Financial accounting worksheet with answers

The gross profit margin is calculated as:

1. AGross profit ÷ total assets × 100
2. BNet profit ÷ revenue × 100
3. CRevenue ÷ cost of sales × 100
4. DGross profit ÷ revenue × 100

Which body issues International Financial Reporting Standards (IFRS)?

1. AThe World Trade Organization (WTO)
2. BThe European Central Bank (ECB)
3. CThe International Accounting Standards Board (IASB)
4. DThe International Monetary Fund (IMF)

Depreciation is:

1. APaying off a loan in instalments
2. BThe interest paid on debts
3. CSpreading the cost of a non-current asset over its useful life
4. DA fall in the market value of shares

A company increases its allowance for doubtful receivables. What is the effect?

1. AAn expense is recognised and net receivables fall
2. BRevenue increases and gross receivables rise by the same amount
3. CCash decreases immediately
4. DOnly the notes change; no figures move

A project has a positive net present value (NPV) at the company's cost of capital. This means:

1. AIt has no risk at all
2. BIt recovers its cost within one year
3. CIts reported accounting profit will be positive in every year
4. DIt earns more than the required return and should add value

Net working capital is:

1. ARevenue minus operating expenses
2. BCurrent assets minus current liabilities
3. CTotal assets minus total liabilities
4. DNon-current assets minus long-term loans

After the year end, but before the accounts are approved, a customer who owed money at year end goes bankrupt. Under IAS 10 this is:

1. AA change in accounting policy
2. BIgnored, because it happened after the year end
3. CAn adjusting event, so receivables are reduced
4. DA non-adjusting event, disclosed only

A company borrows at 5% interest to invest in assets that earn 12%. What is the likely effect on return on equity?

1. AROE rises, but financial risk also increases
2. BROE rises and financial risk falls
3. CROE falls, because interest is an expense
4. DROE stays the same, because debt is not equity