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Contents
1 FINANCIAL STATEMENT ANALYSIS . . . . . . . . . . . . . . . . . . . . 2

1.1 FINANCIAL STATEMENT ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. FINANCIAL STATEMENT
NARAYAN CHANGDER
ANALYSIS
1.1 FINANCIAL STATEMENT ANALYSIS

1. Given instrument is always appears under B. Current assets
Unsecured Loan
C. Non-current liabilities
A. Public Deposits
D. Total assets
B. Debentures
5. Accountants need a related concept that
2. The question “Did the common stockhold- addresses when to recognize the costs as-
ers receive an adequate return on their in- sociated with the recognized revenue:the
vestment?” is answered through the use matching concept
of
A. True
A. liquidity ratios.
B. False
B. profitability ratios.
C. asset management ratios. 6. Marty Company’s benchmark total operat-
D. leverage ratios. ing expense ratio is between 32.0% and
34.0%. An increase in its operating ex-
3. Comparison of values of one period with pense ratio from 33.1% to 34.2% is a fa-
those of another period for the same firm vorable trend.
is
A. True
A. Intra-firm comparison
B. False
B. Inter-firm comparison
C. Pattern comparison 7. The price-earnings ratio is an example of
a
D. Trend comparison
A. solvency ratio
4. While preparing common-size balance
B. profitability ratio
sheet each item of balance sheet is ex-
pressed as percentage of C. liquidity ratio
A. Non-current assets D. market ratio
1. A 2. B 3. A 4. D 5. A 6. B 7. D
1.1 FINANCIAL STATEMENT ANALYSIS 3
8. According to the IASB Conceptual Frame- 13. Working Capital Gap is equal to?
work, the fundamental qualitative char- A. Total Current Assets less Net Working
acteristics that make financial statements

Capital
useful are:
B. Net working Capital plus other current
A. verifiability and timeliness.
liabilities
B. relevance and faithful representation.
C. Net working capital plus Short Term
C. understandability and relevance. Bank Borrowings
D. none of above D. Other Current Liabilities plus Bank Bor-
9. Look at the data above and calculate ROCE rowings
for both 2008, 2009
14. How do you calculate Gross Profit?
A. Sales-COGS
B. Sales-NP
C. COGS-Expenses
D. COGS-NP
15. Money received against share warrants is

A. 23.33 %, and 4.16% shown as
B. 25% and 5% A. Shareholders’ funds
C. 20% and 3.4%
B. Other long-term liabilities
D. None of above
C. Long-term provisions
10. Which analysis is considered as dynamic D. Other current liabilities
A. Horizontal analysis
16. Calculate the quick ratio for a company
B. Vertical analysis
with current assets of $300, 000, inven-
C. Internal analysis tory of $100, 000, and current liabilities
D. External analysis of $150, 000.
11. Contingent Liabilities on account of dis- A. 0.75

puted tax liabilities will be shown in the B. 1.33
Balance Sheet under? C. 1.1
A. Asset side
D. 2.5
B. Liabilities side
C. As a footnote 17. Which of the following parties would per-
form an external financial analysis?
D. Both assets and liabilities side
A. A firm’s compensation committee
12. What does ROA stand for?
B. A financial analyst forecasting the next
A. Rate of Return on Equity period’s borrowing needs
B. Rate of Return on Income C. A firm’s creditors
C. Rate of Return on New Worth D. A CFO comparing the performance of
D. Rate of Return on Assets the firm’s various divisions
8. B 9. C 10. A 11. C 12. D 13. C 14. A 15. A 16. B 17. C

