Analysis of Financial Statements MCQs

[set-3]

Chapter: Introduction to Analysis and Interpretation of Financial Statements

51. The major device for measuring the profitability of a firm over a defined
period of time is the
A. income statement.
B. balance sheet.
C. statement of cash flow.
D. none of the above.
Answer: A

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52. The ________ does not represent continuingc
. operations in any way, but is
e a given point in time.
A. income statement a t
simply a snapshot of the total worth of a firm at

B. balance sheet
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c
C. sources and uses of funds statement
D. none of the above
Answer: B
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53. Cash inflows arise from _____ assets, ________ liabilities, and ___________
stockholders' equity.
A. increasing; increasing; decreasing
B. increasing; decreasing; decreasing
C. decreasing; increasing; increasing
D. decreasing; increasing; decreasing
Answer: C

54. Which of the following is NOT a key ratio in the prediction of bankruptcy as
developed by Edward Altman?
A. debt to equity
B. current ratio
C. retained earnings as a percent of total assets
 D. total assets
Answer: A

55. __________ analysis is the process of studying a series of ratios for a company
and/or industry over time.
A. dupont
B. trend
C. common size
D. all of the above.
Answer: B

56. The statement of cash flows tells us

A. accounting profit or loss
B. how cash was created
C. actual profit or loss
D. two of the above
Answer: B

57. The primary sections of a statement of cash flows are:

A. cash flows from investing, operating, and financing activities.
B. cash flows from investing and operating activities plus investments.
C. cash flows from investing, financing, and accounting activities.
D. cash flows from investing, operating, financing, and accounting activities.
Answer: A

58. Which of the following are Non-current assets?

A. land, building and plant
B. leasehold property
C. computer software
D. all of the above
Answer: D

59. Funds flow statements are prepared so as to

A. to identify the changes in working capital
B. to identify reasons behind change in working capital
C. to know the item-wise outflow of funds during given period
D. all of the above
Answer: D

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60. Financial statements are ____________.
A. anticipated facts
B. recorded facts
C. estimated of facts
D. unknown facts
Answer: B

61. Trend analysis is significant for ____________.

A. forecasting and budgeting
B. profit planning
C. capital rationing
D. working capital management
Answer: B

62. In common size income statement analysis, which is taken as 100 percent?
A. sales
B. cost of goods sold
C. purchases
D. total assets
Answer: A

63. Comparative statement analysis sheet is __________.

A. vertical analysis
B. horizontal analysis
C. either vertical or horizontal analysis
D. neither vertical nor horizontal analysis
Answer: B

64. Financial statements are meaningful and useful only when they are
___________.
A. verified
B. presented to owners
C. analyzed and interpreted
D. published
Answer: C

65. Vertical analysis is made on the basis of __________.

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 A. single set of financial statements
B. multiple sets of financial statements
C. different schedules attached to financial statements
D. similar set of financial statements
Answer: A

66. Horizontal analysis is done by analyzing ____________.

A. quarterly statement
B. half yearly statement
C. financial statements of several years
D. financial statements of a particular year
Answer: D

Chapter: Ratio Analysis

67. When the concept of ratio is defined in respect to the item shown in the
financial statements, it is termed as
A. accounting ratio
B. financial ratio
C. costing ratio
D. none of the above
Answer: B

68. The relationship between two financial variables can be expressed in:
A. pure ratio
B. percentage
C. rate or time
D. all the above
Answer: D

69. Stock is considered as a liquid asset as anytime it can be converted into cash
immediately.
A. yes
B. no
C. only yes
D. none of the above
Answer: B

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70. Return on properties funds is also known as.
A. return on net worth
B. return on shareholders fun
C. return on the shareholders’ investment
D. all the above
Answer: D

71. What will be the Gross Profit if , total sales is Rs 2,60,000,cost of net goods sold
is Rs 2,00,000 & sales return is Rs10,000 ?
A. 13 %
B. 28%
C. 26%
D. 20%
Answer: D

72. Which of the following is not included in current assets.

A. debtors
B. stock
C. cash at bank
D. cash in hand
Answer: B

73. Liquidity ratios are expressed in

A. pure ratio form
B. percentage
C. rate or time
D. none of the above
Answer: A

74. Working capital turnover ratio can be determined by :

A. ( gross profit / working capital )
B. ( cost of goods sold / net sales )
C. ( cost of goods sold / working capital)
D. none of the above
Answer: A

75. Determine Working capital turnover ratio if, Current asset is Rs 1,50,000,
current liability is Rs 1,00,000 & cost of goods sold is Rs 3,00,000.

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 A. 5 times
B. 6 times
C. 3 times
D. 1.5 times
Answer: B

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