What is the formula for Quick Ratio?
(Cash + Total current assets + Accounts Receivable) / Total current liabilities
What is the effect of impairment write-downs on total asset turnover?
They will most likely result in an increase in the debt-to-equity ratio but not the total asset turnover.
What happens to a company’s balance sheet when it pays rent in advance?
It will reflect a reduction in assets and liabilities.
Which of the following is not a current asset?
Goodwill
What is the formula for Financial Leverage Ratio?
Total Assets / Total equity
What costs are included in both the cost of inventory and property, plant, and equipment?
Delivery costs
What ratio would an investor examine to assess a company’s long-term solvency?
Debt-to-equity ratio
What component of shareholders’ equity does ‘retained earnings’ belong to?
Shareholders’ equity
What was the quick ratio for SAP group at 31 December 2017?
1
How are unrealized gains and losses for available-for-sale financial assets reflected in shareholders’ equity?
They are a component of accumulated other comprehensive income.
What percentage do total liabilities represent on a vertical common-size balance sheet if total liabilities are £35 million and total stockholders’ equity is £55 million?
39%
How are unrealized gains and losses for trading securities reflected in shareholders’ equity?
They flow through income into retained earnings.
What is an example of a contra asset account?
Allowance for doubtful accounts
What happens when a company buys shares of its own stock to be held in treasury?
It records a reduction in both assets and shareholders’ equity.
What is a classified balance sheet?
It distinguishes between current and non-current items and presents a subtotal for current assets and liabilities.
How are unrealized gains and losses for held-to-maturity financial assets reflected in shareholders’ equity?
They are not recognized.
What can an analyst determine from a common-size analysis of a company’s balance sheet over several periods?
An increase or decrease in financial leverage.
How is non-controlling (minority) interest in consolidated subsidiaries presented on the balance sheet?
Separately, but as a part of shareholders’ equity.
What does equity equal?
Assets - Liabilities
How is money received from customers for future products recorded?
As an asset and a liability.
What type of company is most likely to use a liquidity-based balance sheet presentation?
A bank.
What is a limitation of the information provided by a balance sheet?
Uncertainty regarding the change in current value following the end of the reporting period.
What are resources controlled by a company as a result of past events?
Assets.