18. If the interest rate on debt is higher than C. Current ratio, inventory
ROA, a firm will by increasing the use D. acid test ratio, inventory
of debt in the capital structure.
A. A. increase the ROE 23. Which are components of Current Assets?
B. not change the ROE A. Shareholder Debt
C. decrease the ROE B. Land & building
D. change the ROE in an indeterminable C. Account receivable
NARAYAN CHANGDER
manner D. Retained Earnings
19. Which of the following is not one of the 24. Which of the following best describes the
three basic financial statements? role of financial statement analysis?
A. Balance sheet A. To provide information about a com-
B. Income and expense statement pany’s performance
C. Uses of revenue accounts B. To provide information about a com-
D. Statement of cash flows pany’s changes in financial position
C. To form expectations about a com-
20. Preparation of Financial Statement is the pany’s future performance and financial-
responsibility of the management. What position
are the responsibilities of the Independent
/ Statutory Auditors? D. None of the above
A. To express an opinion on the financial 25. Under which sub-head will the following
statement be classified or shown:(i) Long-term Bor-
B. Comments on the compliance of the rowings; (ii) Deferred Tax Liabilities (Net);
various Acts, Accounting Standards etc. and (iii) Long-term Provision?
C. Assurance for True and Fair represen- A. Non Current Liabilities
tation of financial statements B. Other Non Current Liabilities
D. All the above
26. Which of the basic financial statements is
21. Which of the statements about profit is in- best used to answer the question, “How
correct? profitable is the business?”
A. Profit = Revenue-Expenses A. Balance sheet
B. Profit includes revenue and other in- B. Statement of shareholder’s equity
come C. Income statement
C. A loss occurs if expenses are greater D. Accounts receivable aging schedule
than revenues
D. Profit at the end of the year is added 27. If Nico Corporation has annual purchases
to the business’s bank balance of RM300, 000 and accounts payable of
RM30, 000, then average purchases per
22. The is a measure of liquidity which ex- day are and the average payment pe-
cludes , generally the least liquid asset: riod is
A. Current ratio, trade receivable A. 36.5; 821.9
B. Liquid ratio, trade receivable B. 36.0; 833.3
18. C 19. C 20. D 21. D 22. D 23. C 24. C 25. A 26. C 27. C 28. A
C. 821.9; 36.5 C. 7 Times

D. 833.3; 36.0 D. 6.2 Times

28. Choose the appropriate ratio analy- 33. What is the inventory holding period in
sis:Current ratio months for a unit with sales of Rs. 49.60
lakh, inventory of Rs. 6.50 lakh, cost of
A. Liquidity ratios
goods sold Rs. 39.00 lakh and trade re-
B. Profitability ratios ceivables of Rs. 12.40 lakh?
C. Solvency Ratios A. 1 Month
D. Financial Ratios B. 1.57 Month
29. Why is FS analysis important? C. 3 Month
A. To determine the profitability of the D. 2 Month

business 34. An example of liquidity ratio is?
B. To check the growth of the business A. Current Ratio
C. All of the above B. Fixed Assets Turnover Ratio
D. none of above C. TOL / TNW ratio
30. Non-written off Miscellaneous Expendi- D. None of the above
ture will appear under this head in Balance
35. Before a credit proposal is submitted to
Sheet
the Credit Decision, whose approval does
A. Owner’s Fund the use of KAP not recommended by CIMB
B. Loan Fund Niaga require?
C. Current Liabilities A. Head of Business (D-1)
D. Working Capital B. Head of Non Retail Credit Risk Manage-

ment (D-1)
31. Indicates how quickly a firm’s credit ac- C. Business Banking Director
counts are being collected and is a good
measure of how efficiently a firm is man- D. Risk Management Director
aging its accounts receivable. 36. Measures to what degree the assets of the
A. average collection period firm have been financed with borrowed
funds.
B. efficiency ratios
A. debt-to-equity-ratio
C. working capital
B. liquidity ratio
D. current ratio
C. profitability ratio
32. Opening Inventory Rs.1, 00, 000; Closing D. debt-to-assets ratio
Inventory Rs.1, 50, 000; Purchases Rs.6,
00, 000; Carriage Rs.25, 000; wages 37. A firm’s financial obligations to short-term
Rs.2, 00, 000. Inventory Turnover Ratio creditors, which must be repaid within one
will be: year.
A. 6.6 Times A. Current Assets
B. 7.4 Times B. Current Liabilities
29. C 30. A 31. A 32. D 33. D 34. A 35. C 36. D 37. B

