Accounting Principles and Analysis Quiz
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Questions and Answers

What is the formula for Net Cash Flow?

  • Fixed Costs ÷ Contribution per Unit
  • Total Cash Inflow – Total Cash Outflow (correct)
  • Selling Price × Quantity Sold
  • Opening Balance + Total Cash Outflow

Which formula correctly calculates Total Costs?

  • Fixed Costs + Total Variable Costs (correct)
  • Total Revenue ÷ Total Contribution
  • Revenue × Cost of Goods Sold
  • Selling Price – Variable Costs

How do you calculate Profit using Contribution?

  • Total Costs × Net Contribution
  • Contribution per Unit × Margin of Safety
  • Fixed Costs ÷ Total Revenue
  • Total Revenue – Total Fixed Costs (correct)

What is the formula for Contribution per Unit?

<p>Selling Price – Variable Costs (D)</p> Signup and view all the answers

How is Closing Balance calculated?

<p>Opening Balance + Net Cash Flow (D)</p> Signup and view all the answers

Which formula calculates Break-even Output?

<p>Total Fixed Costs ÷ Contribution per Unit (D)</p> Signup and view all the answers

Which formula represents Total Revenue?

<p>Selling Price × Quantity Sold (A)</p> Signup and view all the answers

What is the formula for Margin of Safety?

<p>Actual Sales – Break-even Sales (C)</p> Signup and view all the answers

What is the formula for calculating the Gross Profit Margin?

<p>(Gross Profit ÷ Revenue) × 100 (D)</p> Signup and view all the answers

How is the formula for calculating the Current Ratio expressed?

<p>Current Assets ÷ Current Liabilities (D)</p> Signup and view all the answers

What does Net Book Value represent and how is it calculated?

<p>Cost – Depreciation (A)</p> Signup and view all the answers

Which formula correctly finds the Profit/Loss for the Year?

<p>Gross Profit + Other Income – Expenses (B)</p> Signup and view all the answers

How is the formula for Return on Capital Employed (ROCE) structured?

<p>(Profit ÷ Capital Employed) × 100 (C)</p> Signup and view all the answers

Which formula correctly calculates the Capital Employed?

<p>Opening Capital + Profit for the Year – Drawings (B)</p> Signup and view all the answers

In calculating Trade Payable Days, which formula should be used?

<p>(Trade Payables ÷ Credit Purchases) × 365 (C)</p> Signup and view all the answers

What is the correct formula to determine the Mark-up percentage?

<p>(Gross Profit ÷ Cost of Sales) × 100 (C)</p> Signup and view all the answers

How is Net Current Assets calculated?

<p>Current Assets – Current Liabilities (C)</p> Signup and view all the answers

How is Inventory Turnover calculated?

<p>(Cost of Sales ÷ Average Inventory) × 365 (C)</p> Signup and view all the answers

Flashcards

Total Revenue

The total amount of money a business receives from selling its goods or services.

Profit

The difference between the total revenue a business receives and the total costs it incurs.

Total Contribution

The amount of money a business has left after deducting all its variable costs from its total revenue.

Contribution per Unit

The amount of money a business earns from selling one unit of its product or service, after deducting its variable cost per unit.

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Break-even Output

The level of output at which a business's total revenue equals its total costs. This means the business is neither making a profit nor a loss.

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Margin of Safety

The difference between actual sales and break-even sales. It shows how much sales can fall before a business starts to make a loss.

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Revenue

The total amount of money a business receives from selling its goods or services.

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Gross Profit

The difference between the total revenue a business receives and the cost of goods that were sold to generate that revenue.

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Profit/Loss for the Year

The profit or loss made by a business over a period of time. It is calculated by subtracting total expenses from total revenue.

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Net Book Value

The value of a company's assets after deducting accumulated depreciation. It is calculated by subtracting accumulated depreciation from the original cost of the asset.

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Net Current Assets

This is the difference between a company's current assets (cash and assets that can be converted into cash within a year) and its current liabilities (debts that need to be paid within a year).

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Net Assets

The total value of a company's assets minus its liabilities. It represents the company's overall worth.

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Capital Employed

This is the total value of a company's assets that are available for use in its operations. It can be calculated by adding opening capital, profit for the year, and subtracting drawings.

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Gross Profit Margin

A measure of how much profit a company makes on each dollar of revenue. It is calculated by dividing gross profit by revenue and multiplying by 100.

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Profit Margin

A measure of a company's profitability. It is calculated by dividing profit by revenue and multiplying by 100.

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Return on Capital Employed (ROCE)

A measure of a company's ability to generate profit from its assets. It is calculated by dividing profit by capital employed and multiplying by 100.

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Current Ratio

This ratio measures a company's ability to meet its short-term obligations. It is calculated by dividing current assets by current liabilities.

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Liquid Capital Ratio

This ratio is a more conservative measure of a company's liquidity. It focuses on the most liquid current assets (excluding inventory) and divides them by current liabilities.

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Study Notes

Cash Flow Forecasts

  • Net Cash Flow: Total Cash Inflow – Total Cash Outflow
  • Closing Balance: Opening Balance + Net Cash Flow

Break-Even Analysis

  • Total Revenue: Selling Price × Quantity Sold
  • Total Costs: Fixed Costs + Total Variable Costs
  • Profit: Total Revenue – Total Costs
  • Total Contribution: Total Revenue – Total Variable Costs
  • Contribution per Unit: Selling Price – Variable Costs
  • Profit using Contribution: Total Revenue – Total Fixed Costs
  • Break-even Output: Total Fixed Costs ÷ Contribution per Unit
  • Margin of Safety: Actual Sales – Break-even Sales

Statement of Comprehensive Income

  • Revenue: Selling Price × Quantity Sold
  • Gross Profit: Sales Revenue – Cost of Goods Sold
  • Cost of Goods Sold (COGS): Opening Inventory + Purchases – Closing Inventory
  • Profit/Loss for the Year: Total Revenue – Expenses
  • Net Book Value: Cost – Depreciation

Statement of Financial Position

  • Net Current Assets: Current Assets – Current Liabilities
  • Net Assets: Non-current Assets + Net Current Assets – Long-term Liabilities
  • Capital Employed: Opening Capital + Profit for the Year – Drawings
  • Balance Sheet Equation: Net Assets = Capital Employed

Measuring Profitability

  • Gross Profit Margin: (Gross Profit ÷ Revenue) × 100
  • Mark-up: (Gross Profit ÷ Cost of Sales) × 100
  • Profit Margin: (Profit ÷ Revenue) × 100
  • Return on Capital Employed (ROCE): (Profit ÷ Capital Employed) × 100

Measuring Liquidity

  • Current Ratio: Current Assets ÷ Current Liabilities
  • Liquid Capital Ratio: (Current Assets – Inventory) ÷ Current Liabilities
  • Trade Receivable Days: (Trade Receivables ÷ Credit Sales) × 365
  • Trade Payable Days: (Trade Payables ÷ Credit Purchases) × 365

Measuring Efficiency

  • Inventory Turnover: (Average Inventory ÷ Cost of Sales) × 365

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Description

Test your knowledge on key accounting principles including cash flow forecasts, break-even analysis, and financial statements like the statement of comprehensive income and financial position. This quiz covers essential calculations and concepts every accountant should know.

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