Financial Statement Analysis MCQs with Answers

1. Ratio of ‘net sales’ to’ net W.C’ is a:-

A) W.C. turnover ratio
B) Profitability ratio
C) Liquidity ratio
D) Can’t say
Ans. (a)

2. Observing changes in the financial variable across the years in:-

A) Vertical analysis.
B) Horizontal analysis.
C) Inter-firm comparison.
D) None
Ans. (b)

3. Ratio of net profit before interest & fax to sales in a:-

A) Operating profit ratio
B) Capital gearing
C) Solvency ratio
D) Can’t say
Ans. (a)

4. The statistical yardstick that provides a measure of the relationship

Between two accounting figures in:-
A) A operating current ratio
B) The accounting ratio
C) Input-output ratio
D) None
Ans. (b)

5. Debt equity ratio is a:-

A) Liquidity ratio
B) Solvency ratio
C) Profitability ratio
D) None
Ans. (b)

6. The turnover ratio helps management in:-

A) Managing resources
B) Managing a debit
C) Evaluating performance
Ans. (c)

7. Long term solvency is indicated by

A) Current ratio
B) Debit / easily ratio
C) Net profit ratio
Ans. (b)

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8. The three most useful general purpose financial statements for management are:-
a) P & L A/C, B/S & statement of retained earnings.
b) P & L A/C, B/S & statement of changes in financial position.
c) P & L A/C, fund flow statement, stat of R.E
d) Stat. of R.E, B/S & fund flow statement
Ans. (b)

9. In the case of Ltd. Co. the term financial statement includes:-

a) P & L A/C & B/S
b) P & L A/C P & L appropriation A/C & B/S.
c) B/S
d) None
Ans. (b)

10. The term current assets do not include:-

a) Payments in advance
b) Bills receivable
c) Long-term deferred charges.
e) None
Ans. (c)

11. The following is a recorded fact:-

a) Mkt. Value of investment
b) Debtors
c) Replacement cost of M/C
d) None
Ans. (b)

12. The term fixed assets include:-

a) Stock in trade
b) Furniture
c) Payments in advance.
d) None
Ans. (b)

13. The two statements which are generally included in the definition of financial of Statements are
…………………
Ans. P & L A/C balance sheet

14. Income statement ( P & L A/C ) ………… the revenues and costs incurred in the Process of earning
revenues.
Ans. Matches

15. Balance sheet is a statement of ………… of a business at a specific movement of time.

Ans. Financial position

16. Assets & liabilities in a balance sheet (B/S) may be arranged either according to ……….. order or
…………. Order
Ans. Liquidity & permanency

17. Financial statements disclose only …………… facts.

Ans. Monetary
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18. P & L A/C is also called as the …………
Ans. Income statement

19. Rearrangement of figures is necessary for …………… & ………………

Ans. Analysis & interpretation.

20. Fund flow refers to changes in ………….. capital.

Ans. Working

21. Building sold on credit is …………….. of funds.

Ans. A source

22. Goods purchased on credit …………….. inflow of fund.

Ans. Does not result

23. Commission outstanding is …………… of funds.

Ans. An application

24. Any gain on the sale of non – current assets should be ……….. from the net profit for determining
funds from operators.
Ans. Deducted

25. Difference between C.A. & C.L is known as …………….

Ans. Working capital

26. Depreciation is sometimes treated as ………… funds.

Ans. A source

27. Increase in an asset due to purchase is

a) Source of funds
b) User of funds
c) None
Ans. b) User of funds

28. Net profit earned plus non – W.C. expenses is equal to

a) Funk provided by operations
b) Use of funds
c) Sinking fund
Ans. a) Funk provided by operations

29. Tax paid is _________

a) Application of funds
b) Source of funds
c) No flow of funds
Ans. a) Application of funds

30. Stock at the end results in the

a) Application of fund
b) Source of fund
c) No flow fund
Ans. b) Source of fund
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31. An increase in the share premium A/C is
a) An application of fund
b) A source of fund
c) No flow of fund
Ans. b) A source of fund

32. Sale of investments indicate

a) Source of fund
b) Application of fund
c) Change in C.A.
Ans. a) Source of fund

33. Cash from operations is equal to

a) Net profit plus the increase in outstanding expenses
b) Net profit plus the increase in debtors.
c) Net profit plus the increase in stock
Ans. a) Net profit plus the increase in outstanding expenses

34. Increase in the number of debtors results in

a) Decrease in cash
b) Increase in cash
c) No change in cash
Ans. a) Decrease in cash

35. Increase in the number of bills payable results in

a) Increase in cash
b) Decrease in cash
c) No change in cash
Ans. a) Increase in cash

36. In cost accounting marginal cost does near include ....…....

Ans. Fixed cost

37. In absorption costing ……… cost in added to the investment.

Ans. Fixed cost

38. Sales ………. Variable cost = F.C + ………………

Ans. Profit

39. Contribution minus ………….. cost in profit.

Ans. Fixed cost

40. At I.E.P ……….. is equal to F.C.

Ans. Contribution

41. A higher P/W ratio indicates ……………..profitability.

Ans. Greater

42. In marginal costing, fixed costs are charged to …….....

Ans. Costing P & V A/C

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43. The BEP is ………. When selling price increases.
Ans. Decreased

44. In marginal costing, the stock is valued at ………….

Ans. Variable cost

45. When the volume of production is nil, the loss will be equal ………
Ans. Variable cost

46. In marginal cost, V.E are charged to ……... & F.C is charged to ......….
Ans. Products, costing P & L A/C

47. At B.E.P. total cast is equal to ………..

Ans. Sale value

48. The selling price per unit is Rs.20, V.C Rs.12 per unit and fixed cost Rs.16,000 the break-even
production unit:-
(a) 800
(b) 2,000
(c) 3,000
Ans: (b) 2,000

49. Sales Rs. 20,000,V.C. Rs.12,000 & F.C Rs.4,000, the break-even sales
(a) 12,000
(b) 10,000
(c) 1,500
Ans: (b) 10,000

50. Sales Rs. 20,000,V.C. Rs.12,000 & F.C Rs.4,000, P/V ratio is.
(a) 80%
(b) 40%
(c) 30%
Ans: (b) 40%

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