Balance Sheet

Question 0

Name two main types of post balance sheet events

Answer 0

Adjusting and non adjusting events

Question 1

Define post balance sheet events

Answer 1

Events both favourable and unfavourable which occur between the balance sheet event and date on which balance sheet approved by the board of directors

Question 2

What are adjusting events

Answer 2

Those which provide new information relative to conditions which existed at balance sheet events eg
Bankruptcy of a debtor which owed the company money at the time the balance sheet was prepared
Events which provide fresh evidence of net value of realisable value of closing stocks
Announcement of a change of tax rates

Question 3

Define an intangible asset

Answer 3

Non Physical Asset having a useful life more than 1 year

Question 5

Give an example of an intangible asset

Answer 5

Goodwill, Trademarks, Customer lists for databases

Question 6

What is the current ratio

Answer 6

Relationship between the current assets and current liabilities ie current assets divided by current liabilities

Question 7

What is another name for current ratio

Answer 7

Working capital

Question 8

What is the liquid ratio

Answer 8

Cash and other assets being converted into cash quickly with a view to paying off current liabilities. I.e Current Assets less stock divided by current liabilities

Question 9

What is another name for liquid ratio

Answer 9

Quick Ratio or asset tes

Question 10

What is the Debtors Ratio

Answer 10

Trade Debtors ignoring prepayments divided by the total credit sales for the period excluding cash

Question 11

What is the Creditors Ratio

Answer 11

Speed at which the business pays its debts to its creditors. Trade Creditors excluding accruals divided by the total credit purchases for the period

Question 12

What is Return on capital employed

Answer 12

Net profit as a percentage of the funds invested I the business or in other words the net worth of the business

Question 13

Define Shareholders equity

Answer 13

total assets less total liabilities
Net worth of the company
Preference shares are not part of the shareholders equity
Ordinary Shares + reserves + PL

Question 14

Define Net Assets

Answer 14

Total Assets less total liabilities which equates to the value of the business

Question 15

What is Net Current Assets

Answer 15

Current Assets less Current liabilities
Otherwise known as working capital
Reflects capital generated during the business day to day activities and if negative the company may have difficulties in financing its day to day activities

Question 16

Define Capital employed

Answer 16

TOTAL ASSETS - CURRENT LIABILITIES
Capital employed is the value of a company’s assets finance by the companys shareholders from the original capital invested by them in the business and by undistributed profits which have been retained in the business. It can be computed as the value of share capital plus reserves plus profit and loss account plus long term borrowings or alternatively as the value of fixed assets plus net current assets (current assets less current liabilities)