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CURRENT FINAL TERM PAPER 2011
Question No: 1 ( Marks: 1 ) - Please choose one
Which one of the following statements is TRUE regarding distributions to
stockholders?
► The payment of dividends is not directly related to the profits of a given
period
► Shareholders can individually decide on their distributions
► To receive a corporate dividend, stock must be owned on the date of
declaration
► Corporate dividends reduce contributed capital and therefore, stockholders’
Equity
Question No: 2 ( Marks: 1 ) - Please choose one
In a statement of cash flows, the acquisition of land by issuing capital stock:
► Is not shown at all, since no cash was received or disbursed
► Is shown as an investing activity
► Is shown as a financing activity
► Is shown in a supplementary schedule as a non-cash investing and
financing transaction
Question No: 3 ( Marks: 1 ) - Please choose one
In the vertical analysis of income statement, all the accounts are expressed as a
percentage of which of the following?
► Net sales
► Gross sales
► Net income
► Total expenses
Question No: 4 ( Marks: 1 ) - Please choose one
A company has a cost of goods sold of Rs. 530,000; the beginning
inventory is Rs. 120,000, and ending inventory is Rs. 180,000.
Calculate the number of days to sell the inventory. (Round the figures
to the nearest whole)
► 83 days
► 125 days
► 104 days
► 100 days
Question No: 5 ( Marks: 1 ) - Please choose one
Operating cycle belongs to which group of ratios?
► Leverage ratios
► Liquidity ratios
► Profitability ratios
► Activity ratios
Question No: 6 ( Marks: 1 ) - Please choose one
What will be effect of purchase of inventory on open account on quick
ratio of the company?
► Increase
► Decrease
► No effect
► Can not be found from the given information
Question No: 7 ( Marks: 1 ) - Please choose one
Which of the following provides the basis for the trial balance?
► Income statement
► Statement of cash flow
► Ledger
► Adjusting entries
Question No: 8 ( Marks: 1 ) - Please choose one
In order to know the percentage of assets financed by creditors, which
of the following ratio is calculated?
► Debt Ratio
► Equity Ratio
► Operating credit Ratio
► Quick Ratio
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following statement is the LEAST LIKELY to be correct?
► A firm that has a high degree of business risk is less likely to want
to incur financial risk
► There exists little or no negotiation with suppliers of capital
regarding the financing needs of the firm
► Financial ratios are relevant for making internal comparisons
► It is important to make external comparisons or financial ratios
Question No: 10 ( Marks: 1 ) - Please choose one
The cash flow from investing activities shows the cash effects of which of the
following?
► Income statement items
► Long term assets items
► Long term liability & stockholder’s equity
► Long term liability and long term assets
Question No: 11 ( Marks: 1 ) - Please choose one
In a perpetual inventory system, which of the following is NOT part of the series of
journal entries made when merchandise is sold on credit?
► Credit the Cost of Goods Sold account
► Credit the Sales account
► Credit the Merchandise Inventory account
► Debit the Accounts Receivable account
Question No: 12 ( Marks: 1 ) - Please choose one
As stated in the audit report, or Report of Independent Accountants, the primary
responsibility for a company’s financial statements lies with which of the following?
► The owners of the company
► Independent financial analysts
► The auditors
► The company’s management
Question No: 13 ( Marks: 1 ) - Please choose one
The money that a company gets from potential investors in addition to the stated
value of
the stock is referred to which of the following?
► Paid in capital
► Additional paid in capital
► Capital stock
► Contributed capital
Question No: 14 ( Marks: 1 ) - Please choose one
Nishat Corporation had net income of Rs. 100,000, paid income taxes of Rs. 30,000,
and
had interest expense of Rs. 8,000. What was Nishat's times interest earned ratio?
► 12.5
► 16.25
► 17.25
► 17.85
Times interest earned (TIE) ratio = EBIT/interest.
= 138000/8000
= 17.25
Question No: 15 ( Marks: 1 ) - Please choose one
Operating cycle belongs to which group of ratios?
► Leverage ratios
► Liquidity ratios
► Profitability ratios
► Activity ratios
Question No: 16 ( Marks: 1 ) - Please choose one
What will be the effect of conversion of a portion of bonds payable into common
stock
on the interest coverage ratio of the company?
► Increase
► Decrease
► No effect
► Can not be found from the given information
Question No: 17 ( Marks: 1 ) - Please choose one
Assume that a company has current assets of Rs. 60,000, current liabilities of Rs.
35,000
and prepaid expenses of Rs. 5,000. Calculate the quick ratio of the company?
► 1.57
► 1.71
► 1.86
► 0.58
Quick ratio = current assets – inventory – prepaid expenses / current liabilities
= 60000 – 5000 / 35000
= 55000 / 35000
= 1.57
Question No: 18 ( Marks: 1 ) - Please choose one
Which of the following is NOT normally required for revenue to be recognized
according to the revenue principle for accrual basis accounting?
► The price is fixed or determinable
► Services have been performed
► Cash that has already been collected
► Evidence of an arrangement for customer payment exists
Question No: 19 ( Marks: 1 ) - Please choose one
Which one of the following ratios measures general liquidity of a company?
► Quick ratio
► Current ratio
► Investments ratio
► Defensive interval ratio
Question No: 20 ( Marks: 1 ) - Please choose one
Which of the following is a type of preferred stock that entitles the holder to a
fixed dividend and, in addition, to the right to get any surplus profits after
payment of agreed levels of dividends to holders of common stock?