C. Accounts Receivable 42. The operating income after interest of a

D. Accounts Payable manufacturing unit is Rs. 6.35 lakh. Dur-
ing the financial year, the unit has booked
38. The gross profit margin is unchanged, but a profit of Rs. 1.15 lakh on sale of invest-
the net profit margin declined over the ment and amortised Rs. 0.35 lakh. What
same period. This could have happened will be profit before tax and profit after
when tax assuming tax rate @ 20%?
A. cost of goods sold increased relative A. Rs. 7.50 lakh & Rs. 6.00 lakh
NARAYAN CHANGDER
to sales
B. Both will be Rs. 7.15 lakh
B. The government has increased the tax
rate C. Rs. 7.15 lakh & Rs. 5.74 lakh
C. dividends were decreased D. Rs. 6.00 lakh and Rs. 4.80 lakh
D. sales increased relative to expenses
43. Potential investors use the financial re-
E. All of above
ports as an aid in deciding whether to buy
39. In performing a vertical analysis, the base the stock
for prepaid expenses is
A. True
A. total current assets.
B. False
B. total assets.
C. total liabilities. 44. Why we prepare Fund Flow Statement?
D. prepaid expenses in a previous year. A. Its Bank’s requirement
40. A company’s financial position would be B. To know the movement of NWC, liquid-
best evaluated using the ity, sources and uses of long term funds,
A. Balance Sheet diversion, siphoning
B. Income Statement C. To comply with the instructions
C. Statement of Cash Flows D. To know the availability of current as-
D. Auditor’s Report sets
41. How can financial statement analysis help 45. Common size analysis is also known as
in decision making? analysis
A. Financial statement analysis is not use-
A. Vertical Analysis
ful in decision making.
B. Financial statement analysis is too B. Horizontal Analysis
complex and time-consuming to be useful
in decision making. 46. Accounting rules require companies with fi-
nance leases to report leased assets and
C. Financial statement analysis only pro- lease liabilities on
vides historical data and is not relevant
for decision making. A. Cash flow statement
D. Financial statement analysis provides B. Income statement
insights into a company’s financial perfor-
C. Financial Position Report
mance and helps stakeholders make in-
formed decisions. D. Notes to Financial Reports
38. B 39. B 40. A 41. D 42. C 43. A 44. B 45. A 46. C 47. A
47. If we reduce the Non Current Liabilities 53. The impact on long-term asset capitaliza-
from the Non Current assets, then what tion is except
we will get?

A. A reasonable solvency ratio in accor-
A. Net Working Capital dance with actual conditions
B. Long Term Surplus B. Reduced volatility of profit and return
C. Working Capital Gap measurements
D. Other Current Liabilities C. Delay recognition of income and ex-
penses
48. Current assets include all assets such as
D. Cash outflow from investment activi-
cash that are expected to be sold between
ties is too high
one and 5 years.
A. True 54. Balance sheet presents the company’s in-
B. False come and expenditures.
49. Stock at the beginning of the year

A. Opening Inventory
B. Sales
C. Purchases
D. Drawings
50. Which of the following is a current asset?
A. automobiles
B. marketable securities
C. buildings A. True
D. equipment B. False
51. Calculate the current ratio for a company 55. What are profitability ratios used for?
with current assets of $500, 000 and cur- A. Assessing the cash holdings of the
rent liabilities of $250, 000. company
A. 2 B. Evaluating the firm’s ability to pay its
B. 1.5 current debts
C. 0.5 C. Gauge the company’s effectiveness in
D. 3 its use of assets
D. Measure the firm’s ability to retain rev-
52. If net sales is P200, 000 and cost of sales
enues as earnings
is P150, 000, how much is the gross profit
margin in percent? 56. What do we deduct from the current asset
A. 25.00% to calculate the quick asset ratio?
B. 50.00% A. Receivables
C. 75.00% B. Prepaid expense
D. 133.33% C. Inventory
E. NOT IN THE CHOICES D. Short-term investment
48. B 49. A 50. B 51. A 52. A 53. A 54. B 55. D 56. C

