1. Management or Operating Ratios Test This test consists of 10 questions designed to test your understanding of how management performance is measured. The links provide you with a choice of answer, along with explanations and solutions. You will need a calculator to complete this test.

2. Question 1. A firm has a turnover of £365,000, and a gross profit of £126,000. What is the firms GPM? a. 34.5% b. £239,000 c. 28.9%

3. Your answer is correct.

4. Wrong. Your are required to calculate GPM, not Gross Profit. Try Again

5. The formula is Gross Profittimes100 Turnover 1 Try again.

6. Question 2. A Firm has a turnover of £2,600,000. Gross Profit of £1,900,000, and expenses of £1,200,000. What is the firms NPM? A. 46.1% B. 36.8% C. 26.9%

7. Wrong. You must first calculate Net Profit and then apply the NPM formula, which is Net Profittimes100 Turnover 1

8. Wrong. You must first calculate Net Profit and then apply the NPM formula, which is Net Profittimes100 Turnover 1

9. Correct.

10. Question 3. Which of the following are included in ‘Capital Employed’? 1. Short Term Borrowing 2. Shareholders Funds 3. Reserves A. All Three B. 2 and 3 C. 1 and 3

11. Long term borrowing is included, but short term borrowing is not!

12. Correct.

13. Long term borrowing is included, but short term borrowing is not!

14. Question 4. ROCE measures? A. The effective management of liquidity B. The effective management of current assets C. The effective management of capital

15. Liquidity ratios are used for this purpose!

16. Wrong, remember we are looking at capital invested in the business

17. Correct, well done!

18. Question 5. Which of the following defines stock turnover? A.The average time taken to pay for stock and raw materials purchased. B. The value average stock held, in relation to total annual sales.

19. This refers to the creditors ratio. Stock turnover tells us about the relationship between stocks held and turnover.

20. Correct.

21. Question 6. A firm has a total capital employed of £900,000, and a trading profit of £110,000. What is the firms ROCE? A. 12.2% B. 122% C. 8.18%

22. Correct, well done!

23. The formula to use is Trading Profittimes100 Capital Employed 1

24. The formula to use is Trading Profittimes100 Capital Employed

25. Question 7. Which of the following is true? A. A ROCE of less than base rates is desirable. B. A ROCE of more than base rates is desirable.

26. Wrong. Firms would expect a ROCE of at least 2 or 3% greater than the cost of borrowing.

27. Correct. Firms would expect a ROCE of at least 2 or 3% greater than the cost of borrowing, but even higher is preferable.

28. Question 8. Trading profit can be defined as? A. Profit after Interest and Taxation B. Profit before Interest and Taxation C. Turnover less Cost of Sales

29. Wrong. Trading Profit ignores the effects of Interest and Taxation

30. Correct, well done!

31. Wrong. This calculation gives us Gross Profit.

32. Question 9. A firm has an average stock holding of £116,000, and a Turnover of £596,000. What is the firms Stock Turnover Ratio? A. 4.17 times B. 8.6 times C. 5.13 times

33. Wrong, The formula is Average stocktimes100 Turnover 1

34. Wrong, The formula is Average stocktimes100 Turnover 1

35. Correct.

36. Question 10. Which of the following firms is likely to have the highest Stock Turnover Ratio? A. Jewelers B. DIY Store C. Greengrocers

37. Wrong, Likely to have the lowest.

38. Wrong. Probably in the middle of the 3

39. Correct. Likely to have a stock turnover ratio of 50 times or even higher.

40. You have now completed the test. For further more detailed revision please use the case studies on the ALoA web site. www.aloa.co.uk