Financial accounting worksheet with answers

The gross profit margin is calculated as:

1. ANet profit ÷ revenue × 100
2. BGross profit ÷ revenue × 100
3. CGross profit ÷ total assets × 100
4. DRevenue ÷ cost of sales × 100

Opportunity cost is:

1. AThe interest paid on a loan
2. BThe cash cost of buying into a new opportunity
3. CThe value of the best alternative given up
4. DThe total of all past costs

In double-entry bookkeeping, every transaction:

1. AIs recorded with equal debits and credits
2. BIncreases both assets and expenses equally
3. CMust involve cash
4. DIs recorded only once

Revenue is €200,000 and cost of sales is €140,000. What is the gross profit margin?

1. A30%
2. B43%
3. C70%
4. D60%

Why can a profitable company run out of cash?

1. AProfitable companies never pay taxes
2. BCash is not recorded in accounting
3. CProfit includes credit sales and non-cash items, while cash may be tied up in receivables and inventory
4. DProfit always equals cash

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

1. A6 times a year
2. B60 times a year
3. C0.17 times a year
4. D16 times a year

A company records routine repair costs as additions to non-current assets instead of expenses. What is the effect this year?

1. AProfit and assets are overstated
2. BProfit and assets are understated
3. COnly cash is affected
4. DProfit is understated and assets are overstated

A company's debt-to-equity ratio rises sharply. What does this usually indicate?

1. AThat shareholders invested more money
2. BHigher financial risk because the company relies more on borrowed money
3. CBetter liquidity in the short term
4. DHigher profitability