Key Exam Cards

Question 1

Liquidity

Answer 1

Takes into account both the current and quick ratios

Question 2

Current ratio

Answer 2

Hows the ability of the business to meet its obligations in the ordinary course of business.

Question 3

Quick ratio

Answer 3

Shows the ability of the business to meet obligations if pressure is put on them to pay, excludes inventory.

Question 4

Inventory turnover

Answer 4

The higher the better. Represents how well inventory is coming in and going out of the business.

Question 5

Gross Profit Percentage

Answer 5

Shows how much is left from every dollar of sales to cover overheads and profit. A reduction indicates that selling price has decreased or cost price has increased.

Question 6

Net Profit Percentage

Answer 6

A reduction may be a result of higher expenses and costs of goods sold.

Question 7

Contribution Margin

Answer 7

Selling price - expenses

Question 8

Break even point

Answer 8

Fixed costs divided by contribution margin per unit

Question 9

Target Profit

Answer 9

(Fixed costs + target profit) divided by contribution margin per unit

Question 10

Operating activities

Answer 10

Include the primary activities of buying, selling and delivering goods for sale, as well as providing services

Question 11

Investing activities

Answer 11

Include transactions that affect investments in non-current assets of the company

Question 12

Financing activities

Answer 12

Includes obtaining capital from the owner and providing the owner with a return on investment, as well as obtaining capital from creditors and repaying the amounts borrowed

Question 13

Current ratio increase

Answer 13

indicates that creditors will be repaid quicker and likelihood of payment is high

Question 14

Current ratio decrease

Answer 14

company’s ability to cover payments of short-term liabilities using its short-term assets decreases

Question 15

Quick ratio increase

Answer 15

indicates that the business have increased their ability to use their quick assets to reduce their current liabilities

Question 16

Return on Total Assets

Answer 16

Shows how well a business uses its resources.

Question 17

Debt ratio

Answer 17

Shows the percentage of total assets provided by creditors. Is equal to total liabilities over total assets. The higher it its the lower the financial flexibility of the business.

Question 18

Sunk cost (past cost)

Answer 18

Cash receipts and payments that occurred prior to the capital expenditure decision are irrelevant, because they cannot be affected by the decision

Question 19

Relevant costs

Answer 19

Future costs that will change as a result of a decision

Question 20

Sales budget

Answer 20

Sets the level of activity of the business during a given time period and the dollars that activity is expected to generate

Question 21

Purchases budget

Answer 21

On what to buy and what levels of inventory to hold

Question 22

Cash budget

Answer 22

What cash will be received from customers and when that cash will be received (the timing of collection).

Question 23

Integrated Development Agenda

Answer 23

Has social, cultural, environmental and economic dimensions. It is based on traditional Maori/iwi beliefs and value systems

Question 24

Integrated Reporting Framework

Answer 24

Is concerned only with six capitals: financial, manufactures, intellectual, human, social, relationship and natural. It can provide information for making decisions.

Question 25

Integrated Reporting and Thinking

Answer 25

Is a means by which an organisation is thinking about how to make a change, by bringing down barriers. A paradigm shift is required.

Question 26

Treaty settlement

Answer 26

Is composed of providing cultural, financial and historical redress. As well as providing historical account and acknowledgment and apology.

Question 27

Perpetual/kin owned assets are

Answer 27

Those things that Maori would like to bequeath to future generations

Question 28

Integrated Reporting Framework

Answer 28

Can link the Integrated Development Agenda (which s based on Maori/iwi belief and value systems

Question 29

Matauranga Maori is

Answer 29

Based on Maori/iwi traditional beliefs and value systems