Scribd
Upload
29 views4 pages

Final Exam - FA & C

The document is a financial analysis exam with multiple choice and calculation problems. It provides company financial statements and asks students to calculate various financial ratios to analyze the company's liquidity, efficiency, profitability, and leverage.

Uploaded by

bavanthinil
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
29 views4 pages

Final Exam - FA & C

The document is a financial analysis exam with multiple choice and calculation problems. It provides company financial statements and asks students to calculate various financial ratios to analyze the company's liquidity, efficiency, profitability, and leverage.

Uploaded by

bavanthinil
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

COMPUTEK COLLEGE

FINANCIAL ANALYSIS & CONTROL


FINAL EXAM (50%)

I – Answer the following questions briefly (Points, 8)

1) Describe the two main purposes of Financial Ratios.


Financial ratios serve two main purposes: to provide a snapshot of a company's financial health and to
facilitate comparison with other companies or industry benchmarks
2) What does it means by Free Cash Flow (FCF).

Free Cash Flow (FCF) represents the cash a company generates after accounting for capital
expenditures and operational expenses. It is a measure of a company's financial flexibility and ability
to pursue growth opportunities.

3) What is meant by Negotiated Budgeting? Explain briefly.

Negotiated Budgeting involves a collaborative approach where managers and department heads
negotiate their budget targets based on their operational needs and strategic objectives.

4) Mention two financial ratios from Liquidity analysis.

Two financial ratios from Liquidity analysis are the Current Ratio and the Quick Ratio.

II – State True or False for the under listed sentences (Points, 8)

1) Imposed budgeting is a top-down process.-True


2) Vertical analysis involves taking several years of financial data comparing them to
each other to determine growth rate. -False
3) Leverage ratios help us to measure the liquidity of the organization. -False
4) Budgeting control in the organization requires expenditure of time, money and
effort.-True

III – Choose the best answer for the following multiple choice questions (Points, 8)

1) One of the following methods is not one of the main methods of budgeting process:
a) Direct materials purchase budget
b) Incremental budgeting
c) Zero-bas budgeting
d) Activity-based budgeting

1
2) Budgeting control has limitations or disadvantages which include:
a) It may bring about rigidity in the organization (non – flexibility)
b) It becomes useless when there is inflation or depression in the market
c) Most of the people in the organization considers it as an end rather than a means
d) All of the above
3) One of the following is not considered as profitability measure of an organizations
performance
a) Gross profit margin
b) EBIT (Operating income) margin
c) Quick ratio margin
d) Net profit margin
4) Which one of the under mentioned activities is not part of the cash flow components
a) Investing activities
b) Leverage activities
c) Financing activities
d) Operating activities

IV – Problem/Calculation (Points, 26)

The following data is extracted from the financial statements prepared by “ABC”
Company for the year 2019.

Income Statement
Sales 700000
Cost of Sales 500000
Gross Profit 200000
Operating expense 60000
EBIT (Operating profit) 140000
Interest expense 20000
EBT 120000
Taxes 30000
Net Income 90000

Balance Sheet

Assets Liabilities
Current Assets Current Liabilities
Cash 80,000 Accounts Payable 45,000
Accounts Receivable 40,000 Notes payable 45,000
Inventory 80,000 Taxes payable 30,000
Supplies 30,000 Total Current Liab 120,000
Total Current Assets 230,000 Long-term Liab
Fixed Assets Long-term loan 80,000

2
Equipment 270,000 Total Liabilities 200,000
Equity/Capital
ABC Co. Equity 300,000
Total Assets 500,000 Total Liab & Equity 500,000

Required:
i) Liquidity Ratios (4 points)
a. Current Ratios
b. Acid-test Ratio

ii) Efficiency Ratios (9 points)


a. Inventory Turnover
b. Receivable Turnover
c. Asset Turnover

iii) Profitability Ratios (9 points)


a. Gross Profit Margin
b. Operating Profit Margin
c. Net Profit Margin

iv) Leverage Ratios (4 points)

a. Debt to Asset Ratio


b. Interest Coverage Ratio

. Brief Answers
1. Financial ratios serve two main purposes: to provide a snapshot of a company's financial health and to
facilitate comparison with other companies or industry benchmarks.
2. Free Cash Flow (FCF) represents the cash a company generates after accounting for capital
expenditures and operational expenses. It is a measure of a company's financial flexibility and ability
to pursue growth opportunities.
3. Negotiated Budgeting involves a collaborative approach where managers and department heads
negotiate their budget targets based on their operational needs and strategic objectives.
4. Two financial ratios from Liquidity analysis are the Current Ratio and the Quick Ratio.

II. True or False


1. True
2. False
3. False
4. True

III. Multiple Choice


1. The method not part of the main methods of budgeting process is a) Direct materials purchase budget.

3
2. The limitations or disadvantages of budgeting control include d) All of the above.
3. The profitability measure not considered is c) Quick ratio margin.
4. The activity not part of the cash flow components is b) Leverage activities.

IV. Problem/Calculation
i) Liquidity Ratios
a) Current Ratio = Current Assets / Current Liabilities
b) Acid-test Ratio = (Current Assets - Inventory) / Current Liabilities

ii) Efficiency Ratios


a) Inventory Turnover = Cost of Goods Sold / Average Inventory
b) Receivable Turnover = Net Credit Sales / Average Accounts Receivable
c) Asset Turnover = Net Sales / Average Total Assets

iii) Profitability Ratios


a) Gross Profit Margin = (Gross Profit / Net Sales) * 100
b) Operating Profit Margin = (Operating Income / Net Sales) * 100
c) Net Profit Margin = (Net Income / Net Sales) * 100

iv) Leverage Ratios


a) Debt to Asset Ratio = Total Debt / Total Assets
b) Interest Coverage Ratio = EBIT / Interest Expense

You might also like