CIMA Financial Reporting and Analysis 2

Question 1

Which of the following is a non-cash item that must be added back to net income in the operating section of the indirect cash flow statement?

Accepted Answer

Depreciation expense

Answer

Depreciation is a non-cash charge that reduces net income but does not involve a cash outflow, so it is added back under the indirect method.

Question 2

The acid-test (quick) ratio excludes which current asset from the numerator?

Accepted Answer

Inventory

Answer

The acid-test ratio excludes inventory because it is the least liquid current asset and may not be quickly converted to cash.

Question 3

Under IAS 36, an impairment loss is recognized when an asset's carrying amount exceeds its:

Accepted Answer

Recoverable amount

Answer

IAS 36 requires an impairment loss when the carrying amount exceeds the recoverable amount, which is the higher of fair value less costs of disposal and value in use.

Question 4

Earnings per share (EPS) is calculated by dividing:

Accepted Answer

Net income by weighted average shares outstanding

Answer

Basic EPS divides net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Question 5

A company's gearing ratio measures:

Accepted Answer

The proportion of debt financing relative to equity or total capital

Answer

Gearing (leverage) ratios measure the extent to which a company is financed by debt relative to equity or total capital.

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA Financial Reporting and Analysis 2