N. S. Toor Solutions for Chapter: Financial Statements Analysis, Exercise 4: OBJECTIVE TYPE QUESTIONS

What is indicated by the high Debtors turnover ratio, of a business firm?

a. The firm is efficiently collecting its receivables.

b.  The firm is slow in collection of its book debts.

c. The firm is having very high level of book debts.

d. The firm is having low sales compared to book debts.

A firm is having a very high Stock Turnover ratio, which indicates that:

a. The firm is having very high amount of stocks.

b.  The firm has low level of sales compared to its stocks.

c.  The firm is able to use its stocks inefficiently.

d.  The firm is able to use its stocks efficiently.

Stock Turnover ratio of a company declined from 6.3 times to 5 times. This may be the result of:

a. Increase in sales

b. Decrease in stocks.

c. Decrease in Sales or Increase in Stock.

d. Increase in Sales or Decrease in Stock.

A Firm has $3$ month's Debt Collection period. Its Sales are $\mathrm{Rs}.180 \mathrm{lac}$. What is the amount of Average Book Debts?

a. $\mathrm{Rs}. 48 \mathrm{lac}$

b. $\mathrm{Rs}. 45 \mathrm{lac}$

c. $\mathrm{Rs}. 36 \mathrm{lac}$

d. None of the above

Firm A's debtor are $60$ and stock $50$. Its sales are $1200$. Which of the following is not correct?

a. Debtors Turnover Ratio $= 20$ times

b. Stock Turnover Ratio $= 24$ times

c. Debt Collection Period $= 0.6$ months

d. None of the above

Firm A's sales are 1000, Debtors 100 and Stocks 50. Firm B's Sales are 1800, Debtors 125 and Stocks 150.

a. Firm A has better stock management and Firm B has better debtor management.

b. Firm A has better stock management and firm A has better debtor management.

c. Firm A has better stock management and better debtor management.

d. Firm B has better stock management and better debtor management.

Sales of Firm A — $1800$ and of Firm B — $2400$. Their stocks are $200$ and $240$ respectively. Choose the correct option:

a. Stock turnover ratio of A is high, hence its stock management is better.

b. Stock turnover ratio of A is lower, hence its stock management is better.

c. Stock turnover ratio of B is high, hence its stock management is better.

d. Stock turnover ratio of B is low, hence its stock management is better.

Sales of Firm $A — 4800$ and of Firm $B — 3600$. Their debtors are $700$ and $600$ respectively. Choose the correct option:

a. Debtor turnover ratio of $A$ is high, hence its debtor recovery management is better.

b. Debtor turnover ratio of $A$ is lower, hence its debtor recovery management is better.

c. Debtor turnover ratio of $13$ is high, hence its debtor recovery management is better.

d. Debtor turnover ratio of $B$ is low, hence its debtor recovery management is better.