Finance/Accounting Test

 Total Duration of the Test: 60 Minutes

 Please read all the instructions carefully. The test is divided into two parts. You are
required to answer all the questions.
 Please write your name here:
Part 1: Financial Statement Analysis
Cyclorama Ltd is a retailer. It buys goods and then sells them on. The company’s statement of
financial position and income statement for its most recent year are:

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Q1. Calculate the following ratios for Cyclorama Ltd in 2020.

(i) Gross profit margin

Operating profit margin
(ii)Return on Capital Employed (ROCE)
(iii) Inventories’ turnover period
Duration: 20 minutes

Answer:
(i) Gross profit margin = 43.12387
(ii) Operating profit margin = 26.5668
(i) Return on Capital Employed (ROCE) = 443.98%
(ii)Inventories’ turnover period =

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Q2. Critically discuss whether ratio analysis is useful in understanding how an entity has
performed. Please provide references for this answer.
Reference Style: APA
Word count: 150 words
Duration: 10 minutes

Answer: Ratio analysis is a useful management tool that improves our understanding of
financial results and trends over time, and provide key indicators of organizational
performance. Managers use ratio analysis to look for strengths and weaknesses from which
strategies and initiatives can be formed.
It compares line-item data from a company's financial statements to reveal insights regarding
profitability, liquidity, operational efficiency, and solvency. Ratio analysis can mark how a
company is performing over time, while comparing a company to another within the same
industry or sector.
American Psychological Association (APA) is use for citation. APA format is one of several
different writing formats used for publications, papers, essays, and books today. This
particular style is established by the American Psychological Association, and used by
professionals in psychology and many other sciences. So, what does this have to do with you?
APA style is also one of the most common styles taught at and used by colleges and high
schools.

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 Part 2: Income Statement and Statement of Financial
Position Duration: 30 minutes
Inventus Inc. had the following account balances as of and for the year ended 31 December 2020:

Required:

(a) Prepare a statement of financial positions (i.e., balance sheet) for Inventus Inc. Begin by
calculating any missing figures (e.g., missing account balances) if applicable.

(b) Prepare an income statement (‘statement of profit or loss’) for Inventus Inc.

Answer:

(a) BALANCE SHEET

ASSETS LIABILITIES
Cash $60 Trade payable $210
Machinery $600 Capital $960
Total assets $660 Total liabilities $1170

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(b) INCOME STATEMENT

Revenue 720
Expenses:
Machinery 600
Raw material 180
Salaries and wages 130
Total expenses 910
Net Income 1,630