Financial accounting worksheet with answers

Gross profit is:

1. ARevenue minus all expenses
2. BTotal assets minus total liabilities
3. CCash in minus cash out
4. DRevenue minus cost of goods sold

Contribution per unit is:

1. ASelling price minus variable cost per unit
2. BRevenue minus fixed costs
3. CFixed costs divided by units sold
4. DSelling price minus full absorption cost per unit

How does management accounting mainly differ from financial accounting?

1. AIt provides information for internal decision-making rather than external users
2. BIt only reports on past events
3. CIt is regulated by IFRS and must be published
4. DIt is prepared only for tax authorities

Current assets are €300,000, including inventory of €100,000. Current liabilities are €200,000. What is the quick (acid-test) ratio?

1. A2.0
2. B1.5
3. C0.5
4. D1.0

Cost of sales is €600,000 and average inventory is €100,000. What is the inventory turnover?

1. A60 times a year
2. B0.17 times a year
3. C6 times a year
4. D16 times a year

Net working capital is:

1. ANon-current assets minus long-term loans
2. BRevenue minus operating expenses
3. CCurrent assets minus current liabilities
4. DTotal assets minus total liabilities

Making a part costs €10 materials, €6 labour and €4 variable overhead, plus €5 of fixed overhead that continues anyway. A supplier offers it at €22. What should the firm do on cost grounds?

1. AMake it, because the full cost of €25 is below €22
2. BBuy it, because the full cost of €25 per unit is above €22
3. CBuy it, because fixed costs are always relevant
4. DMake it, because the relevant cost of €20 is below €22

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

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