Financial ratios/ taxation

Question 1

When will a taxpayer have a refund or balance owing to CRA?

Answer 1

• A taxpayer will have a refund if total refundable credits is greater than total payable amount
• Will have a balance owning if total payable credits is greater than refundable credits

Question 2

What slips or forms will you receive for employment, RESP, tuition, and interest income

Answer 2

• Employment income is a T4 slip
• RESP is a T4A slip
• Tuition paid is a T2202 form
• Interest income is a T3 slip

Question 3

26. Income deductible items, non-refundable items and refundable items all have its benefit for a taxpayer which is the best to have more of and in what circumstances

Answer 3

• Income deductions lower your total income (need an income)
• Non refundable deductions lowers your taxes owe (need an income)
• Refundable deductions also lowers yor taxes owe but you don’t require an income.

Question 4

25. Name some of the non-refundable income credits items

Answer 4

• Personal basic amount which is different every year
• Caregiver
• Disability
• Interest paid on student loan
• Tuition
• Medical expenses etc

Question 5

Name some of the income deductible items that are mentioned in class.

Answer 5

• RRSP
• union due
• child care expense
  -mo ving expense, etc

Question 6

What is the difference between, total income, net income, taxable income?

Answer 6

• Total income is all the money you earn in a fiscal year
• Net income is the difference between total income and deductible like rrsp, union due, child care expense, moving expense etc
• Taxable income is the difference between net income and additional deductions like security options and net capital losses of other years

Question 7

Which income will not be included in the income calculation for tax purposes

Answer 7

• Lottery and gifts

Question 8

What should be included in the income calculation

Answer 8

• Employment income (interest, dividend, and rental income
• Gain capital
• Tips or gratuities
• Resp
• Unemployment income
• Social assistance payments
• Self employment income

Question 9

what is income

Answer 9

money that you earn on a regular basis

Question 10

How role does the Canada Revenue Agency (CRA) play in terms of the Canadian tax law

Answer 10

carry out laws

Question 11

How role does the Canadian Parliament play in terms of the Canadian tax law

Answer 11

passes laws

Question 12

How role does the department of finance play in terms of the Canadian tax law

Answer 12

creates laws

Question 13

What is dividend yield? how is this calculated

Answer 13

• represents the return or yield on share’s dividend as a percentage yearly
• can be used to spot potential earnings based on company performance
• (dividend/share)/(stock price/share)

Question 14

what is PEG how is it calculated

Answer 14

-price/earnings to growth ratio
- important indicator of a stocks potential value
- (P/E ratio)/EPS

Question 15

What is EPS? how is this calculated

Answer 15

• earnings per share
• important in determining a share’s price
• (net income – dividends on preferred shares)/ average # shares outstanding

Question 16

What is P/E ratio, how is this calculated?

Answer 16

• price/earnings ratio
• represents the multiple earnings per common share (ofte n called “multiple)
• shows how much investors are willing to pay per dollar of earnings
• (stock price/share)/earnings per share

Question 17

How are the profitability calculated?

Answer 17

• Return on sales or profit margin (%) = (net income/revenue) x 100
• Return on assets = (net income/total assets) x 100
• Return on equity = (net income/owners equity) x 100

Question 18

10. Name three profitability ratios?

Answer 18

• Return on sales or profit margin (%)
• Return on assets
• Return on equity

Question 19

How are efficiency ratios calculated

Answer 19

• Accounts receivable = (total AR/total revenue) x 365
• Inventory turnover = total sales/total inventory

Question 20

8. Name the two efficiency ratios

Answer 20

• Accounts receivable
• Inventory turnover

Question 21

7. How are liquidity ratios calculated

Answer 21

• Curent ratio = total curent assets/total curent liabilities
• Quick ratio = (total current assets – inventory)/total current liabilities
• Debt to equity = total liabilities or debt/ owner’s equity

Question 22

6. Name three main liquidity ratios.

Answer 22

• Quick ratio
• Current ratio
• Debt to equity ratio

Question 23

5. What do the categories liquidity, efficiency and profitability ratios mean?

Answer 23

• Liquidity ratios measures the liquidity of the company; it measures the ability of a company to meet its short and long term obligations
• Efficiency ratios measures the efficiency of a company in either turning their inventory, sales, etc. also ties in the liquidity of a company
• Profitability ratios shows the ability of a company to get returns or profit on the investment the owners made

Question 24

4. What are the three main categories of ratios?

Answer 24

• Liquidity ratios
• efficiency ratios
• profitability ratios

Question 25

3. What is the purpose of ratio analysis?

Answer 25

• To spot trends
• Compare the business’s performance and condition with average performance of similar businesses in the same industry
• It can provide an early warning of problems that may potentially destroy the business

Question 26

what is ratio analysis

Answer 26

• It is the use of various ratios to analyze financial statements and the financial health of a company.

Question 27

1. What is a ratio?

Answer 27

A relationship between two number that is expressed as a comparison.