week 4

Question 1

ROCE worse

Answer 1

when lower as less profitable. capital employed less efficient at generating profit

Question 2

ROCE causes

Answer 2

lower profits and or high equity, higher bank loans

Question 3

operating profit worse

Answer 3

lower, less profitable, margins getting squeezed

Question 4

operating profit percentage causes

Answer 4

lower selling prices, higher purchase costs, higher expenses

Question 5

gross profit percentage

Answer 5

higher, more profitable. good trend

Question 6

gross profit percentage causes

Answer 6

higher selling price, lower purchasing costs

Question 7

current ratio worse

Answer 7

lower, less solvent- current assets less able to cover current liabilities

Question 8

acid test worse

Answer 8

lower, current assets excluding inventories are unable to cover current debts

Question 9

current ratio and acid test ratio causes

Answer 9

lower current assets, higher current liabilities

Question 10

asset turnover worse

Answer 10

lower -assets less efficient at generating sales

Question 11

asset turnover causes

Answer 11

lower revenue or higher assets

Question 12

inventory holding period

Answer 12

better when lower as selling inventories quicker
lower storage costs, lower risk of damage or going out of date

Question 13

inventory holding period causes

Answer 13

lower prices, better marketing, better stock control

Question 14

trade receivables collections

Answer 14

worse when higher, take longer to collect debt off customers. bad for cash, higher risk of bad debt

Question 15

trade receivables collections causes

Answer 15

poor credit control, deliberate- offer longer payment term to get more business