Accounting 01 Introduction Quiz 20201218 Parab-Merged

Accounting for Managerial Decisions
Introduction to
Accounting Quiz
Balkrishna Parab
ACMA, FCS, PhD
1. Accounting is a system of analysing, recording, summarising, and ... financial transactions

and reporting the results.
a. Verifying
Authenticating
b. Substantiating
c. Endorsing
Answer: A
2. Financial accounting is oriented towards providing information to ….

a. Internal users
b. Managers
c. External users
d. Board of Directors
Answer: C
3. Cost accounting is oriented towards providing information for the purposes of control and
guidance of …
a. Shareholders
b. Internal Managers
c. Government
d. Regulators
Answer: B
Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 1

4. Cost accounting is oriented towards providing information to …
a. External users
b. Lenders
c. Media
d. Internal users
Answer: D
5. Management accounting is oriented towards providing information to …

a. Managers
b. Shareholders
c. Lenders
d. Media
Answer: A
6. Government accounting a branch of accounting system that involves analysing, recording,

summarising, and verifying financial transactions entered by the government and reporting
the results to the … and the public at large.
a. Legislature
b. Judiciary
c. Executive
d. Prime Minister
Answer: A
7. Owners, or shareholders, while using accounting information focus on:

a. Loan Repayment capacity
b. Overall profitability of the company
c. Operational efficiency
d. Regulatory compliance
Answer: B
8. Managers within the company use accounting information for:

a. Evaluating stock market performance
b. Determining debt capacity
c. Making operational decisions
d. Confirming compliance with regulations
Answer: C
9. Lenders use accounting information for:

a. Making operational decisions
b. Evaluating stock market performance
c. Confirming compliance with regulations
d. Determining debt capacity
Answer: D

10. Regulators use accounting information for:
a. Confirming compliance with regulations
b. Determining debt capacity
c. Making operational decisions
d. Evaluating stock market performance
Answer: A
11. Lenders and credits, while using accounting information focus on … and …
a. Determining debt repayment capacity, long term stability of the company.
b. Return on assets, Funding choices of the company.
c. Return on assets, Determining debt repayment capacity.
d. Stock market performance, confirming compliance with regulations.
Answer: A
12. Managers use accounting information for … and …

a. Formulating plans and policies, Making operational decisions.
b. Determining debt repayment capacity, long term stability of the company.
c. Return on assets, Funding choices of the company.
d. Return on assets, Determining debt repayment capacity.
Answer: A
13. Regulators use accounting information for … and …

a. Checking compliance with laws and regulations, Investigating complaints for fair
trade practices.
b. Determining debt repayment capacity, long term stability of the company.
c. Return on assets, Funding choices of the company.
d. Return on assets, Determining debt repayment capacity.
Answer: A
14. Owners, or shareholders, while using accounting information focus on … and …

a. Return on assets, Determining debt repayment capacity.
b. Return on assets, Funding choices of the company Return on assets, Funding choices
of the company.
c. Stock market performance, Confirming compliance with regulations.
d. Determining operational efficiency, long term stability of the company.
Answer: B
15. What of the following is primarily focussed on the critical examination of financial
statements by an independent chartered accounting to express an opinion regarding the
fairness of the contents of the financial Statements?
a. Auditing
b. Verification
c. Vouching
d. Attestation
Answer: A

16. Which branch of accounting is primarily concerned with the preparation of specific purpose
financial statements for the management to base financial decisions on?
a. Financial accounting
b. Government accounting
c. Social accounting
d. Cost accounting
Answer: D
17. Which branch of accounting is concerned with analyzing costs of products or services
rendered in a business?
a. Cost accounting
b. Financial accounting
c. Government accounting
d. Social accounting
Answer: A
18. Which branch of accounting deals with the calculate the profit or loss of a business during a
period and to provide an broad picture of the financial position of the business as on a
particular date to investors or
a. Statutory audit
b. Financial Accounting
c. Cost accounting
d. Management accounting
Answer: B
19. Which of the following statements is TRUE?

a. Cost accounting is oriented towards providing accounting information to regulators.
b. Financial accounting is oriented towards external users of accounting information.
c. Management accounting is oriented towards providing accounting information to
shareholders.
d. Government accounting is oriented towards enabling lenders and creditors to
determine the borrowing capacity of the company.
Answer: B

a. Management accounting reports are detailed.
b. Financial accounting reports are detailed.
c. Financial accounting reports provide information about every department of the
company.
d. Management accounting is highly regulated by the government.
Answer: A

a. Financial accounting is future oriented.
b. Financial accounting is unregulated.
c. Management accounting is future oriented.
d. Financial accounting is focussed on influencing behaviour within the organisation.
Answer: C
22. Which of the following branches of accounting is designed to influence the behaviour of
managers and other employees?
a. Management accounting
b. Financial accounting
c. Government Accounting
d. Tax accounting
Answer: A
23. Which of the following branches of accounting primarily reports economic events but also
influences behaviour because manager’s compensation is often based on reported financial
results?
a. Government Accounting
b. Cost accounting
c. Management accounting
d. Financial accounting
Answer: D
24. The reports of which of the following branches of accounting has a combination of financial
and non-financial information?
a. Financial accounting
b. Management accounting
c. Government Accounting
d. Tax accounting
Answer: B
25. Which of the following terms is used to describe the activities managers undertake to use
resources in a way that increases a product’s value to customers and achieves an
organization’s goals?
a. Cost management
b. Financial management
c. Resource management
d. Strategic management
Answer: A

26. Which of the following accountants work closely with managers in various departments to
formulate strategies by providing information about the sources of competitive advantage?
a. Financial
b. Tax
c. Management
d. External
Answer: A
27. Auditing involves:

a. Assessment of the system of internal controls, Physical verification of assets
b. Analysing financial transaction, reporting results Recording financial transactions,
c. Assessment of the system of internal controls
d. Summarising financial transactions, Physical verification of assets
Answer: A
BALKRISHNA PARAB
teaches law, accounting and finance at the
Jamnalal Bajaj Institute of
Management Studies
University of Mumbai
balkrishnaparab@jbims.edu
Cell: 9833528351

Ratio Analysis
Quiz
Balkrishna Parab
ACMA, FCS, PhD
Introduction
1. Examining the ratios of a firm against the same measures for a small group of firms from the
same industry, at a point in time, is an example of
a. Trend analysis.
b. Benchmarking.
c. Peer Analysis.
d. Horizontal Analysis.
Answer: C
2. Which of the following kinds of ratios attempt to measure how likely a company will be able
to meet its near-term obligations?
a. Efficiency ratios.
b. Liquidity ratios.
c. Leverage ratios.
d. Solvency ratios.
Answer: B

3. Which of the following is a true statement concerning the use of financial ratios to compare
financial results of two or more companies?
a. Ratios are sufficient as a basis for judgment about the future.
b. Ratios may be viewed as an end in themselves.
c. Ratios rarely raise questions but provide many answers by themselves.
d. In addition to using ratios, the analyst should look at industry trends, economic
factors, etc. for additional information.
Answer: D
4. The primary purpose of the balance sheet is to:

a. Measure the net income of a business up to a particular point in time.
b. Report the difference between cash inflows and cash outflows for the period.
c. Reports the financial position of the reporting entity at a particular point in time.
d. Reports the current value of the business.
Answer: C
5. Horizontal analysis looks at:

a. Selected ratios of the company over a period of time.
b. Two years of information for comparison.
c. Two or more peer group companies for comparison.
d. Profitability by industry.
Answer: A
Liquidity Analysis
6. Which of the following actions will INCREASE a firm's current ratio if it is now less than 1.0?
a. Convert marketable securities to cash.
b. Pay accounts payable with cash.
c. Buy inventory with short term credit.
d. Sell inventory at cost.
Answer: B
7. Andheri Avionics Limited has a current ratio of 0.5. Which of the following actions would
improve (increase) this ratio?
a. Use cash to pay off current liabilities.
b. Collect some of the trade receivables.
c. Use cash to pay off some long-term debt.
d. Purchase additional inventory on credit (trade payables).
Answer: D