In arrears preferred shares
Call able preferred shares
Cumulative preferred shares
Participating preferred shares
Question No: 21 ( Marks: 1 ) - Please choose one
To financial analysts, "working capital" means the same thing as which of the
following?
Total assets
Fixed assets
Current assets
Current assets minus current liabilities
Question No: 22 ( Marks: 1 ) - Please choose one
Which group of ratios relates the financial charges of a firm to its ability to service
them?
Debt ratios
Coverage ratios
Profitability ratios
Activity ratios
Question No: 23 ( Marks: 1 ) - Please choose one
Ames Corporation's net accounts receivable were Rs. 750,000 on December 31,
20X1, and Rs.1,250,000 on December 31, 20X2. Net cash sales for 20X2
were Rs. 3,300,000. The accounts receivable turnover ratio for 20X2 was 16.
What were the total net sales for 20X2?
Rs. 12,800,000
Rs. 16,000,000
Rs. 16,100,000
Rs. 19,300,000
Calculation:
Receivable turnover = net credit sales/Avg.receivable
16 = net credit sales/1000,000
16*1000,000=net credit sales
16,000,000= net credit sales
total sales = cash sales – credit sales
= 3,300,000 – 16,000,000
= 19,300,000
Question No: 24 ( Marks: 1 ) - Please choose one
Return on Sales is also known as which of the following?
Gross profit margin
Operating profit margin
Return on total assets
Return on investment
Question No: 25 ( Marks: 1 ) - Please choose one
What are the effects of an adjusting entry on the financial statements?
Match revenues and expenditures
Increase net income
Increase the accuracy of balance sheet and income statement
Match revenues and assets
Question No:26 ( Marks: 1 ) - Please choose one
ABC Company has a cost of goods sold of Rs. 500,000. During the year the
inventory increased by Rs. 10,000 and accounts payable increased by Rs.
15,000. The interest expense was Rs. 15,000 for the year and dividend of Rs.
11,000 were paid during the year. What would be the cash payments for the
purchase of the merchandise?
Rs. 505,000
Rs. 516,000
Rs. 490,000
Rs. 495,000
Question No: 27 __ ( Marks: 1 ) - Please choose one
Which of the following valuation methods can distort the comparison between
companies?
Inventory valuation methods
Assets valuation methods
Sales valuation methods
Expenses valuation methods
Question No: 28__ ( Marks: 1 ) - Please choose one
When dividends are paid to the shareholders they must be approved by which of
the following authority?
Board of directors
Management
Common Stockholders
Preferred Stockholders
Question No: 29 __( Marks: 1 ) - Please choose one
Which of the following statements (in general) is CORRECT?
A low receivables turnover is desirable
The lower the total debt-to-equity ratio, the lower the financial risk for a
firm
An increase in net profit margin with no change in sales or assets means a
weaker ROI
The higher the tax rate for a firm, the lower the interest coverage ratio
Question No: 30 __( Marks: 1 ) - Please choose one
Using the following information, calculate the book value per share of common
stock.
Common stock, 0.10 par, 10,000 shares authorized
2000 share issued and outstanding Rs. 200
Paid-in capital in excess of par - common Rs. 49,800
Retained Earnings Rs. 28,000
Rs. 25
Rs. 39
Rs. 5
Rs. 7.8
Book value per share common stock = common stockholders equity / Number of
common
share
200+49800+28000 /10000
7.8
Question No: 31 ( Marks: 1 ) - Please choose one
Oliver Incorporated has a current ratio equal to 1.6 and a quick ratio equal to 1.2.
The company has Rs. 2 million in sales and its current liabilities are Rs. 1 million.
what is the value of company's current assets?
1,600,000
1,200,000
3,200,000
2,400,000
current ratio = current assets / current liabilities
current assets = current ratio * current liabilities
= 1.6*1,000,000
= 1,600,000
Question No: 32 __ ( Marks: 1 ) - Please choose one
A firm has beginning accounts receivables of Rs. 375,000, and ending accounts
receivables of Rs. 400,000. The sales were Rs. 2,500,000 including cash sales
of Rs. 600,000.
Calculate the accounts receivable turnover ratio of the company.
0.76
6.45
4.75
4.90
Account receivable turnover = net credit sales / average account receivable
= 1,900,000 / 387,500
= 4.90
AND OTHER WERE NEW ………..
Q.1. what do you mean by the efficiency of the business? 3 marks.
Q.2. Some data was given like current assets, fixed assets,current liabilities etc. and
current ratio and quick ratio were given…from the given information comment on
the liquidity of the business.. 3 mark
Q,3. what information do you produce from ratio than through the simple
observation of the business?. Marks.3
Q.4. some data was given of 2 years, like opening and closing account receivable and
credit sales. Calculate the account receivable turnover ratio. Marks.5
Q.5. some data was given for the 1996 to 2001, their sales and net incomes also
given. Calculate the trend percentage. Marks.5
Q.6. what is the effect of the following on the assets, liabilities and owner
equity?.MARKS 5
i. borrowd money from a bank.
ii. returned office equipment which was previously purchased on credit and
payment was not made.
iii. sold land for cash in excess the cost price.
iv. purchase a computer on credit.
v. payment made to a creditor.
Q.7. calculate the price earning ratio from the following. Marks.5
Net income Rs.130000
Opening shares outstanding 250000
Ending shares outstanding 270000
Current price per share Rs.2.7
Dividend price per share Rs.1.2
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