57. What is the formula for stockholders eq- B. Long Term Deposits received from
uity? dealer
C. Term Loan Installment payable within
next one year
D. All are current liabilities
61. The ratio that measures the relationship

between cash and current assets is the
NARAYAN CHANGDER
quick ratio.
A. True
B. False
A. Stockholders equity = Assets x Liabil-
ities 62. Which one of the following ratios would
most likely not be used by a short-term
B. Stockholders equity = Assets + Lia-
creditor in evaluating whether to sell on
bilities
credit to a company?
C. Stockholders equity = Liabilities-
Assets A. Current ratio
D. Stockholders equity = Assets- B. Quick ratio

Liabilities C. Total asset turnover
58. A firm has an ROE of 2%, a debt/equity D. Account receivable turnover
ratio of 1.0, a tax rate of 0%, and an in-
terest rate on debt of 10%. The firm’s 63. As on 31.03.2018, Adjusted TNW was Rs.
ROA is 243 lakh, Deferred Tax Assets outstand-
ing was Rs. 6 lakh, Investment in asso-
A. 2%.
ciates was Rs. 60 lakh. Work out the Net
B. 4%. Worth of the unit?
C. 6%. A. Rs. 249 lakh
D. 8%. B. Rs. 309 lakh
E. None of the options are correct. C. Rs. 303 lakh
59. Following is deducted while calculating D. Rs. 177 lakh
COGS.
64. A financial report that shows an organiza-
A. Opening Stock
tion’s profitability over a period of time-
B. Closing Stock month, quarter, or year.
C. Direct Expenses A. Statement of Financial Position
D. none of above B. Statement of the Comprehensive In-
come
60. Which one of the following is not a Current
Liability? C. Statements of Cash Flow
A. Statutory Dues Payable D. Cost of Goods Sold
57. D 58. B 59. B 60. B 61. B 62. C 63. B 64. B 65. A

65. Disclosure for Related Party Transactions C. Invoicing are now being done through
is mandatory on the Audited Financial computers in place of manual
Statements under which Accounting Stan-

D. The unit is offering additional dis-
dard (AS)? counts for bulk purchases
A. AS-18
71. Assertion (A):Current ratio is computed to
B. AS-15
assess the short-term financial position of
C. AS-3 the enterprise. Reason (R):Current ratio
D. None of the above explains the relation between long term
assets and current liabilities of a business.
66. State whether each of the following is True
A. Both (A) and (R) are correct and (R) is
or False:Statement of profit and loss ac-
the correct explanation of (A)
count shows the operating performance of
an enterprise for a period of time. B. Both (A) and (R) are correct and (R) is
not the correct explanation of (A)
A. False
B. True C. (A) is correct, but (R) is incorrect
D. (A) is incorrect, but (R) is correct
67. Financial statements are prepared based
on 72. What does the basic earning power (BEP)
A. Past data ratio measure?
B. Future cost A. Operating income per dollar of sales
C. Terminal cost B. Net income per dollar of sales
D. Historical cost C. Net income to total assets
D. EBIT per total assets
68. Compares the total debt of the firm with
the owner’s equity. 73. Who is responsible for compliance of vari-
A. debt-to-assets ratio ous Accounting Standards, Principles, Poli-
B. debt-to-equity ratio cies etc. in preparation and finalising the
financial statements?
C. asset turnover ratio
A. The Auditors of the entity
D. efficiency ratio
B. The management of the entity
69. All of the following are assets, except for? C. The Shareholders / Investors
A. Goodwill
D. All the above
B. Patents
74. From the viewpoint of a stockholder,
C. Loans to other businesses
which of the following relationships do
D. Loans from other businesses you consider of the least significance?
70. The trade receivables period will be im- A. ROA consistently is higher than the in-
pacted under which scenario? dustry average.
A. The competitors in the market have in- B. ROA is greater than the interest rate
crease the credit period being paid to creditors.
B. Sales are increased on the existing C. ROE has increased in each of the past
terms five years.
66. B 67. D 68. B 69. D 70. A 71. C 72. D 73. B 74. D 75. A
D. Net income is greater than the amount 80. Which of these are not the methods of fi-
of working capital. nancial statement analysis?
75. Long Term Sources consist of? A. Ratio analysis
A. Net worth + Term Liabilities B. Comparative analysis
B. Net Worth C. Trend analysis
C. Current Liabilities + Term Liabilities D. Capitalization method
D. Total Liabilities
NARAYAN CHANGDER
81. The financial statement that presents a
76. Stockholders are most interested in evalu- shareholder’s residual claim on assets is
ating the:
A. liquidity. A. balance sheet.
B. solvency. B. income statement.
C. profitability. C. cash flow statement.
D. marketability. D. management commentary.
77. A comparison between two numbers 82. Which condition is the most favorable?
showing how many times one number ex-
ceeds the other. A. Debtors with DSCR <0.5x
A. return on investment B. Debtors with DSCR <1x