8. Liquidity ratios measure:
a. The speed at which the firm is turning over its assets
b. The ability of the firm to earn an adequate return on sales, total assets, and invested
capital
c. The firm's ability to pay off short term obligations as they are due
d. The debt position of the firm in light of its assets and earning power.
Answe
9. Which of the following is a FALSE statement about the current ratio?

a. A declining current ratio might be a sign of a deteriorating financial condition.
b. A declining current ratio might be the result of eliminating obsolete inventories.
c. In improving current ratio might be the result of stockpiling inventories.
d. The general rule of thumb calls for a current ratio of 3:1.
Answer: D
10. Inventory is removed from liquid assets in the calculation of the quick ratio because
a. Inventory is meaningless.
b. Inventory is usually the least liquid of the current assets.
c. Inventory is a large part of current assets.
d. Inventory it cannot be sold for cash.
Answer: B
11. Inventory is removed from current assets in the calculation of the quick ratio because:
a. Inventory is meaningless.
b. It is usually the least liquid of the current assets.
c. It constitutes a large part of current assets.
d. It cannot be sold for cash.
Answer: B
12. Other things held constant, which of the following will NOT affect the quick ratio? (Assume
that current assets equal current liabilities.)
a. Fixed assets are sold for cash.
b. Cash is used to purchase inventories.
c. Cash is used to pay off accounts payable.
d. Trade receivable are collected.
Answer: D
13. A current ratio of 2.0

a. Tells us that current assets are twice current liabilities.
b. Indicates good amount of liquidity
c. Indicates a problem with liquidity.
d. Is greater than the quick ratio for a firm.
Answer: A
14. Which financial ratio would you calculate to determine whether the company will be able to
pay for the goods when payment is due in 30 days?
a. Creditors Turnover Multiple.

b. Current Ratio.
c. Debt-Equity Ratio.
d. Price-Earnings Multiple.
Answer: B
15. The current ratio is defined as:

a. Current assets minus current liabilities.
b. Current assets plus current liabilities.
c. Total assets minus total liabilities.
d. Current assets divided by current liabilities.
Answer: D
16. Chuim Crayons has Rs. 100 in inventories, a current ratio equal to 1.2, and a quick ratio
equal to 1.1, what is the firm's net working capital?
a. 100
b. 200
c. 300
d. 350
Answer: B
17. Which of the following statements is most correct?

a. If two companies have the same return on equity, they should have the same stock
price.
b. If Company A has a higher profit margin and higher total assets turnover relative to
Company B, then Company A must have a higher return on assets.
c. If Company A and Company B have the same debt ratio, they must have the same
times interest earned (TIE) ratio.
d. If Company A and Company B have the same current rate, they must always have
the same quick ratios.
Answer: B
18. The acid-test ratio includes all the following assets in the numerator except:
a. Cash.
b. Inventory.
c. Marketable securities.
d. Current accounts receivable.
Answer: B
19. The net working capital of Karad Kings is Rs.45,000. If the firm raises Rs.18,000 by issuing
equity share, what will happen to the current ratio?
a. It will decrease
b. It will remain unchanged
c. It will increase
d. In will change from less than one to greater than one
Answer: C

20. Last year, Dabhol Energy Company had cost of goods sold (COGS) of Rs. 200 million, and its
inventory turnover ratio was 5.0. The company’s current assets totalled Rs. 100 million, and
its current ratio was 1.2. What was the company’s quick ratio?
a. 1.2
b. 1.39
c. 0.72
d. 0.55
Answer: C
21. When Bandra Balloons Company compares its ratios to industry averages, it has a higher
current ratio, an average quick ratio, and a low inventory turnover. What might you assume
about the company?
a. Its cash balance is too low.
b. Its cost of goods sold is too low.
c. Its current liabilities are too low.
d. Its average inventory is too high.
Answer: D
22. Cutler Enterprises has current assets equal to Rs.4.5 million. The company’s current ratio is
1.25. What is the firm’s level of current liabilities (in millions)?
a. Rs.0.8
b. Rs.1.8
c. Rs.2.4
d. Rs.3.6
Answer: D
23. Which of the following would NOT improve the current ratio?
a. Borrow short term to finance additional fixed assets.
b. Issue long-term debt to buy inventory.
c. Sell common stock to reduce current liabilities.
d. Sell fixed assets to reduce accounts payable.
Answer: A
24. Suppose the current assets of a company are greater than its current liabilities. If the
company raises Rs.18,000 by issuing equity share, what will happen to the current ratio?
a. Current ratio will decrease
b. Current ratio will remain unchanged
c. Current ratio will increase
d. Current ratio will become 1:1
Answer: C

25. Which of the following ratios best provides an indication of the immediate liquidity of a
company?
a. Trade receivables turnover
b. Net profit margin.
c. Current ratio
d. Interest Coverage Ratio
Answer: C
26. Net working capital is defined as:

a. Current assets minus current liabilities.
b. Current assets plus current liabilities.
c. Total assets minus total liabilities.
d. Current assets divided by current liabilities.
Answer: A
27. The following information available from a company's financial statements: (1) Cash: Rs.
20000; (3) Trade Receivables: Rs. 45000; (4) Short-term Investments: Rs. Rs. 12000; (5)
Inventories: Rs. 42000; and (6) Current Liabilities: Rs. 67000. Which of the following is true?
a. Working capital is Rs. 52000, current ratio is 1.17
b. Current ratio is 2.0; acid-test ratio is 1.15
c. Working capital is Rs. 10000; acid-test ratio is 1.15
d. Working capital is Rs. 52,000, current ratio is 1.78
Answer: D
28. Which of the following would NOT improve the current ratio?
a. Borrow short term to finance additional fixed assets.
b. Issue long-term debt to buy inventory.
c. Issue equity shares to reduce current liabilities.
d. Sell fixed assets to reduce accounts payable.
Answer: A
29. Other things held constant, which of the following will NOT affect the current ratio,
assuming an initial current ratio greater than 1.0?
a. Fixed assets are sold for cash.
b. Long-term debt is issued to pay off current liabilities.
c. Trade receivables are collected.
d. Cash is used to pay off trade payable.
Answer: C

3 Activity
30. A measure of asset utilisation is:
a. Sales divided by working capital
b. Return on equity capital
c. Return on total assets
d. Operating profit divided by sales
Answer: C
31. Net credit sales were Rs. 450000; and the trade receivable turnover was 5.5 times. What is
the average trade receivable?
a. Not determinable from the information provided
b. Rs. 24750
c. Rs. 81818
d. Rs. 90000
Answer: C
32. The opening balance of a company's stock was Rs. 400,000 and the closing balance of its
stock is 800,000. The cost of goods sold was Rs. 900,000. What is the company's inventory
turnover?
a. 2.25
b. 1.5
c. 1.125
d. Insufficient information
Answer: B
33. Which of the following statements (in general) is correct?

a. A low receivables turnover is desirable.
b. The lower the total debt-to-equity ratio, the lower the financial risk for a firm.
c. An increase in net profit margin with no change in sales or assets means a poor ROI.
d. The higher the tax rate for a firm, the lower the interest coverage ratio.
Answer: B
34. The cost of goods sold was Rs. 240000. Beginning and ending inventory balances were
Rs.20000 and $30000, respectively. What is the inventory turnover ratio?
a. 8.0 times
b. 12.0 times
c. 7.0 times
d. 9.6 times
Answer: D

