Question

A company has Cash of $1000, Accounts Receivable of $200, Inventory of $300, Long-Term Assets of $4000, Accounts Payable of $500 and a Long-Term Bank Loan of $5000. Calculate the company's current ratio.

Question 1 options:

	1
	2
	3
	4

Question 2

Using the following information, calculate the inventory turnover for ABC Retailers: Sales are $4800, Cost of Goods Sold is $2000, operating expenses are $1000, and average inventory is $500.

Question 2 options:

	4
	5
	6
	7

Question 3

For the current period, a company had sales of $400,000, a gross margin of 50%, opening inventory of $40,000 and closing inventory of $60,000. Calculate the inventory days on hand ratio.

Question 3 options:

	180 days
	91 days
	45 days
	60 days

Question 4

Taking on more bank debt impacts which of the following on the statement of cash flows?

Question 4 options:

	cash flows from operations activities
	cash flows from investing activities
	cash flows from financing activities

Answer 1

Question 1

A company has Cash of $1000, Accounts Receivable of $200, Inventory of $300, Long-Term Assets of $4000, Accounts Payable of $500 and a Long-Term Bank Loan of $5000.

Calculate the company's current ratio.

Question 1 options:

	1
	2
	3
	4

.ans: 3

current ratio = Current assets / Current liabilities

Current assets = Cash of $1000 + Accounts Receivable of $200 + Inventory of $300 = 1500

Current liabilities = Accounts Payable of $500  = 500

current ratio = 1500 / 500 = 3:1

.

Question 2

Using the following information, calculate the inventory turnover for ABC Retailers: Sales are $4800, Cost of Goods Sold is $2000, operating expenses are $1000, and average inventory is $500.

Question 2 options:

	4
	5
	6
	7

Ans: 4.

inventory turnover = Cost of goods sold / Average inventory

Where,

Cost of goods sold = 2000

Average inventory = 500

inventory turnover = 2000 / 500 = 4 times

.

Question 3

For the current period, a company had sales of $400,000, a gross margin of 50%, opening inventory of $40,000 and closing inventory of $60,000. Calculate the inventory days on hand ratio.

Question 3 options:

	180 days
	91 days
	45 days
	60 days .

.ans: 91 days

Inventory days on hand = Average inventory / Cogs per day

Average inventory = (40000 + 60000) / 2 = 50000

Cogs per day = Cost of goods sold / 365

Cost of goods sold = sales * (100-50) = 400000 * 50% = 200000

Cogs per day = 200000 / 365 = 547.9452

Inventory days on hand = 50000 / 547.9452 = 91 days

.

Question 4

Taking on more bank debt impacts which of the following on the statement of cash flows?

Question 4 options:

	cash flows from operations activities
	cash flows from investing activities
	cash flows from financing activities

.

Ans: cash flows from financing activities.

Because the borrowing money is financing activities. This money is used for non operating activities, it is usually used for purchase assets, investment, expansion etc.. So it is classified under financing activities