Please wait...

Accountancy Test - 24
Menu grid icon
Result Result point icon
Accountancy Test - 24
  • Goals icon

    /

    Score
  • Trophy icon

    -

    Rank
White alarm icon Time Taken: -
Result frame illustration
  • Question 1/10
    5 / -1

    Debt-equity ratio expresses the relationship between short-term debt and equity share capital of an enterprise.

    Solutions

    Debt-equity ratio = Long-term debt/Shareholder’s funds

  • Question 2/10
    5 / -1

    A rise in operating ratio will indicate a rise in efficiency.

    Solutions

    A higher operating ratio indicates a decline in efficiency. It is a cost ratio. Higher operating ratio will mean there is a greater component of cost in price and hence lesser profits.

  • Question 3/10
    5 / -1

    Which ratio indicates the speed with which amount is being paid to the creditors?

    Solutions

    Trade payables turnover ratio indicates the speed with which amount is being paid to creditors.

  • Question 4/10
    5 / -1

    XYZ Ltd. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was.

    Solutions

    If the average collection period exceeds the credit terms its credit collection would be considered poor.

  • Question 5/10
    5 / -1

    Which of the following groups of ratios primarily measure risk?

    Solutions

    By considering liquidity, debt, and profitability ratios together, stakeholders can gain a comprehensive understanding of a company's financial risk. Liquidity ratios indicate short-term risk, debt ratios assess financial risk, and profitability ratios provide insight into the company's ability to manage risk and generate returns.

  • Question 6/10
    5 / -1

    What will be the effect of purchase of goods for cash ₹ 3,000 on gross profit ratio?

    Solutions

    Gross profit ratio is unaffected because cash purchases increase inventory (an asset) but do not impact COGS or sales until the goods are sold. The ratio depends on sales and COGS, not purchases.

  • Question 7/10
    5 / -1

    What will be the current ratio of a company whose net working capital is zero?

    Solutions

    Net working capital = 0

    Current assets - Current liabilities = 0

    So, Current assets = Current liabilities ....(i)

    Current ratio = Current assets/Current liabilities

    Using Eq.(i); Current ratio = Current liabilities/Current liabilities = 1

  • Question 8/10
    5 / -1

    There are two statements marked as Assertion (A) and Reason (R). Read the statements and choose the appropriate option from the options given below.

    Assertion (A): The debt to equity ratio will increase at the time of issue of equity shares for cash.

    Reason (R): Issue of equity shares will increase the shareholders’ funds but the long-term debts will remain the same.

    Solutions

    The debt-to-equity ratio = Total Debt / Shareholders’ Funds. Issuing equity shares for cash increases Shareholders’ Funds without affecting Total Debt, which decreases the ratio. Thus, Assertion (A) is false. Reason (R) is true, as issuing equity shares increases Shareholders’ Funds while long-term debts remain unchanged, explaining the decrease.

    Therefore, the correct option is 3 (C).

  • Question 9/10
    5 / -1

    There are two statements marked as Assertion (A) and Reason (R). Read the statements and choose the appropriate option from the options given below.

    Assertion (A): Inventories and prepaid expenses are not considered as quick assets.

    Reason (R): Inventories take some time before it is converted into cash while prepaid expenses can be converted into cash.

    Solutions
    • Assertion (A) is true because quick assets exclude inventories and prepaid expenses (Quick assets = Current assets - Inventories - Prepaid expenses).
    • Reason (R) is false. Inventories take time to convert into cash, which is correct, but prepaid expenses, being payments made in advance (e.g., prepaid rent), cannot be converted into cash, contradicting the original statement.
    • Thus, the correct option is option (D), as Assertion (A) is true and Reason (R) is false
  • Question 10/10
    5 / -1

    Directions For Questions

    Read the following case study and answer questions on the basis of the same.

    Tony and Rony started a partnership firm, TR CDs to manufacture music CDs way back in 1990. Now since the music CDs are out of business, they plan to sell the business to one of the major content production houses in Mumbai. For the purpose of selling business, they reached to their accountant to calculate the goodwill and other financial advice. He suggested that since the CDs are very less in demand, their goodwill value will be hampered. Nonetheless, the framework for goodwill calculation was decided as follows

    ‘The goodwill be valued at 4 years’ purchase of super profits.’ The following financial information was obtained at the end of this transaction

    • Assets ₹ 8,000

    • Creditors ₹ 1,000

    • Normal rate of return 10%

    • Goodwill of the firm ₹1,000

    ...view full instructions

    What is the average profit of business?

    Solutions

    Normal Profit = Capital Employed x Normal Rate of Return / 100

    = 8,000−1,000 = 7,000

    Normal Profit = 7,000 × 10/100 ​= 700

Close button icon
User Profile
-

Correct (-)

Wrong (-)

Skipped (-)

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
Mockers logo Get latest Exam Updates
& Study Material Alerts!
No, Thanks
Arrow pointer icon
Click on Allow to receive notifications
Notification bell icon ×
Open Now