ratio Analysis allows us to answer questions such as: How profitable is the company? Problem 6. Practice the concepts of Ratio and Proportion at MBA section of jagranjosh.com and prepare well … The performance of Debt Collection Department is poor. The sample papers have been provided with marking scheme. stock + purchases + carriage and Freight + wages – Closing Stock = 76250 + 315250 + 2000 + 5000 ‐ 98500 It means current assets of Rs.2.90 are available against each rupee of current liability. It means greater part of current assets constitute stock; the stock is slow-moving. The position is satisfactory on the basis of current ratio. Answer : Accounting ratios (also known as financial ratios) are considered to be part of financial statement analysis. Illustration No. (Reference : Oxford dictionary) Notation: Ratio of two values a and b is written as a:b or a/b or a to b. Also known as Solvency Ratios, and as the name indicates, it focuses on a company’s current assets and liabilities to assess if it can pay the short-term debts. Ans. We use Microsoft Corporation's 2004 financial statements for illustration purposes throughout this reading. The following is the Balance Sheet of a company as on 31st March: From the following particulars found in the Trading, Profit and Loss Account of A Company Ltd., work out the operation ratio of the business concern: The following is the summarised Profit and Loss Account of Taj Products Ltd. for the year ended 31st December: From the following Balance Sheet and additional information, you are required to calculate: A company has capital of Rs. So there is no need to calculate the average stock. Therefore, the liquidity position is not satisfactory. But the Net Profit Ratio is only 5%. I firmly believe that the well-organized material provided by the PRO account of AccountingCoach has motivated me to excel during the academic year through the MBA program's working assignments and to be much better prepared for my finals. Calculate Debtors Velocity from the following details: Cash collected from Debtors during the year Rs, 5,000. 8. Disclaimer 8. 375, ©                                 Solvency Ratio = Outside Liabilities / Total Assets, Outside Liabilities = Debenture + Overdraft + Creditors, = 3,00,000 + 1,00,000 + 2,00,000 = 6,00,000, Solvency Ratio =( 600000 / 2200000) * 100, (d)                                Stock of Working Capital Ratio = Stock / Working Capital, Stock of Working Capital Ratio =* 100 = 100%. MBA Sales™ Degree Sample Test Questions Question 1 Selling involves: Choice-1: pushing the product in the market without any consideration for your customer's needs and wants Choice-2: trying to make your customer want what the company has to offer Choice-3: focus is on your product Choice-4: focus is on your customer Choice-5: Options 1, 2 and 3 From the following details of a trader you are required to calculate : (iii) Percentage of Gross profit to turnover, Sales $                         33,984             Stock at the close at cost price                        1814, Sales Returns              380                  G.P. Problem 7. Prohibited Content 3. Calculate the following ratios from the balance sheet given below : (i) Debt – Equity Ratio                        (ii) Liquidity Ratio, (iii) Fixed Assets to Current Assets    (iv) Fixed Assets Turnover, Liabilities                                $                                  Assets                                      $, Equity shares of $ 10 each      1,00,000                     Goodwill                                             60000, Reserves                                  20,000                         Fixed Assets                                       140000, P.L. Problem 5: From the following particulars pertaining to Assets and Liabilities of a company calculate : (a) Current Ratio                     (b) Liquidity Ratio                  (c) Proprietary Ratio, (d) Debt-equity Ratio                         (e) Capital Gearing Ratio, Liabilities                                $                                  Assets                                      $, each                                                     500000                        Land & Building                     500000, 8% 2000 pre shares $ 100                                                       Plant & Machinery                  600000, Each                                                    200000                        Debtors                                   200000, 9% 4000 Debentures of                                                          Stock                                       240000, $ 100 each                                           400000                        Cash and Bank                        55000, Reserves                                              300000                        Prepaid expenses                     5000, Creditors                                             150000, Bank overdraft                                    50000, 1600000                                                               1600000, Current Assets = Stock + Cash + Prepaid Expenses + Debtors, = 2,40,000 + 55,000 + 5,000 + 2,00,000 = 5,00,000, Current Liabilities = Creditors + Bank Overdraft, Liquid Ratio = Liquid Assets / Liquid Liabilities, Liquid Liabilities : Creditors   = 1,50,000, Proprietor’s Ratio = Proprietor’s Fund / Total Tangible Assets, Proprietor’s Fund  = Equity Share Capital + Preference, Debt – Equity Ratio = External Equities / Internal Equities, External Equities = Long-term Liabilities + Short-term Liabilities, Capital Gearing Ratio = Fixed Interest Bearing Securities / Equity Share Capital + Reserves, Fixed Interest Bearing Securities = Preference Shares           2,00,000. for the year                                             8068, To Opening stock                                1378                By Sales                      33984, To Purchase (BD                                 25972              Sales Return                380, To gross profit                                     8068                                                    33604, 35418                                                  35418, Cost of Goods Sold = Cost of Goods Sold / Average Stock, Average Stock = (Opening Stock + Closing Stock)/ 2, (iii) Percentage of Gross Profit to Turnover = Gross Profit / Sales *100. 