35. The days inventory in stock (DIS) is determined by:
a. Dividing average inventory by 365 days.
b. Dividing 365 days by the inventory turnover.
c. Dividing cost of goods sold by net sales for the period.
d. Dividing total sales by average accounts receivable.
Answer: B
36. The opening balance of a company’s trade receivables was Rs. 400,000 and the closing
balance of its trade receivables is 800,000. The amount of goods sold on credit was Rs.
900,000. Assuming 360 days in a year, what is the company's average collection period?
a. 160
b. 240
c. 320
Answer: B
37. Inventory turnover is equal to:

a. Ending inventory divided by cost of goods sold.
b. Sales on account divided by average accounts receivable.
c. Cost of goods sold divided by average inventory.
d. Inventory at the beginning of the period divided by inventory at the end of the
period.
Answer: C
38. Total asset turnover is:

a. The ratio of credit sales to total assets.
b. The ratio of sales to total assets.
c. The ratio of the cost of goods sold to total assets.
d. The ratio of the net profit to total assets.
Answer: B
39. Oshiwara Oven Company had credit purchases of Rs. 340000; the opening balance of trade
payables was Rs. 120000 and the closing balance was 220000. Assuming the number of days
in a year to be 360, what is the average payables period (APP) in days?
a. 180
b. 240
c. 120
d. 200
Answer: A

40. Amboli Aviation Company had sales of Rs. 580000 out of which 20 per cent were on cash
basis. The opening balance of trade receivables was Rs. 124000 and the closing balance was
Rs. 140000. Assuming the number of days in a year to be 360, what is the average collection
period (ACP) in days?
a. 120
b. 100
c. 140
d. 150
Answer: B
41. Versova Voltmeter Company's cost of goods sold was Rs. 834000 and the opening balance of
its inventories was Rs. 187000 and the closing balance was 201000. What is the inventory
turnover ratio?
a. 3.32 Times
b. 3.40 Times
c. 4.30 Times
d. 2.30 Times
Answer: C
4 Solvency
42. The interest coverage ratio is the ratio of
a. Operating profit to the interest expense.
b. Net profit to the interest expense.
c. Gross profit to operating profit.
d. Net profit to interest income.
Answer: A
43. Which of the following is true of the debt-to-equity ratio?

a. Measures the portion of assets provided by lenders and the portion of assets
provided by the shareholders.
b. Debt-to-equity ratio = Shareholders equity / Total liabilities.
c. Creditors would like to keep the debt-to-equity ratio relatively high.
d. Equity shareholders would like to keep the debt-to-equity ratio relatively low.
Answer: A
44. A company can improve (lower) its debt-to-total assets ratio by doing which of the
following? Assume the present debt to total asset ratio is 2:1.
a. Borrow funds to pay dividends
b. Shift short-term to long-term debt.
c. Shift long-term to short-term debt.
d. Issue new equity shares and buy assets
Answer: C

45. The interest coverage ratio is the ratio of:
a. Operating profit to the interest expense.
b. Net profit to the interest expense.
c. Gross profit to operating profit.
d. Net profit to interest income.
Answer: A
46. The debt-to-equity ratio indicates

a. The amount of assets being provided by creditors for each rupee provided by
owners.
b. The total amount of debt less equity received by owners of the company.
c. The company's ability to borrow long-term debt.
d. The number of times the company has raised capital from debt issues as compared
to stock issues.
Answer: A
47. A firm has a higher asset turnover ratio than the industry average, which implies
a. The firm is utilising assets more efficiently than other firms in the industry
b. The firm is more likely to avoid insolvency in the short run than other firms in the
industry
c. The firm is more profitable than other firms in the industry The
d. firm has a higher P/E ratio than other firms in the industry
Answer: A
48. Times interest earned (TIE) is equal to

a. Net profit divided by earnings per share.
b. Interest expense divided by total long-term debt.
c. Net profit divided by interest expense.
d. Net profit before interest expense and income taxes divided by interest expense.
Answer: C
49. A company can improve (lower) its debt-to-total assets ratio by doing which of the
following?
a. Borrow more.
b. Shift short-term to long-term debt.
c. Shift long-term to short-term debt.
d. Sell equity shares.
Answer: C
50. Paltan Industries has a debt-to-equity ratio of 1.6 compared with the industry average of
1.4. This means that the company ...
a. Will not experience any difficulty with its creditors.
b. Has less liquidity than other firms in the industry.
c. Will be viewed as having high creditworthiness.
d. Has greater than average financial risk when compared to other firms in its industry.
Answer: D

51. Dindoshi Bank, in deciding whether to make a loan to Dahisar Company, would be interested
in the amount of liabilities Rodney has on its balance sheet because:
a. The liabilities represent resources that could be used to repay the loan.
b. If Dahisar Bank already has many other liabilities relative to its assets, it might not be
able to repay the loan.
c. The existing liabilities give an indication of how profitable Dahisar Company has
been in the past.
d. Dindoshi Bank would be interested in the amount of Dahisar Company's assets but
not the amount of liabilities.
Answer: B
52. The debt ratio is a measure of

a. Net cash flows relating to financing activities.
b. Long-term solvency.
c. Short-term solvency.
d. Profitability, independent of the manner in which assets are financed.
Answer: B
53. Chembur Chemical Company has a debt-to-equity ratio of 1.6 compared with the industry
average of 1.4. This means that the company:
a. The company will not experience any difficulty with its creditors.
b. The company has less liquidity than other firms in the industry.
c. The company will be viewed as having high creditworthiness.
d. The company has greater than average financial risk when compared to other firms
in its industry.
Answer: D
54. A company with a debt-to-equity ratio of 2.5 and Rs. 10 million of assets has debt of ...?
a. Rs. 2.9 million
b. Rs. 5 million
c. Rs. 7.14 million
d. Rs. 8.23 million
Answer: C

5 Profitability
55. The price to book value per share ratio is most appropriate for valuation of which of the
following types of companies?
a. Cement Manufacturing Company
b. Finance Company
c. Pharmaceutical Company
d. Civil Aviation Company
Answer: B
56. Which of the following is considered a profitability ratio?

a. Average Collection Period
b. Fixed asset turnover
c. Price-earnings ratio
d. Return on Assets
Answer: D
57. A company's net profit is Rs. 200,000; its shareholders' funds are Rs. 300,000 and its total
assets were Rs. 400,000. What is the company's net profit margin?
a. 66.67 per cent
b. 37.65 per cent
c. 50 per cent
Answer: D
58. Return on assets measures the efficiency with which management

a. Generates profits from the assets under its control, regardless of how these assets
are financed.
b. Generates profits from the assets under its control, considering any costs of
financing these assets.
c. Generates cash from the assets under its control.
d. Converts its current assets into cash.
Answer: A
assets were Rs. 400,000. What is the company's return on assets?
a. 66.67 per cent
b. 37.65 per cent
c. 50 per cent
Answer: C

60. A company's net profit is Rs. 200,000; its shareholders' funds are Rs. 300,000 and its sales
were Rs. 400,000. What is the company's net profit margin?
a. 66.67 per cent
b. 37.65 per cent
c. 50 per cent
Answer: C
61. The gross profit margin of a company is unchanged, but the net profit margin declined over
the same period. This could have happened if:
a. Cost of goods sold increased relative to sales.
b. Sales increased relative to expenses.
c. The rate of income tax was raised
d. Dividends paid to equity shareholders declined.
Answer: C
assets were Rs. 400,000. What is the company's return on equity?
a. 50 per cent
b. 66.67 per cent
c. 37.65 per cent
Answer: B
6 Stock Market
63. Book value per share is:
a. The most widely quoted financial statistic developed by accountants.
b. A measure of the total market value of the company's stock.
c. Equal to the total stockholder's equity at a particular date.
d. Equal to common stockholder's equity divided by the number of common shares
outstanding.
Answer: D
64. Dapoli Developers has 31000 shares of stock outstanding with a market price of Rs. 15 per
share. If net profit for the year is Rs. 155,000 and the retention ratio is 80 per cent, what is
the dividend per share on Dapoli Developers’ stock?
a. Rs. 0.68
b. Rs. 0.83
c. Re. 1.00
d. Rs. 1.25
Answer: C

