Management or Management or Operating Operating Ratios Test Ratios Test This test consists of 10 questions This test consists of 10 questions designed to test your designed to test your understanding of how management understanding of how management performance is measured. performance is measured. The links provide you with a choice The links provide you with a choice of answer, along with explanations of answer, along with explanations and solutions. and solutions. You will need a calculator to You will need a calculator to complete this test. complete this test.
Management or Operating Ratios Test. This test consists of 10 questions designed to test your understanding of how management performance is measured. The links provide you with a choice of answer, along with explanations and solutions. You will need a calculator to complete this test. - PowerPoint PPT Presentation
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Management or OperatingManagement or Operating Ratios Test Ratios Test
This test consists of 10 questions This test consists of 10 questions designed to test your understanding of designed to test your understanding of how management performance is how management performance is measured.measured.
The links provide you with a choice of The links provide you with a choice of answer, along with explanations and answer, along with explanations and solutions.solutions.
You will need a calculator to complete You will need a calculator to complete this test.this test.
Question 1.Question 1.
A firm has a turnover of £365,000, and a A firm has a turnover of £365,000, and a gross profit of £126,000. What is the firms gross profit of £126,000. What is the firms GPM? GPM?
a. 34.5%a. 34.5%
b. £239,000b. £239,000
c. 28.9%c. 28.9%
Your answer is correct.
Wrong. Your are required to calculate GPM , not Gross Profit. Try Again
The formula is
Gross Profit times 100
Turnover 1
Try again.
Question 2.Question 2.
A Firm has a turnover of £2,600,000. Gross A Firm has a turnover of £2,600,000. Gross Profit of £1,900,000, and expenses of Profit of £1,900,000, and expenses of £1,200,000. What is the firms NPM?£1,200,000. What is the firms NPM?
A. 46.1%A. 46.1%
B. 36.8%B. 36.8%
C. 26.9%C. 26.9%
Wrong. You must first calculate Net Profit and then apply the NPM formula, which is
Net Profit times 100Turnover 1
Wrong. You must first calculate Net Profit and then apply the NPM formula, which is
Net Profit times 100Turnover 1
Correct.
Question 3.Question 3.
Which of the following are included in ‘Capital Which of the following are included in ‘Capital Employed’?Employed’?
1. Short Term Borrowing1. Short Term Borrowing
2. Shareholders Funds2. Shareholders Funds
3. Reserves3. Reserves
A. All ThreeA. All Three
B. 2 and 3B. 2 and 3
C. 1 and 3C. 1 and 3
Long term borrowing is included, but short term borrowing is not!
Correct.
Long term borrowing is included, but short term borrowing is not!
Question 4.Question 4.
ROCE measures?ROCE measures?
A. The effective management of liquidityA. The effective management of liquidity
B. The effective management of current assetsB. The effective management of current assets
C. The effective management of capitalC. The effective management of capital
Liquidity ratios are used for this purpose!
Wrong, remember we are looking at capital invested in the business
Correct, well done!
Question 5.Question 5.
Which of the following defines stock Which of the following defines stock turnover?turnover?
A.The average time taken to pay for stock and A.The average time taken to pay for stock and raw materials purchased.raw materials purchased.
B. The value average stock held, in relation to B. The value average stock held, in relation to total annual sales.total annual sales.
This refers to the creditors ratio. Stock turnover tells us about the relationship between stocks held and turnover.
Correct.
Question 6.Question 6.
A firm has a total capital employed of A firm has a total capital employed of £900,000, and a trading profit of £110,000. £900,000, and a trading profit of £110,000. What is the firms ROCE?What is the firms ROCE?
A. 12.2%A. 12.2%
B. 122%B. 122%
C. 8.18%C. 8.18%
Correct, well done!
The formula to use isTrading Profit times 100Capital Employed 1
The formula to use isTrading Profit times 100Capital Employed
Question 7.Question 7.
Which of the following is true?Which of the following is true?
A. A ROCE of less than base rates is A. A ROCE of less than base rates is desirable.desirable.
B. A ROCE of more than base rates is B. A ROCE of more than base rates is desirable.desirable.
Wrong. Firms would expect a ROCE of at least 2 or 3%greater than the cost of borrowing.
Correct. Firms would expect a ROCE of at least 2 or 3%greater than the cost of borrowing, but even higheris preferable.
Question 8.Question 8.
Trading profit can be defined as?Trading profit can be defined as?
A. Profit after Interest and TaxationA. Profit after Interest and Taxation
B. Profit before Interest and TaxationB. Profit before Interest and Taxation
C. Turnover less Cost of SalesC. Turnover less Cost of Sales
Wrong. Trading Profit ignores the effects of Interest and Taxation
Correct, well done!
Wrong. This calculation gives us Gross Profit.
Question 9.Question 9.
A firm has an average stock holding of A firm has an average stock holding of £116,000, and a Turnover of £596,000. £116,000, and a Turnover of £596,000. What is the firms Stock Turnover Ratio?What is the firms Stock Turnover Ratio?
A. 4.17 timesA. 4.17 times
B. 8.6 timesB. 8.6 times
C. 5.13 timesC. 5.13 times
Wrong, The formula is
Average stock times 100Turnover 1
Wrong, The formula is
Average stock times 100Turnover 1
Correct.
Question 10.Question 10.Which of the following firms is likely to have Which of the following firms is likely to have
the highest Stock Turnover Ratio?the highest Stock Turnover Ratio?
A. JewelersA. Jewelers
B. DIY StoreB. DIY Store
C. GreengrocersC. Greengrocers
Wrong, Likely to have the lowest.
Wrong. Probably in the middle of the 3
Correct. Likely to have a stock turnover ratio of 50 timesor even higher.
You have now completed the test. For further more detailed revision please use the case studies on