This test consists of 10 questions designed to
test your understanding of the structure of
and ability to simply analyse a Balance
sheet.
The links provide you with a choice of answer,
along with explanations and solutions.
You will need a calculator to complete this test.
Which of the following is a Fixed Asset
a. Factory Premises
b. Work-in-progress
c. Cash at Bank
Fixed Assets are those things owned by a
business, that do not change in the normal
course of business. Factories are therefore
fixed assets.
Fixed Assets are those things owned
by a business, that do not change in
the normal course of business. Workin-progress are part completed goods
for sale. The value of quantity of these
is likely to change on a daily basis Try
again.
Fixed Assets are those things owned by
a business, that do not change in the
normal course of business. Cash is
likely to change on a daily basis as bills
are paid and payments received. Try
again.
Which of the following is a Current Liability?
A. Debtors
B. Commercial Mortgage
C. Creditors
Debtors are firms or individuals that
owe the company money, for
example by buying on credit.
Debtors are Current Assets.
A Commercial mortgage will
have a term up to 20 years. It is
therefore not likely to be due for
payment in the near future ( less
than 12 months)
Correct, Creditors are businesses or
individuals to whom the business owes
money. They are typically created by
buying goods on business credit
A firms Current Assets are £376,000, and Current
Liabilities are £293,000. What is the firms Net
Current assets Figure?
A. £669,000
B. £83,000
C. - £83,000
You have totaled both types of
assets, when you should deduct,
CL from CA
Correct. CA-CL = Net
Current Assets
You have reversed the
calculation. CA- CL = Net
Current Assets
A firms Current Assets are £376,000, and Current
Liabilities are £293,000. What is the firms Current
Ratio figure?
A. 0.78 : 1
B. 1 : 1.28
C. 1.28 : 1
You have reversed the calculation .
Current ratio = CA : CL
Ratios are always show as
something : 1. You have carried
out the correct calculation, but
then reversed the figures.
Well done! Current Ratio = CA : CL
Which of the following defines Retained Profits?
A. Profits made by the business, but kept by the
business as cash in the bank.
B. Profits made by the business, but reinvested in the
business, as working capital or fixed assets.
Retained profit, can be held as
any form of asset, and is best
used for reinvestment within
the business.
Correct!
A firm starts trading with Fixed Assets to the value of
£45,000. In a three year period it purchases no new
assets and depreciates the value of its assets by 10%
of the initial cost each year. What will be the value
of its assets at the end of the period?
A. £31,500
B. £45,000
C. £30,000
Correct. 3 times £4,500 = £13,500. £45,000 £13,500 = £31,500
Wrong. The firm will depreciate its
assets by 10% of £45,000 each year.
Try again.
Wrong. The firm will depreciate its
assets by 10% of £45,000 each year. Try
again.
Which of the following defines current liabilities?
A. Debts owed by the business due to be repaid in
more than one year.
B. Debts owed by the business due to be repaid in less
than one year.
Wrong current liabilities are
Debts owed by the business due
to be repaid in less than one year.
If they are due to be paid in more
than one year they are known as
Long Term Liabilities
Correct, current liabilities are
Debts owed by the business due
to be repaid in less than one year.
If they are due to be paid in more
than one year they are known as
Long Term Liabilities
Which of the following is a reason why stock is
ignored when calculating the firms Acid Test Ratio?
A. the value of stock is hard to calculate
B. stock may not be easily converted into cash
C. stock is often overvalued on a firms balance sheet
Wrong. Remember the ATR is
looking at the liquidity of the firm.
Correct. The ATR is looking at the
liquidity of the firm, and stock may
such as raw materials and work in
progress is unlikely to be easily
convertible into cash..
Wrong. Remember the ATR is
looking at the liquidity of the
firm.
Which of the following is a long term liability?
A. Share Capital
B. Overdraft
C. Mortgage
Wrong. Share capital is a
form of permanent capital it does not have to be repaid.
Wrong. An overdraft is a
current liability.
Correct. A commercial mortgage
may have a term of up to 20
years.
For which of the following can reserves be used?
1. Paying dividends in a loss making year
2. Purchasing Fixed assets
3. Funding a take-over
A. 2 only
B. 2 and 3
C. All of the above
. Purchase of fixed assets is one of
the main purposes to which
reserves are put, but not the only
one
Firms can and do use reserves to
pay dividends, as well as purchase
fixed assets. But there are other uses
to which they can be put.
Correct. They can be used for all
three purposes.
You have now completed the test.
For further
more detailed revision please use the
case studies available from the NGFL
site.