29 Jun The following data was extracted from the records of XYZ Ltd at 31 December 2001 and is to be used for Questions 3 and 4.
Question
Chapter 9
Interpretation of accounts
1.Which of the following is not an essential prerequisite to permit the successful use of financial
statements for ratio analysis?
(a) The accounts should use comparable accounting policies.
(b) The accounts should be drawn from similar types of organizations.
(c) The accounts should be available for several accounting periods.
(d) The accounts used should not include forecast financial information.
2.The current ratio is an indicator of which following characteristic of an organization?
(a) The current level of profitability.
(b) The future level of profitability.
(c) The investment potential.
(d) The liquidity in the short term.
The following data was extracted from the records of XYZ Ltd at 31 December 2001 and is to be
used for Questions 3 and 4.
£000
Sales 2500
Cost of sales 1200
Stock at 31 December 2001 350
Stock at 1 January 2001 300
Debtors 340
Creditors 400
3.The debtors collection period in days was?
(a) 43.
(b) 45.
(c) 50.
(d) 58.
4.The rate of stock turnover was?
(a) 3.5 times.
(b) 3.7 times.
(c) 6.3 times.
(d) 7.7 times.
5.For a limited company, return on capital
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