30 MBA Finance Questions and Answers: 1:: What are the various streams of … At the same time, a higher ratio reflects efficient business activities. Accounting ratios usually relate one financial statement amount to another. Report a Violation 10. Background Performance evaluation of a company is usually related to how well a company can use it assets, share holder equity and liability, revenue and expenses. 2 RATIO ANANLYSIS Introduction The ratio analysis is the most powerful tool of financial analysis. Here, there is no closing stock. Days sales in inventory. They analyze the firm’s profitability over time, its ability to generate cash to be able to pay interest and repay the principal amount. Uploader Agreement, Read Accounting Notes, Procedures, Problems and Solutions, Learn Accounting: Notes, Procedures, Problems and Solutions, List of Ratio Analysis Formulas and Explanations | Accounting, Underwriting of Profit: Problems and Solutions | Business | Accounting, Quick Notes on Du Pont Chart | Accounting, Preparation of Accounts of Insurance Companies | Accounting. Financial modelling is a quantitative analysis commonly used for either asset pricing or general corporate finance. It is not desired. Students should solve the CBSE issued sample papers to understand the pattern of the question paper which will come in class 12 board exams this year. It means the firm is not dependent on outside liabilities. Through ratio analysis, special events cannot be identified. (ii) Estimates can be obtained using A. M. (iii) A. M. is used for different purposes by different persons like it is used for calculating average marks of the students. Stock Turnover Ratio and Turnover to fixed assets indicate an unhealthy sign. The higher the Turnover Ratio and the shorter the average collection period, the better the trade credit management and the better the liquidity of debtors. 4 Calculate the capital gearing from the following information: Rs. Candidates must be prepared to apply … CBSE issues sample papers every year for students for class 12 board exams. However, the fixed assets to proprietorship ratio reveals that the entire fixed assets were not purchased by the proprietors’ equity. financial ratio analysis in order to evaluate the firm’s liquidity position. Will the organization be able to meet its obligations in the short and long-term? These interview questions and answers on MBA Finance will help you strengthen your technical skills, prepare for the interviews and quickly revise the concepts. The Balance sheet of Naronath & Co. as on 31.12.2000 shows as follows: Liabilities                                $                      Assets                                                  $, Equity capital                          1,00,000          Fixed Assets                           1,80,000, 15% Preference shares            50,000             Stores                                      25,000, 12% Debentures                      50,000             Debtors                                   55,000, Retained Earnings                   20,000             Bills Receivable                      3,000, Creditors                                 45,000             Bank                                        2,000, 2,65,000                                                          2,65,000. Bills Receivable from the buyer of fixed assets, should be excluded. It is a sign of under trading. address all of these questions through financial analysis. Ratio analysis facilitates the management to know whether the firms financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling. MBA Quiz Quiz Revision Quizes, MBA Quiz articles. It has mainly two types of ratio under this. Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. :                                                           By Non-operating Incomes, Interest                                    1200                                        Interest on Securities 1,500, Discount                      2400                                        Dividend on Shares 3, 750, Bad Debts                   3400    7000                            Profit on Sale of Shares 750   6,000, To Selling Distribution Expenses        12000, To Net profit                                       84000, 206000                                                                        206000, (i) Gross profit Ratio               (ii) Expenses Ratio (individual), (iii) Net profit Ratio                (iv) Operating profit Ratio, (v) Operating Ratio                 (vi) Stock turnover Ratio, Gross Profit Ratio =Gross Profit/ Sales * 100 =  2,00,000 / 500000 * 100, Expenses Ratio =Individual Expenses / Sales, Administration Expenses / Sales *100 =101000/500000 *100= 2.02%, Finance Expenses/ Sales *100 = 7000/ 500000 * 100=1.04 %, Selling and Distribution Expenses / Sales* 100= 12 000/ 500000 *100= 2.40%, Non- Operating Expenses / Sales * 100 = 2000/ 500000 * 100= 0.4%, Net Profit/ Sales *100 = 84000/ 500000 *100= 16.8%, Operating Profit Ratio =Operating Profit / Sales *100, Operating Profit = Net Profit + Non-Operating Expenses – Non Operating Incomes, Operating Ratio = ( Cost of Goods Sold + Operating Expenses)/Sales* 100, Cost of Goods Sold = Sales – Gross profit, All Expenses Debited in the Profit & Loss A/c Except Non-Operating Expenses, Operating Ratio = (3,00,000 + 1,20,0000) 500000 * 84%, Average Stock = (Opening Stock + Closing Stock)/2, Copyright © 2012-19 Finance-assignment.com All Rights Reserved | Privacy Policy | Terms & Conditions | Finance Homework Help. Calculate the operating Ratio from the following figures. Quick ratio helps us find the solvency for six months and the reason why inventory is subtracted is that inventory usually take more than six month to convert into liquid asset. Accounting, India, Problems, Ratio Analysis. A turnover ratio of 8 signifies that debtors get converted into cash 8 times in a year. It is an indication of excessive inventory and over investment in inventory. Home → Problems and Solutions – Ratio Analysis . The economic condition of the firm is not sound. Task: Students will be required to use the financial ratio analysis question available on moodle and in the subject outline. 