BUSSFIN WEEK 3-4

Question 1

are records that provide an indication of the organization’s financial
status and Provide an overview of a business or person’s financial condition in both short and long term.

Answer 1

Financial statements

Question 2

Four basic types of financial statements:

Answer 2

Balance sheet
Income statement
Cash flow statements
Statements of retained earnings

Question 3

referred to as statement of financial position or condition, reports on a
company’s assets, liabilities, and Ownership equity as of a given point in time.

Answer 3

Balance sheet

Question 4

It is also referred to as Profit and Loss statement (or “P&L”), reports on a company’s
income, expenses, and profits over a period of time. Profit & Loss account provide information on the
operation of the enterprise. These include sale and the various expenses incurred during the processing state.

Answer 4

Income statement:

Question 5

It explains the changes
in a company’s retained earnings over the reporting
period.

Answer 5

Statement of Retained Earnings

Question 6

It reports on a company’s cash
flow activities, particularly it is operating, investing and
financing activities.

Answer 6

Cash Flow Statement

Question 7

types of cash flow activities

Answer 7

operating, investing and
financing activities.

Question 8

a matter of ensuring that
transactions that take place after the business’s financial
period are not included in the financial statements.

Answer 8

Adjusted Trial Balance - Closing the Books

Question 9

a journal entry made at the end of
an accounting period that allocates income and
expenditure to the appropriate years.

Answer 9

Adjusting entry

Question 10

refers to the ability to convert the asset into cash – some
items may be more liquid than others.

Answer 10

Liquidity

Question 11

a term that is used to refer to the current level of financial
stability associated with a company or individual.

Answer 11

Solvency

Question 12

means that the business has cash in hand to honor
current obligations, or at least has assets that can quickly be
converted to cash without impacting the ability of the business
to continue functioning.

Answer 12

Liquidity solvency

Question 13

refers to the potential of a venture to be financially successful.

Answer 13

Profitability

Question 14

Three basic situations that can describe a business’
financial situation.

Answer 14

It can be profitable
It can break even
It can operate at a loss.

Question 15

enables investors and corporate management to take a deep look at
a company’s finances, with a special emphasis on how financial
statement items vary over a period of time. It is a method of analyzing financial statements in which each item in the
statement is represented as a percentage of a single larger item

Answer 15

Vertical analysis

Question 16

refers to a type of fundamental analysis in which a financial analyst
uses certain financial data to assess a company’s performance over
time. It helps a firm appraise its economic evolution from one
period to another.

Answer 16

Horizontal Anaysis

Question 17

simple but effective tool that is often used to get an accurate picture
of the financial stability of a company and This figure will reveal the current status of a company to honor short-
term debt obligations.

Answer 17

Current Ratio

Question 18

shows the proportion of profits generated by the sale of
products or services, before selling and administrative expenses. It is used to examine the ability of a business to create sellable products in a cost-effective
manner.

Answer 18

Gross Profit Ratio

Question 19

net sales minus cost of goods sold?
total gross sales less returns inwards and discount allowed?

Answer 19

Gross Profit
Net Sales

Question 20

the ratio of after-tax profits to net sales.

Answer 20

Net Profit Ratio

Question 21

gross profit minus operating expenses and income tax.

Answer 21

Net profit

Question 22

a financial analysis tool used to measure a company’s ability
to collect outstanding account receivables balances. This ratio determines how quickly a company collects outstanding cash balances
from its customers during an accounting period.

Answer 22

Receivables Turnover Ratio

Question 23

the amount of sales revenues less discounts, returns or other allowances
posted in the company’s accounts receivable journal.

Answer 23

Net credit sales

Question 24

the company’s total outstanding accounts receivable less
the allowance for bad debts expense.

Answer 24

Average net accounts receivable

Question 25

is a standard financial calculation that determines the number of times a business replaces its
inventory to generate its current level of sales over a given time period, typically 12 months. enables a company to properly manage its
inventory levels and to determine how much of its cash should be tied up in
inventory at any one time.

Answer 25

Inventory Turnover Ratio

Question 26

is a measure of the proportion of equity versus debt that is used to finance various portions of a
company’s operations. primarily to determine what amount of risk
there may be in either buying equity in the company through stock, or purchasing
bonds issued by the company.

Answer 26

Debt Equity Ratio

Question 27

If the ratio reveals a higher amount of debt compared to equity, investors may not consider the
company a greater risk. TRUE OR FALSE?

Answer 27

FALSE

Question 28

Vertical analysis refers to a type of fundamental analysis in which a financial analyst
uses certain financial data to assess a company’s performance over
time. TRUE OR FALSE?

Answer 28

FALSE ( HORIZONTAL ANAYLISIS)

Question 29

Liquidity solvency - means that the business has no cash in hand to honor
current obligations, or at least has assets that can quickly be
converted to cash impacting the ability of the business
to continue functioning. TRUE OR FALSE?

Answer 29

FALSE

Question 30

Solvency refers to the ability to convert the asset into cash – some
items may be more liquid than others. TRUE OR FALSE?

Answer 30

FALSE ( LIQUIDITY)

Question 31

Financial statements are formal records of the financial activities of a
business, person, or other entity. TRUE OR FALSE?

Answer 31

TRUE

Question 32

Dedbt equity Ratio is used as a standard for judging a company’s financial standing. TRUE OR FALSE?

Answer 32

TRUE

Question 33

Inventory Turnover Ratio
is a standard financial calculation that determines the number of times a business replaces its
inventory to generate its current level of sales over a given time period, typically 6 months. TRUE OR FALSE?

Answer 33

FALSE ( 12 MONTHS)