65. A company paid a dividend per share, Rs. 65 and the market price of the company's share is
Rs. 170. The earnings per share of the company is Rs. 104. What is the dividend pay-out
ratio?
a. 62.50 per cent
b. 7.65 per cent
c. 37.65 per cent
Answer: A
66. Hingoli Helium Company has a current stock price of Rs.65. For the past year, the company
had net profit of Rs. 7.4 million, shareholder funds of Rs. 32450000, and 3.6 million shares of
stock outstanding. What is the price-earnings multiple?
a. 21.55
b. 31.55
c. 11.55
d. 41.55
Answer: B
67. The price earnings multiple of the company is 25 and its earnings per share is 13. What is the
company's market price per share?
a. 325
b. 1.92
c. 0.52
Answer: A
68. A company's equity share capital is Rs. 500,000; Reserves and Surplus is Rs. 800,000;
Numbers of equity shares outstanding is 130,000 and the market price of its equity share is
Rs. 250. What is the company's price to book value per share ratio?
a. 25
b. 40.63
c. 65.07
Answer: A
69. A company paid a dividend per share, Rs. 51 and the market price of the company's share is
Rs. 170. The earnings per share of the company is Rs. 130. What is the dividend yield?
a. 30 per cent
b. 7.65 per cent
c. 37.65 per cent
Answer: A

70. Which of the following formulas is used to calculate a price-earnings ratio?
a. Dividends per share divided by earnings per share
b. Current market price per share divided by earnings per share
c. Net profit less preferred dividends divided by number of equity shares outstanding
d. Dividends per share divided by market price per share
Answer: C
71. Bhandara Borax Company has a current stock price of Rs.65. For the past year, the company
had net profit of Rs. 7.4 million, shareholder funds of Rs. 32.45 million, and 3.6 million
shares of stock outstanding. What is the book value per share?
a. Rs. 8.01
b. Rs. 7.01
c. Rs. 9.01
d. Rs. 6.01
Answer: C
72. A company earned a net profit of Rs. 650,000; Numbers of equity shares outstanding is
130,000 and the market price of its equity share is Rs. 50. What is the company's price
earnings (PE) ratio?
a. 40.63
b. 65.07
c. 10
Answer: C
73. A company earned a net profit of Rs. 650,000; its sales are Rs. 5,200,000; the numbers of
equity shares outstanding are 130,000 and the market price of its equity share is Rs. 200.
What is the company's price to sales per share ratio?
a. 65.07
b. 5
c. 40.63
Answer: B
74. Which of the following is true about a dividend pay-out ratio?

a. It represents the percentage of shareholders that will receive a dividend.
b. Investors who seek growth in market price would like for it to be large.
c. Investors who seek dividends would like for it to be small.
d. It represents the proportion of net profits distributed as dividends.
Answer: D

75. The price-earnings ratio is calculated by
a. Dividing net income minus preferred dividends by the average number of common
shares outstanding.
b. Dividing dividends per share by earnings per share.
c. Dividing the market price of the stock by earnings per share.
d. Dividing dividends per share by market price per share.
Answer: C
76. Sangli Steel has a current stock price of Rs.65. For the past year, the company had net profit
of Rs. 7.4 million, shareholder funds of Rs. 32.45 million, and 3.6 million shares of stock
outstanding. What is the market-to-book ratio?
a. Rs. 4.21
b. Rs. 5.21
c. Rs. 6.21
d. Rs. 7.21
Answer: D
77. Alibaug Air Purifier Company has 31000 shares of stock outstanding with a market price of
Rs. 15 per share. If net profit for the year is Rs. 155,000 and the dividend per share is Rs.
2.00, what is the retention ratio for Alibaug Air Purifier Company in per cent?
a. 21.6
b. 40
c. 60
d. 78.4
Answer: C
78. The market price per share is Rs. 32. The price earnings ratio is 5.0. The earnings per share
are:
a. Rs. 160
b. 50% of the market price per share
c. Rs. 25.60
d. Rs. 6.40
Answer: D
79. Company J and Company K each recently reported the same earnings per share (EPS).
Company J’s stock, however, trades at a higher price. Which of the following statements is
most correct?
a. Company J must have a higher P/E ratio.
b. Company J must have a higher market to book ratio.
c. Company J must be riskier.
d. Company J must have fewer growth opportunities.
Answer: A

80. Chiplun Construction Company has a current stock price of Rs.65. For the past year, the
company had net profit of Rs. 7.4 million, shareholder funds of Rs. 32450000, and 3.6 million
shares of stock outstanding. What are the earnings per share (EPS)?
a. Rs. 2.06
b. Rs. 1.06
c. Rs. 3.06
d. Rs. 0.06
Answer: A
81. Which of the following is FALSE about the dividend yield ratio?
a. Dividend yield ratio = Dividends per share / Market price per share.
b. Measures the rate of return that would be earned by an investor who buys the
equity shares at the current market price.
c. A low dividend yield is neither bad nor good by itself.
d. Dividend yield ratio = Market price per share / Dividends per share.
Answer: D
82. The price-earnings ratio is calculated by:

a. Dividing net profit minus preference dividends by the average number of common
shares outstanding.
b. Dividing dividends per share by earnings per share.
c. Dividing the market price of the stock by earnings per share.
d. Dividing dividends per share by market price per share.
Answer: C
7 Combined Ratios
83. Weep Row Ltd. sold goods worth Rs. 60,00,000. Its return on equity is 12% and its sales to
total asset ratio is 3:1. The company is 50% equity financed. What is the company’s net
profit in rupees?
a. 120000
b. 210000
c. 100000
d. 240000
Answer: A
84. Krisel Ltd. is financed only by equity and debt; there are no current liabilities. Its debt-to-
total assets ratio is 0.4. What is its debt-to-equity (D/E) ratio?
a. 0.67
b. 1.33
c. 1.5
d. 0.33
Answer: A

85. Oliver Company has a current ratio = 1.6, and a quick ratio equal to 1.2. The company’s cost
of goods sold is Rs. 2 million and its current liabilities are Rs. 10,00,000. What is the
company’s inventory turnover ratio?
a. 5
b. 5.2
c. 5.5
d. 6
Answer: A
86. A firm has total interest charges of Rs. 20,000 per year, sales of Rs. 2 million, and an
operating profit margin of 6 percent. What is the firm’s times-interest-earned ratio?
a. 6
b. 7
c. 8
d. 9
Answer: A
87. Determine a firm's sales to total assets ratio if its return on investments (ROI) is 8 per cent,
net profit margin is 5 per cent, total assets are Rs. 80,00,000.
a. 1.6
b. 0.03
c. 1.06
d. 0.3
Answer: A
88. A company has annual credit sales of Rs. 1440000. It wishes to maintain an average
collection period of 50 days. Assuming 360 days in a year, what is the average level of
account receivables that the company should maintain?
a. 100000
b. 200000
c. 300000
d. 150000
Answer: B
89. Krisel Ltd. is financed only by equity and debt; there are no current liabilities. It has a debt-
to-equity ratio of 2.5. If the company’s total assets are Rs. 100,00,000, what is the amount of
its debt in lakhs?
a. 63.13
b. 53.41
c. 43.14
d. 71.43
Answer: D

90. Anchor Limited’s return on equity is 15% and its sales to total asset ratio is 3. The company
sold goods worth Rs. 6000000 during the year. The company is 60% equity financed. What is
the company’s net profit?
a. 380000
b. 280000
c. 480000
d. 180000
Answer: D
91. Bambi Ltd. is financed only by equity and debt; there are no current liabilities. Its debt-to-
total assets ratio is 0.4. What is its debt-to-equity ratio?
a. 0.67
b. 1.33
c. 1.5
d. 0.33
Answer: A
92. You have found that Ratnagiri Electricity Company's return on equity is 12 percent and its
debt ratio is 0.40. What is its return on assets in per cent?
a. 4.9
b. 5.35
c. 6.6
d. 7.2
Answer: D
93. Chembur Chemical Company has Rs. 5 million in sales. Its ROE is 10 percent, and its total
assets turnover is 2.5X. The company is 60 percent equity financed. What is the company’s
net profit?
a. Rs. 95750
b. Rs. 105300
c. Rs. 110250
d. Rs. 120000
Answer: D
94. Agro Supplies Limited has a net profits to total assets ratio of 8%; total assets being Rs.
300,000. Its net profit margin is 5%. What are its sales?
a. 380000
b. 280000
c. 480000
d. 180000
Answer: C

