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Free ACCA Financial Reporting Practice Questions & Answers

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Question 301

An entity has the following: Revenue 2,000,000; EBITDA 400,000; Depreciation 60,000; Interest 40,000; Tax 75,000. Calculate the net profit margin.

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Question 302

A highly geared company is considered higher risk because:

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Question 303

When comparing two companies with different depreciation policies, which adjustment is most appropriate to improve comparability?

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Question 304

Which of the following would reduce gearing?

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Question 305

The price/earnings (P/E) ratio measures:

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Question 306

A company improves its payables days from 30 days to 50 days. The most likely effect on cash flow is:

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Question 307

An entity's operating cash flow is 200,000 but its net profit is 350,000. Which of the following could explain this difference?

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Question 308

An entity's current ratio is 2.5 but its quick ratio is 2.3. What can be inferred?

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Question 309

An entity has: Revenue 4,000,000; Gross profit 1,600,000; Operating profit 800,000; Net profit 500,000; Total assets 5,000,000; Current liabilities 600,000; Equity 2,000,000. Calculate asset turnover and ROCE.

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Question 310

Company A has a current ratio of 3.0 and inventory represents 60% of current assets. Company B has a current ratio of 1.5 and inventory represents 10% of current assets. Which company has stronger immediate liquidity?

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Question 311

An entity's inventory days increase from 45 to 70 during the year while revenue grows 10%. Which interpretation is most appropriate?

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Question 312

Which of the following pairs of ratios would a long-term lender be MOST interested in?

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Question 313

An analyst notes that a company's operating cash flow has been consistently lower than its operating profit for three consecutive years, with trade receivables rising sharply. What concern does this raise?

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Question 314

Which of the following would improve return on equity WITHOUT improving return on assets?

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Question 315

What does the equity multiplier in DuPont analysis measure?

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Question 316

Entity Z has: Revenue 5,000,000; Net profit 250,000; Total assets 4,000,000; Equity 1,500,000. Calculate ROE and comment on whether the DuPont leverage is contributing.

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Question 317

Two companies have identical operating profits but Company A has higher gearing than Company B. Which statement is most likely true?

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Question 318

An entity switches from FIFO to weighted average cost for inventory valuation. During a period of rising prices, what effect does this have on reported profit?

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Question 319

Over three years, a company's revenue grows 30% but net profit margin falls from 12% to 7%. Which conclusion is best supported?

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Question 320

Which of the following best explains why two companies in the same industry can have very different gearing ratios without either being financially distressed?

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Question 321

Analyst A calculates interest cover of 4x for Entity Z. Analyst B calculates 2.5x for the same entity but uses EBITDA in the numerator rather than EBIT. Entity Z has depreciation and amortisation of 600,000 and interest of 300,000. What is EBIT?

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Question 322

Entity Q has the following 3-year data: Year 1 gross margin 42%, Year 2 40%, Year 3 35%. Net margins are 15%, 14% and 14% respectively. What trend is most significant for an analyst?

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Question 323

An entity's financial leverage (assets/equity) has risen from 2.0 to 3.5 over three years, while net profit margin and asset turnover are unchanged. What is the effect on ROE?

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Question 324

An analyst observes that Entity W's operating cash flow is consistently 40% lower than its operating profit over three years. Which of the following is the most concerning explanation?

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Question 325

Using DuPont analysis: Entity X has NPM 8%, asset turnover 1.5, and financial leverage 2.5. Entity Y has NPM 12%, asset turnover 1.0, and financial leverage 1.5. Calculate both ROEs and comment.

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Question 326

An analyst compares two retailers: Retailer A has high payables days (75) and low receivables days (8). Retailer B has low payables days (25) and high receivables days (45). What does this suggest about their cash conversion cycles?

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Question 327

An entity has the following trend over 3 years: Revenue +20%, Operating profit +5%, Net profit flat, Operating cash flow +30%. What combination of findings is most significant?

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Question 328

A retail company has: Inventory days 90, Receivables days 5, Payables days 60. Calculate the cash conversion cycle and comment.

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Question 329

An entity's revenue grows 15% while its operating profit grows 25%. Which of the following is the most likely explanation?

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Question 330

What is a subsidiary?

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Free ACCA Financial Reporting Practice Questions & Answers

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