Financial statements – Quiz

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Question 1 of 4

1. Question
Q1. Profit and Loss (P&L) statements : which statement is most correct ?
- a) Give an overview of sales and cost of goods sold, and are often displayed on a year to date, monthly and annual basis
- b) Can show EDITDA (earnings before interest tax and depreciation) which is a crude indicator of cash generation and much loved by Private Equity (PE) investors
- c) Are linked to the Balance Sheet through retained profit and loss
- d) All of the above
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Question 2 of 4

2. Question
Q2. Gross margins :
- a) Give an idea of the profitability of the business, by expressing revenue less incremental costs of production as a percentage of revenue
- b) Give an idea of the profitability of the business, by expressing revenue less the full cost of sales, less incremental costs of production and development as a percentage of revenue
- c) Give an idea of the profitability of the business, by expressing revenue less the full cost of sales less incremental costs of production and development and general management (but not administration) as a percentage of revenue
- d) Of software are typically 50%
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Question 3 of 4

3. Question
Q3. Balance sheets, which one of these statements is most true ?
- a) Reflect a snapshot of company value at a specific date
- b) Include long term debt as an asset, alongside the value of the company’s shares
- c) Count money owed to the company by customers (debtors) as a current asset
- d) All of the above
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Question 4 of 4

4. Question
Q4. Working capital
- a) Is the capital that is actually being put to work by the company, so funds in a low interest savings account are excluded from working capital calculations, as those funds just are not working
- b) Is key to the business as it is essential ensure that the business runs without interruption, smoothing out late payments from customers, paying salaries on time etc.
- c) Is often provided by a long term bank loan or a specialist financial instrument
- d) Is rarely a consideration for young companies and SMEs
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Financial statements – Quiz

Financial statements – Quiz

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