1 CHAPTER-I INTRODUCTION 2. Items                                       ($ in Lakhs), Sales                                                    17874, Sales Returns                                      4, Other Incomes                                                53, Cost of Sales                                       15440, Administration and Selling Exp. Account Disable 11. Price-earnings ratio. MBA; Online test; Login; Ratio Analysis - Finance (MCQ) Questions and answers . "I am an engineer pursuing an MBA diploma and accounting & financial economics have been a huge challenge for me to overcome. 2 times c. 6 times d. 8 times. A: Multiple Choice Questions. (v) Financiers of Long-term Funds : They are concerned with the firm’s long-term solvency and survival; since they provide long-term funds to firm. Here is a compilation of top thirteen accounting problems on ratio analysis with its relevant solutions. This video helps you to learn Calculation of Financial Ratios with the help of practical example Which of the following is considered a profitability measure? A low ratio may be result of inferior quality goods, stock of un-saleable and absolute goods. Gross Profit Ratio is 20% which is a healthy sign. Of course, some of the ratios (such as the profitability ratios) if not assessed against other ratios do not mean anything. The firm can increase the rate of return on investment by increasing production. Several ratios calculated from the accounting data can be grouped into various classes according to financial activity or function to be evaluated. Return on Assets. However, the Liquid Ratio is 0.65: 1. 1, 00,000. On the overall evaluation at each and every aspect, the following findings are found. online gk on Commarce Quiz MBA and BBA Quiz, Accounting Terms. That is, high Turnover Ratio and short collection period imply prompt payment on the part of debtors. This chapter focuses on the interpretation and analysis of fi nancial statements. Assume that a firm has owners’ equity of Rs. Firm managers use accounting information to help them manage the fi rm. Content Guidelines 2. For example, maturity of debentures cannot be identified with ratio analysis. View Homework Help - Extra Ratio Analysis Questions MBA from FINANCE ea212 at Arab Academy for Science, Technology & Maritime Transport. $                                                                                  $, To Stock in hand                                 76250                          By Sales                                  500000, To Purchases                                       315250                        By Stock in hand                    98500, To Carriage and Freight                      2000, To Wages                                            5000, To Gross Profit                                   200000, 598500                                                                        598500, Expenses                                 1,01,000                      By Gross profit           2,00,000, To Finance Expenses. Before uploading and sharing your knowledge on this site, please read the following pages: 1. The average collection period ratio measures the quality of debtors since it indicates the rapidity or slowness of their collectability. Fixed assets are not used properly. Financial Performance Analysis (MBA project) January 2019; DOI: 10.13140/RG.2.2.33643.39203. This test comprises 40 questions on Management Accounting. For instance, the ratio of number of boys in a class to the number of girls is 2:3. Capital Gearing Ratio is also satisfactory. Question 25. 1. Ratio is the quantitative relation between two amounts showing the number of times one value contains or is contained within the other. Fixed asset turnover. DEFINITION: “The indicate quotient of two mathematical expressions and as “The … QUESTION 2: Accounting analysis (18 marks) 2.1 Provide adjusting journal entries (with amounts) to correct for American Tissue’s improper capitalization of operating expenses in its fiscal year ending September 30, 2000. Ratio analysis project 1. A high ratio implies good inventory ‘management and an indication of under-investment. Also, if you want to know more about one … The average collection period of 1.5 months implies that debtors are collected in 45 days. It means the firm depends on outside liabilities. Current ratio which let us know the short term solvency of a firm. A/c                                   30,000                         Stock                                                   30000, Secured loan                           80,000                         Sundry Debtors                                   30000, Sundry creditors                     50,000                         Advances                                            10000, Provision for taxation                         20,000                         Cash Balance                                      10000, 3,00,000                                                                                  300000, Debt – Equity = Long – Term Debt / Shareholders Fund, Shareholder’s Fund= Equity Share Capital + Reserves + P.L.A/c, = 1,00,000 + 20,000 + 30,000       = 1,50,000, Debt-Equity Ratio = 80,000 / 1,50,000=.53, Liquidity Ratio = Liquid Assets / Liquid Liabilities, Liquid Assets = Sundry Debtors + Advances + Cash Balance, Liquid Liabilities = Provision for Taxation + sundry creditors, = Fixed Assets / Current Assets= 1,40,000/ 100000, Fixed Assets Turnover =Turnover / Fixed Assets= 5,60,000/1,40,000. 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