95. A firm has a net profit margin of 15 percent on sales of Rs. 20,000,000. If the firm has debt
of Rs. 7,500,000, total assets of Rs. 22,500,000, and an after-tax interest cost on total debt of
5 percent, what is the firm's return on equity (ROE) in per cent?
a. 20
b. 10
c. 12
d. 13
Answer: A
96. You have found that Sindhudurg Electricity Company's return on equity (ROE) is 15 per cent
and its return on assets (ROA) is 10 per cent. What is the firm’s debt to total assets in per
cent?
a. 67
b. 50
c. 25
d. 33
Answer: D
97. Kanji Company had sales last year of Rs. 26 crores, including cash sales of Rs. 2.50 crores. If
its average collection period was 36 days, its accounts receivable balance is closest to in
crores: (Assume a 365-day year)
a. 1.32
b. 0.32
c. 2.32
d. 3.32
Answer: C
98. The sales to total assets ratio of Weep Row Ltd. is 1.5 and its net profit to total assets ratio is
3 per cent. What is the company’s net profit margin in per cent?
a. 1
b. 3
c. 1.5
d. 2
Answer: D
99. The current ratio of a company is 2.50:1; its quick ratio is 2:1; and current liabilities are Rs.
175000. What is the amount invested by the company in inventories in rupees?
a. 75800
b. 87500
c. 57800
d. 68700
Answer: B

100. A firm has a net profit margin of 15 percent on sales of Rs. 20,000,000. If the firm
has debt of Rs. 7,500,000, total assets of Rs. 22,500,000, and an after-tax interest cost on
total debt of 5 percent, what is the firm's ROA in per cent?
a. 8.4
b. 10.9
c. 12
d. 13.3
Answer: D
101. The Chandrapur Carriage Company has a net profit margin of 5 per cent and a total
asset turnover of 5 times. What is the company's return on assets (ROA) in per cent?
a. 1
b. 5
c. 10
d. 25
Answer: D
102. The sales to total assets ratio of Coal Gate Ltd. is 2 and its return on assets ratio is
5%. What is the company’s net profit margin in per cent?
a. 1.5
b. 0.5
c. 2.5
d. 1.75
Answer: C
103. Determine a firm's sales to total asset ratio if its return on investments (ROI) is 9%,
net profit margin (NPM) is 7%, total assets are Rs. 90,00,000.
a. 0.29
b. 1.29
c. 2.29
d. 3.29
Answer: B
BALKRISHNA PARAB
Management Studies
Cell: 9833528351

Financial
Statements Quiz
Balkrishna Parab
ACMA, FCS, PhD
Profit and Loss Account

1. An income statement, or profit and loss account is also known as:
a. Statement of Financial Position
b. Statement of Financial Flows
c. Statement of Financial Performance
d. Statement of Financial Strength
Answer: C
2. Which of the following transaction will be reported in the profit and loss account?
a. Purchase of company car
b. Taking a loan for purchase of company car
c. Payment of advance for purchase of company car
d. Maintenance of company car
Answer: D
a. Purchase of equipment.
b. Taking a loan for purchase of equipment.
c. Payment of interest on loan taken to purchase of equipment.
d. Payment of an advance for purchase of equipment.
Answer: C

a. Proceeds from the sale of company car
b. Repayment of loan taken for purchase company car.
c. Receipt of an advance from client
d. Proceeds from sale of goods
Answer: D
5. Which of the following items will be reported as ‘revenue’ in the profit and loss account?
a. Sale of goods
b. Profit on sale of long-term assets
c. Loss on sale of long-term assets
d. Proceeds from disposal of investments
Answer: A
6. Which of the following items will be reported as ‘gain’ in the profit and loss account?
a. Profit on sale of long-term assets
b. Sale of goods
c. Proceeds from sale of scrap
d. Proceeds from rendering of service
Answer: A
7. A company disposed of an item of long-term asset which had a book value of Rs. 100,000 for Rs.
80,000. How would this item be reported in the profit and loss account?
a. Income of Rs. 100,000
b. Loss of Rs. 20000
c. Income of Rs. 80,000
d. This transaction will not be reported in the profit and loss account.
Answer: B
8. A company disposed of an item of long-term asset which had a book value of Rs. 500,000 for Rs.
600,000. How would this item be reported in the profit and loss account?
a. Gain of Rs. 100,000
b. Income of Rs. 500,000
c. Income of Rs. 600,000
Answer: A
9. How is payment of interest on loans is treated in the profit and loss account?
a. Operating expense
b. Either operating or non-operating expense
c. Non-operating expense
Answer: C

10. How is incurrence of general advertising expense is treated in the profit and loss account?
a. Non-Operating expense
b. Either operating or non-operating expense
c. Operating expense
Answer: C
11. What would you call the difference between operating income and operating expenses?
a. Net Profit
b. Pre-Tax Profit
c. Earnings after taxes
d. Earnings before interest and taxes (EBIT)
Answer: D
12. How is payment of insurance premium on company car treated in the profit and loss account?
a. Operating expense
b. Non-Operating expense
c. Either operating or non-operating expense
Answer: A
13. How is receipt of interest from investment treated in the profit and loss account?
a. Non-Operating income
b. Operating income
c. Either operating or non-operating income
Answer: A
14. How is payment of advance to a supplier treated in the profit and loss account?
a. This transaction will not be reported in the profit and loss account.
b. Operating expense
c. Operating expense
d. Either operating or non-operating expense
Answer: A
15. How is receipt of advance from a client treated in the profit and loss account?
a. This transaction will not be reported in the profit and loss account.
b. Operating income
c. Operating income
d. Either operating or non-operating income
Answer: A

16. The income statement's primary purpose is to show the __________ of a business.
a. Financial Performance
b. Financial Position
c. Income
d. Expenses
Answer: A
17. Ajra Aluminium Company's EBITDA is Rs. 912000, and its depreciation and amortisation are Rs.
256000. The non-operating income of the company is Rs. 0, and it non-operating expenses is Rs.
96000. The tax rate applicable to the company is 30 per cent. What is the company's pre-tax
profit (EBT)?
a. 560000
b. 392000
c. 752000
d. 638400
Answer: A
18. Bavda Burette Company's net profit (EAT) is Rs. 245000. The non-operating income of the
company is Rs. 7000, and it non-operating expenses is Rs. 7000. The tax rate applicable to the
company is 30 per cent. What is the company's operating profit (EBIT)?
a. 116667
b. 245000
c. 350000
d. 350000
Answer: D
19. Chandgad Chemicals Company's net profit (EAT) is Rs. 756000. The non-operating income of the
a. 3400000
b. 1020000
c. 714000
d. 1080000
Answer: B
20. Dapoli Drums Company's operating profit (EBIT) is Rs. 1020000. Its sales are Rs. 2000000, and its
operating expenses (except depreciation and amortisation) is Rs. 640000. The tax rate applicable
to the company is 30 per cent. What is the company's depreciation and amortisation?
a. 714000
b. 306000
c. 340000
d. 214200
Answer: C

