ACCA Applied Knowledge (BT, MA, FA) · Financial Accounting (FA)

Interpretation of financial statements

10 practice questions, each with the answer and an explanation.

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Random questions from this topic, one at a time. You see the answer and the explanation straight after each one.

All 10 questions

  1. A company has profit before interest and tax of £90,000, equity of £400,000, non-current liabilities (long-term loans) of £100,000 and current liabilities of £100,000. What is the return on capital em…
  2. A company has current assets of £120,000, of which inventories are £45,000, and current liabilities of £80,000. What are the current ratio and the quick (acid test) ratio?
  3. A company has trade receivables of £41,000 at the year end and revenue for the year of £328,000, all on credit. Using a 365-day year, what are the receivables days?
  4. A company has profit before interest and tax of £90,000 and finance costs of £15,000. What is the interest cover?
  5. A company's non-current liabilities (loan notes) are £150,000 and its equity is £350,000. What is its gearing using debt ÷ (debt + equity)?
  6. A company's gross profit margin fell from 32% to 27% over the year while revenue was unchanged and operating expenses stayed the same in amount. What is the most likely effect on the net profit margin…
  7. A business's inventory days rise from 40 to 65 while its payables days stay at 30. What is the most likely consequence for the business?
  8. Which is the best definition of working capital?
  9. Which of the following would cause the current ratio to fall?
  10. A company has revenue £800,000, cost of sales £560,000 and operating expenses £120,000. Its equity is £450,000 and its non-current liabilities are £150,000. What is the return on capital employed (ROC…

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