# Profit and loss Profit and Loss by sdfwerte

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```									Profit and Loss Account Test
This test consists of 10 questions designed to
test your understanding of Profit and Loss
Accounts as well as analysis of P&L
account analysis.
along with explanations and solutions.
You will need a calculator to complete this
test.
Question 1.
A Profit and Loss Account shows us a
snapshot in time of the companies trading
activities.
a. False
b. True
The Profit and Loss Account is a historical
record of trading activities, normally showing
the previous 12 months
A Balance Sheet gives us a snapshot in
time of a companies assets and
liabilities. The Profit and Loss Account
is a historical record of trading activities,
normally showing the previous 12
months
Question 2.
Sales less Cost of Sales gives us?
A. Net Profit
B. Expenses
C. Gross Profit
Net Profit is found by taking expenses from
Gross Profit. Try Again
Total expenses are found by adding
together individual expenses, or by taking Net Profit
from Gross Profit. Try again.
Correct. Sales less Cost of Sales =
Gross Profit.
Question 3.
A firm has an opening stock of £37,000, a
closing stock of £29,000, and has
purchasing during the year stock costing
£121,000. What is the firms cost of sales?
A. £115,000
B. £129,000
C. £140,000
Wrong. To calculate cost of sales add purchases to
opening stock and take away closing stock. Try again.
Correct. To calculate cost of sales you added
purchases to opening stock and took
away closing stock.
Wrong. To calculate cost of sales add purchases to
opening stock and take away closing stock. Try again.
Question 4.
A firm has a gross profit of £854,000 and a
net profit of £421,000. What are the firms
expenses?
A. £1,275,000
B. £450,000
C. £433,000
Wrong. To find expenses take net profit
from gross profit. Try again.
Wrong. To find expenses take net profit
from gross profit. Try again.
Correct. To find expenses you took net profit
from gross profit.
Question 5.
Which of the following defines
mark up?
A. The % difference between net profit and
gross profit
B. The difference between purchase price and
gross profit, as a % of purchase price.
Wrong. Mark up is the difference between
purchase price and gross profit,
as a % of purchase price.
Correct Mark up is the difference between
purchase price and gross profit,
as a % of purchase price.
Question 6.
A firm with gross profit of £67,000 has a sales
figure of £521,000. What is the firms gross
profit margin.?
A. 12.86%
B. 7.77%
C. 34%
Correct. You calculated Gross Profit as a Percentage
of Sales.
Wrong. To find GPM you must calculate
Gross Profit as a Percentage
of Sales.
Wrong. To find GPM you must calculate
Gross Profit as a Percentage
of Sales.
Question 7.
Which of the following defines The Bottom
Line?
A. The lowest level sales can fall to if the firm
is to stay profitable.
B. Profit remaining after all costs of the firm
have been paid
Wrong. The bottom line is Profit
remaining after all costs of the firm
have been paid
Correct.
Question 8.
Which of the following
firms is likely to have the highest GPM?
A. A supermarket
B. A restaurant
C. A travel agent
Wrong. Supermarkets have low GPM’s
Correct. Restaurants have high GPM’s. With a
high level of expenses, this is to be expected.
Wrong. Good Net profits will depend upon
a high level of sales, each with a low gross profit
margin.
Question 9.
Which of the following firms is likely to have
low expenses in proportion to cost of sales
A. A jewelers
B. A restaurant
C. A petrol station
Wrong. This type of business has a high proportion
of expenses to cost of sales.
Wrong. This type of business has a high proportion
of expenses to cost of sales.
Correct. This type of business has a low proportion
of expenses to cost of sales.
Question 10.
A computer firm has just launched its new
intelligent mouse onto the market. The total
costs of production are £3.00, the retail
price is £8.00. What is the % mark up?
A. 62.5%
B. 60%
C. 166.67%
Wrong. To find % mark up, calculate
the difference between production and retail prices,
as a % of production price.
Wrong. To find % mark up, calculate
the difference between production and retail prices,
as a % of production price.
Correct.To find % mark up, you calculated
the difference between production and retail prices,
as a % of production price.
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

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