21. Ehtasampur Electrical Company's sales is Rs. 700000. Its operating expenses (except
depreciation and amortisation) is Rs. 224000, and its depreciation and amortisation are Rs.
126000. The tax rate applicable to the company is 30 per cent. What is the company's operating
profit (EBIT)?
a. 350000
b. 245000
c. 476000
d. 333200
Answer: A
22. Faridabad Fan Company's operating profit (EBIT) is Rs. 656000. Its sales are Rs. 1600000, and its
a. 256000
b. 459200
c. 196800
d. 137760
Answer: A
23. Guhagar Gaming Company's EBITDA is Rs. 476000, and its depreciation and amortisation are Rs.
126000. The non-operating income of the company is Rs. 7000, and it non-operating expenses is
Rs. 7000. The tax rate applicable to the company is 30 per cent. What is the company's pre-tax
profit (EBT)?
a. 350000
b. 245000
c. 364000
d. 333200
Answer: A
24. Hatkanangle Hessian Company's net profit (EAT) is Rs. 756000. Assume there is no non-
operating income and no non-operating expense, and the amount of depreciation and
amortisation is Rs. 340000. The tax rate applicable to the company is 30 per cent. What is the
company's operating profit (EBITDA)?
a. 1420000
b. 2860000
c. 1020000
d. 714000
Answer: A

25. Ichalakaranji Ice-cream Company's EBITDA is Rs. 1360000, and its depreciation and amortisation
are Rs. 340000. The non-operating income of the company is Rs. 80000, and it non-operating
expenses is Rs. 20000. The tax rate applicable to the company is 30 per cent. What is the
company’s-tax profit (EBT)?
a. 1080000
b. 756000
c. 1120000
d. 952000
Answer: A
26. Jalgaon Juniper Company's sales is Rs. 2000000. Its operating expenses (except depreciation and
amortisation) is Rs. 640000, and its depreciation and amortisation are Rs. 340000. The tax rate
applicable to the company is 30 per cent. What is the company's operating profit (EBIT)?
a. 714000
b. 1020000
c. 1360000
d. 952000
Answer: B
27. Khed Karbon Company's operating profit (EBIT) is Rs. 350000. Its sales are Rs. 700000, and its
a. 245000
b. 105000
c. 126000
d. 73500
Answer: C
28. Lanja Lichi Company's net profit (EAT) is Rs. 392000. Assume there is no non-operating income
and no non-operating expense, and the amount of depreciation and amortisation is Rs. 256000.
The tax rate applicable to the company is 30 per cent. What is the company's operating profit
(EBITDA)?
a. 816000
b. 156266
c. 656000
d. 459200
Answer: A
29. Mhasala Manganese Company's net profit (EAT) is Rs. 245000. Assume there is no non-operating
income and no non-operating expense, and the amount of depreciation and amortisation is Rs.
profit (EBITDA)?
a. 476000
b. 942667
c. 350000
d. 245000
Answer: A

30. Nagpur Nanotechnology Company's sales is Rs. 1600000. Its operating expenses (except
depreciation and amortisation) is Rs. 688000, and its depreciation and amortisation are Rs.
profit (EBIT)?
a. 459200
b. 656000
c. 912000
d. 638400
Answer: B
31. Osmanabad Oxalic Company's net profit (EAT) is Rs. 392000. The non-operating income of the
a. 218667
b. 459200
c. 560000
d. 656000
Answer: D
32. Palghar Paint Company's net profit (EAT) is Rs. 254800. Assume there is no non-operating
income and no non-operating expense, and the amount of depreciation and amortisation is Rs.
profit (EBITDA)?
a. 490000
b. 975333
c. 336000
d. 235200
Answer: A
33. Ponda Photography Company's reserves and surplus was Rs. 3700000 as on March 31, 2020, and
Rs. 3900000 as on March 31, 2021. During the financial year 2020-21 the company paid a
dividend of Rs. 800000. What was the net profit of the company during the financial year 2020-
21?
a. 1000000
b. -1000000
c. 3700000
d. 3900000
Answer: A

Balance Sheet
34. A balance sheet is also known as:
a. Statement of Financial Position
b. Statement of Financial Performance
c. Statement of Financial Flows
d. Statement of Financial Strength
Answer: A
35. How is long-term loan reported in the balance sheet of a company?

a. Current liability
b. Non-current liability
c. Shareholders’ equity
d. This item will not be reported in the balance sheet.
Answer: B
36. How is short-term loan reported in the balance sheet of a company?

a. Non-current liability
b. Shareholders’ equity
c. Current liability
Answer: C
37. How is bank overdraft reported in the balance sheet of a company?

c. This item will not be reported in the balance sheet.
d. Current liability
Answer: D
38. How are payables to trade suppliers reported in the balance sheet of a company?
Answer: A
39. How are the proceeds from issue of bonds reported in the balance sheet of a company?
Answer: B

40. How are the proceeds from issue of debentures reported in the balance sheet of a company?
c. Non-current liability
Answer: C
41. How are the proceeds from issue of shares reported in the balance sheet of a company?
b. Current liability
c. This item will not be reported in the balance sheet.
d. Shareholders’ equity
Answer: D
42. How is the premium on issue of shares reported in the balance sheet of a company?
c. Current liability
Answer: B
43. What is the difference between total assets and total liabilities is called?
a. Net assets
b. Residual assets
d. Asset balance
Answer: C
44. The balance sheet’s primary purpose is to show the … of a business.

a. Financial Performance
b. Assets
c. Liabilities
d. Financial Position
Answer: D
45. How is purchase of real estate property reported in the balance sheet of a company?
a. Non-current asset
b. Current asset
c. Deferred Asset
d. Real asset
Answer: A

46. How is purchase of manufacturing plant reported in the balance sheet of a company?
a. Deferred Asset
b. Real asset
c. Non-current asset
d. Current asset
Answer: C
47. How is purchase of equipment reported in the balance sheet of a company?

a. Current asset
b. Deferred Asset
c. Non-current asset
d. Real asset
Answer: C
48. How is investment in long-term financial instruments reported in the balance sheet of a
company?
a. Current asset
b. Deferred Asset
c. Real asset
d. Non-current asset
Answer: D
49. How is the amount receivable from clients on account of sale of goods on credit reported in the
balance sheet of a company?
a. Current asset
b. Non-current asset
c. Deferred Asset
d. Real asset
Answer: A
50. How is the pre-payment of insurance premium reported in the balance sheet of a company?
b. Deferred Asset
c. Current asset
d. Real asset
Answer: C
51. How is the payment of insurance premium reported in the balance sheet of a company?
b. Deferred Asset
c. Current asset
d. It is not reported in the balance sheet of the company.
Answer: D

52. How is the payment of short-term advance to a supplier reported in the balance sheet of a
company?
a. Current asset
c. Deferred Asset
d. Real asset
Answer: A
53. Which of the following is reported under the property, plant, and equipment item in the balance
sheet?
a. Real assets having a useful life of less than one year.
b. Intangible assets having a useful life of more than one year.
c. Intangible assets having a useful life of less than one year.
d. Tangible assets having a useful life of more than one year.
Answer: D
54. How is the receipt of short-term advance from clients reported in the balance sheet of a
company?
a. Current asset
c. Deferred Asset
d. Current Liability
Answer: D
55. Under which head of the balance sheet is accumulated profits reported in the balance sheet?
b. Reserves and surplus
c. Non-current liability
d. Share capital.
Answer: B
56. Panhala Peninsular Company has non-current liabilities of Rs. 2500000 and current liabilities of
Rs. 1400000. The total asset of the company is Rs. 8500000. What is the company's
shareholders' equity?
a. 4600000
b. 1000000
c. 12400000
d. 3900000
Answer: A

57. Quetta Quasar Company has non-current liabilities of Rs. 2700000 and current liabilities of Rs.
1000000. The total asset of the company is Rs. 9500000. What is the company's shareholders'
equity?
a. 5800000
b. 2000000
c. 13200000
d. 3700000
Answer: A
58. Ratnagiri Rusk Company has non-current assets of Rs. 4100000 and current assets of Rs.
4500000. The shareholder funds are Rs. 5100000, and the amount of current liabilities is Rs.
1400000. What is the company's non-current liabilities?
a. 7200000
b. 5100000
c. 2100000
d. 8600000
Answer: C
59. Talegaon Tin Company has non-current assets of Rs. 3000000 and current assets of Rs. 5200000.
The shareholder funds are Rs. 4200000, and the amount of current liabilities is Rs. 1300000.
What is the company's non-current liabilities?
a. 6900000
b. 2700000
c. 4200000
d. 8200000
Answer: B
60. Umarkhed Uranium Company has total assets of Rs. 8200000 and the total of its non-current
liabilities and current liabilities is Rs. 4000000. The share capital of the company is Rs. 1100000.
What is the company's reserves and surplus?
a. 3100000
b. 4200000
c. 4000000
d. 8200000
Answer: A
61. Vishalgad Viscose Company has total assets of Rs. 8000000 and the total of its non-current
liabilities and current liabilities is Rs. 3600000. The share capital of the company is Rs. 1400000.
What is the company's reserves and surplus?
a. 4400000
b. 3000000
c. 3600000
d. 8000000
Answer: B

62. Warangal Wool Company has non-current assets of Rs. 4300000; current assets of Rs. 4000000;
non-current liabilities of Rs. 2800000; current liabilities of Rs. 1000000; and the reserves and
surplus of Rs. 3200000. What is the company's share capital?
a. 1300000
b. 4500000
c. 3200000
d. 2500000
Answer: A
63. Xanadu XMos Company has non-current assets of Rs. 4300000; current assets of Rs. 5100000;
non-current liabilities of Rs. 2600000; current liabilities of Rs. 1500000; and the reserves and
surplus of Rs. 3500000. What is the company's share capital?
a. 5300000
b. 3500000
c. 1800000
d. 2300000
Answer: C
64. Yeole Yacht Company has non-current assets of Rs. 4000000; non-current liabilities of Rs.
2900000; current liabilities of Rs. 1000000; and the total of share capital and reserves and
surplus of Rs. 4800000. What is the company's current assets?
a. 1000000
b. 4800000
c. 800000
d. 4700000
Answer: D
65. Zanzibar Zoological Company has non-current assets of Rs. 3500000; non-current liabilities of Rs.
a. 5700000
b. 1500000
c. 5600000
d. 2100000
Answer: A
66. Churchgate Cistern Company has non-current assets of Rs. 3300000; non-current liabilities of Rs.
a. 5900000
b. 1000000
c. 5500000
d. 2200000
Answer: A

Cash Flow Statements
67. Patalganga Penicillin Company's current assets were Rs. 7800000 as on March 31, 2020, and Rs.
9400000 as on March 31, 2021. Company's current liabilities were Rs. 1000000 as on March 31,
2020, and Rs. 1500000 as on March 31, 2021. Which of the following statements is TRUE?
a. Increase in working capital of Rs. 1100000
b. Decrease in working capital of Rs. 1100000
c. Increase in working capital of Rs. 1600000
d. Decrease in working capital of Rs. 500000
Answer: A
68. Taxes paid by the company will appear in the which of the following part of the cash flow
statement?
a. Cash flow from operating activities
b. Cash flow from investing activities
c. Cash flow from financing activities
d. This will not appear in the cash flow statement.
Answer: A
69. Issue of bonus shares by the company will appear in the which of the following part of the cash
flow statement?
Answer: D
70. Increase in trade payables will directly affect which of the following part of the cash flow
statement?
Answer: A
71. Proceeds from sale of investments will appear in the which of the following part of the cash flow
statement?
Answer: B

72. Repayment of loans will appear in the which of the following part of the cash flow statement?
Answer: C
73. Cash paid for buyback of shares will appear in the which of the following part of the cash flow
statement?
Answer: C
74. Badlapur Benzene Company's current assets were Rs. 9200000 as on March 31, 2020, and Rs.
a. Decrease in working capital of Rs. 900000
b. Increase in working capital of Rs. 900000
c. Decrease in working capital of Rs. 1200000
d. Increase in working capital of Rs. 300000
Answer: A
75. Cash received from issue of shares at a premium will appear in the which of the following part of
the cash flow statement?
Answer: C
76. Sale of a part of property, plant and equipment will appear in the which of the following part of
Answer: B
77. Purchase of an item of property, plant and equipment will appear in the which of the following
part of the cash flow statement?
Answer: B

78. Payment of dividends to holders of preference shares will appear in the which of the following
part of the cash flow statement?
Answer: C
79. Nagpada Nitrogen Company's current assets were Rs. 8800000 as on March 31, 2020, and Rs.
c. Decrease in working capital of Rs. 500000
d. Increase in working capital of Rs. 200000
Answer: B
80. Payment of interest to holders of debentures will appear in the which of the following part of
Answer: C
81. Payment of dividends to holders of equity shares will appear in the which of the following part of
Answer: C
82. Repayment of bank overdraft directly affect which of the following part of the cash flow
statement?
Answer: A

83. Receipt of refund of taxes will directly affect which of the following part of the cash flow
statement?
Answer: A
84. Issue of debentures for cash will appear in the which of the following part of the cash flow
statement?
Answer: C
85. Amboli Avionics Company's reserves and surplus was Rs. 3800000 as on March 31, 2020, and Rs.
3700000 as on March 31, 2021. During the financial year 2020-21 the company paid a dividend
of Rs. 800000. What was the net profit of the company during the financial year 2020-21?
a. 700000
b. -700000
c. 3800000
d. 3700000
Answer: A
86. Bandra Binocular Company's long-term borrowing was Rs. 2600000 as on March 31, 2020, and
Rs. 2300000 as on March 31, 2021. Which of the following statements is true?
a. The company made a further long-term borrowing of Rs. 300000
b. The company redeemed long term borrowings of Rs. 2600000
c. The company redeemed long term borrowings of Rs. 300000
d. The company made a further long-term borrowing of Rs. 2600000
Answer: C
87. Breach Candy Candle Company's current assets were Rs. 8700000 as on March 31, 2020, and Rs.
c. Increase in working capital of Rs. 300000
d. Decrease in working capital of Rs. 400000
Answer: D

88. Dronagiri Draperies Company's property, plant and equipment was Rs. 4400000 as on March 31,
2020, and Rs. 3500000 as on March 31, 2021. During the financial year 2020-21 the company
charged depreciation of Rs. 700000. What was the net cash flow of the company from the
purchase or sale of property, plant, and equipment?
a. -200000
b. 200000
c. 4400000
d. 3500000
Answer: A
89. Elephanta Electronics Company's equity share capital was Rs. 1300000 as on March 31, 2020,
and Rs. 1700000 as on March 31, 2021. Which of the following statements is true?
a. The company bought back equity share capital of Rs. 400000
b. The company made a further issue of share capital of Rs. 400000
c. The company bought back equity share capital of Rs. 1700000
d. The company bought back equity share capital of Rs. 1300000
Answer: B
90. Fariyas Furniture Company's long-term borrowing was Rs. 2200000 as on March 31, 2020, and
c. The company made a further long-term borrowing of Rs. 2700000
d. The company redeemed long term borrowings of Rs. 2700000
Answer: A
91. Ghobadi Gunpowder Company's property, plant and equipment was Rs. 3600000 as on March
31, 2020, and Rs. 5000000 as on March 31, 2021. During the financial year 2020-21 the company
a. -1900000
b. 3600000
c. 1900000
d. 5000000
Answer: C
92. Hingoli Hatcheries Company's reserves and surplus was Rs. 3000000 as on March 31, 2020, and
21?
a. -1000000
b. 3000000
c. 3400000
d. 1000000
Answer: D

93. Indore Interiors Company's property, plant and equipment was Rs. 3000000 as on March 31,
a. 1900000
b. -1900000
c. 3000000
d. 4100000
Answer: A
94. Jayanagar Jasmine Company's reserves and surplus was Rs. 3100000 as on March 31, 2020, and
21?
a. -1400000
b. 1400000
c. 3100000
d. 3900000
Answer: B
95. Kagal Ketone Company's equity share capital was Rs. 1700000 as on March 31, 2020, and Rs.
2100000 as on March 31, 2021. Which of the following statements is true?
a. The company made a further issue of share capital of Rs. 400000
b. The company bought back equity share capital of Rs. 400000
Answer: A
96. Latur Lampshade Company's property, plant and equipment was Rs. 3100000 as on March 31,
a. 2700000
b. -2700000
c. 3100000
d. 4900000
Answer: A
97. Malad Manufacturing Company's equity share capital was Rs. 2000000 as on March 31, 2020,
and Rs. 1900000 as on March 31, 2021. Which of the following statements is true?
b. The company made a further issue of share capital of Rs. 2000000
d. The company made a further issue of share capital of Rs. 1900000
Answer: C

98. Nerul Naturopathy Company's equity share capital was Rs. 1000000 as on March 31, 2020, and
b. The company bought back equity share capital of Rs. 500000
Answer: A
99. Okhla Omelette Company's long-term borrowing was Rs. 2000000 as on March 31, 2020, and Rs.
1900000 as on March 31, 2021. Which of the following statements is true?
c. The company redeemed long term borrowings of Rs. 2000000
d. The company made a further long-term borrowing of Rs. 2000000
Answer: B
100. Pandharpur Pencil Company's reserves and surplus was Rs. 3900000 as on March 31, 2020,
and Rs. 3500000 as on March 31, 2021. During the financial year 2020-21 the company paid a
21?
a. 100000
b. -100000
c. 3900000
d. 3500000
Answer: A
101. Panvel Pharmaceutical Company's reserves and surplus was Rs. 3400000 as on March 31,
paid a dividend of Rs. 700000. What was the net profit of the company during the financial year
2020-21?
a. 900000
b. -900000
c. 3400000
d. 3600000
Answer: A
102. Purchase of an item of property, plant, and equipment on credit will appear in which of the
following sections of the cash flow statement?
Answer: D

103. Purchase of a manufacturing plant on deferred credit basis will appear in which of the
following sections of the cash flow statement?
Answer: D
BALKRISHNA PARAB
Jamnalal Bajaj Institute of Management
Studies, University of Mumbai.
E-Mail: balkrishnaparab@jbims.edu;
Cell: 9833528351; Address: JBIMS, 164,
DN House, HT Parekh Marg, Backbay
Reclamation, Mumbai 400 020.

Corporate Finance
Financial
Management Quiz
Balkrishna Parab
ACMA, FCS, PhD
1. The decision function of financial management can be broken down into three major areas:
the ..., financing, and asset management (dividend) decisions.
A. Investment
B. Risk Management
C. Analysis
D. Planning
Answer: A
2. Which of the following is the goal of financial management?

A. Maximisation of profits.
B. Maximisation of shareholder wealth.
C. Maximisation of stakeholder welfare.
D. Maximisation of social welfare.
Answer: B
3. Which of the following refers to a change in control of a company in favour of the

professional managers of the company?
A. Friendly takeover.
B. Management buyout.
C. Leveraged buyout.
D. Hostile takeover.
Answer: B

4. Agency cost comprises of three elements: bonding cost, monitoring cost, and ... cost.
A. Managerial cost.
B. Fixed cost.
C. Marginal cost.
D. Residual cost.
Answer: D
5. Courts have tried to balance the interests of ... and ... by developing the doctrine of capital
maintenance.
A. Majority shareholders, minority shareholders.
B. Shareholders, Directors
C. Shareholders, Creditors
D. Lenders, Public shareholders
Answer: C
6. ... buyouts use significant amounts of borrowed money, with the assets of the company
being acquired often used as collateral for the loans.
A. Management
B. Horizontal
C. Leveraged
D. Institutional
Answer: C
7. A ... takeover occurs when an acquiring entity seeks to acquire another company – the
target company – but the board of directors from the target company has no desire to be
acquired by another company.
A. Friendly
B. Hostile
C. Leveraged
D. Institutional
Answer: B
8. A ... takeover bid occurs when the board of directors from both companies (the target and
acquirer) negotiate and approve the bid.
A. Friendly
B. Hostile
C. Leveraged
D. Institutional
Answer: A
9. A ... usually occurs when one entity makes a bid to take control of a company, often by
buying a majority stake in the target company.
A. Merger
B. Management Buyout
C. Sell out
D. Takeover
Answer: D

10. Which of the following actions is not allowed by the law in India?
A. Issue of bonus shares by capitalising its reserves.
B. Acquisition of its own shares by a company.
C. Issue of shares at a price higher than the share's face value.
D. Hostile takeover of a company.
Answer: B
11. Which of the following problem is created because of separation of ownership and
management of a company?
A. Capital maintenance problem.
B. Agency problem.
C. Social responsibility problem.
D. Sustainability problem.
ANSWER: B
12. Which of the following problem is created because of transferability of shares of a company?
A. Capital maintenance problem.
B. Agency problem.
C. Social responsibility problem.
D. Market for corporate control problem.
ANSWER: D
13. Which of the following does NOT involve an outflow of cash for the firm?
A. Depreciation.
B. Dividends.
C. Interest.
D. Taxes.
ANSWER: A
14. Which of the following results in creation of an asset for the company?
A. Payment of advance to suppliers.
B. Receipt of advance from suppliers.
C. Payment of interest to lenders.
D. Payment of taxes to the government.
ANSWER: A
15. Which of the following results in creation of a liability for the company?
D. Payment of taxes to the government.
ANSWER: B

16. Which of the following is an expense for the company?
B. Refund of advance received from suppliers.
D. Receipt of refund of taxes paid to the government.
ANSWER: C
17. Which of the following is an income for the company?

A. Receipt of deposits from the public.
C. Receipt of interest on investments.
D. Receipt of loan from a bank.
ANSWER: C
18. Which of the following problem is created because the liability of the shareholders of a
company is limited?
A. This makes the position of the minority shareholders vulnerable.
B. This makes the position of the lenders vulnerable.
C. This makes the position of the public shareholders vulnerable.
D. This makes the position of the directors vulnerable.
ANSWER: B
19. The doctrine of capital maintenance has emerged to address which of the following
vulnerabilities?
A. Vulnerability of minority shareholders vis-à-vis majority shareholders.
B. Vulnerability of shareholders vis-à-vis directors.
C. Vulnerability of lenders vis-à-vis shareholders.
D. Vulnerability of directors vis-à-vis shareholders.
ANSWER: C
BALKRISHNA PARAB
Management Studies
Cell: 9833528351

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Accounting for Managerial Decisions

1. Accounting is a system of analysing, recording, summarising, and ... financial transactions

2. Financial accounting is oriented towards providing information to ….

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 1

5. Management accounting is oriented towards providing information to …

6. Government accounting a branch of accounting system that involves analysing, recording,

7. Owners, or shareholders, while using accounting information focus on:

8. Managers within the company use accounting information for:

9. Lenders use accounting information for:

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 2

12. Managers use accounting information for … and …

13. Regulators use accounting information for … and …

14. Owners, or shareholders, while using accounting information focus on … and …

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 3

19. Which of the following statements is TRUE?

20. Which of the following statements is TRUE?

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Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 5

27. Auditing involves:

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 6

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 1

4. The primary purpose of the balance sheet is to:

5. Horizontal analysis looks at:

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9. Which of the following is a FALSE statement about the current ratio?

13. A current ratio of 2.0

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15. The current ratio is defined as:

17. Which of the following statements is most correct?

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Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 5

26. Net working capital is defined as:

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33. Which of the following statements (in general) is correct?

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 7

37. Inventory turnover is equal to:

38. Total asset turnover is:

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 8

43. Which of the following is true of the debt-to-equity ratio?

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 9

46. The debt-to-equity ratio indicates

48. Times interest earned (TIE) is equal to

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52. The debt ratio is a measure of

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 11

56. Which of the following is considered a profitability ratio?

58. Return on assets measures the efficiency with which management

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 12

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 13

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74. Which of the following is true about a dividend pay-out ratio?

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 15

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 16

82. The price-earnings ratio is calculated by:

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 17

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 18

Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 19

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Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 21

Profit and Loss Account

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Balkrishna Parab (2020) | balkrishnaparab@jbims.edu | Page # 3