B. profitability ratios C. Debtors with DSCR > 2x
C. ratio D. Debtors with DSCR > 3x
D. efficiency ratios 83. The gross profit margin ratio is calculated
78. True or False:When a firm improves (in- by dividing:
creases) its average collection period, it A. profit by sales revenue.
improves the firm’s liquidity position
B. profit by shareholders’ equity.
A. True
C. gross profit by sales revenue.
B. False
D. sales revenue by cost of sales.
Explanation:False. The faster a firm col-
lect cash from sales (decrease in ac- 84. What is the balance sheet?
counts receivable), the more cash will be
available to the firm to pay its current lia- A. The balance sheet is a report that
bilities shows a company’s revenue and profit.
B. The balance sheet is a statement that
79. Agency costs are:
displays a company’s cash flow and invest-
A. Costs incurred resulting from conflicts ments.
of interest between the shareholders and
C. The balance sheet is a document that
the managers of a corporation.
lists all the expenses of a company.
B. Costs of monitoring the managers’ ac-
tions D. The balance sheet is a financial state-
ment that shows a company’s assets, lia-
C. Both A and B bilities, and shareholders’ equity at a spe-
D. None of the above cific point in time.
76. C 77. C 78. B 79. C 80. D 81. A 82. D 83. C 84. D 85. A
85. The least likely factor a business will use C. profitability ratios
to determine a benchmark is D. efficiency ratios

A. government economic standards
90. The following statements correspond
B. actual ratios from the prior year
to changes in estimated asset life
C. industry standards and/residual value, except
D. its business plan A. The amount of depreciation expense
will change
86. When an auditor issues an unqualified
opinion of a company’s financial state- B. The amount of depreciation expense
ments, this means that: recorded in previous years has not
A. The accounting estimates are the changed
same as those used in the previous years C. The depreciation method will change
B. The financial statements are pre- D. The basis of the depreciation asset
sented fairly and, therefore, are free from value changes
error
91. Which of the following is the correct
C. The auditor is unaware of any mate-
choice?
rial misstatements affecting the financial
statements A. Asset = Liabilities + Owner’s Equity
D. A financial analyst does not need to B. Asset = Liabilities-Owner’s Equity
make adjustments to the financial state- C. Asset + Liabilities = Owner’s Equity
ments before computing financial ratios
D. Asset-Liabilities = Owner’s Equity
87. Which of the following is not an assump-
tion in accounting? 92. How many clauses exist in the Companies
(Auditor’s Report) Order, 2016 (”the or-
A. Separate entity
der”)?
B. Going concern or Continuity
A. 12
C. Market value in determining the cost
B. 15
of asset
D. None of the above C. 16
D. 21
88. Surplus, i.e., Balance in Statement of
profit and loss is shown as 93. Discuss the importance of the return on as-
A. Share capital sets (ROA) ratio in evaluating a company’s
performance.
B. Reserves and surplus
A. It measures the efficiency of the com-
C. Other long-term liabilities
pany in using its assets to generate profit.
D. Current liabilities
B. It measures the number of employees
89. Financial ratios that indicate how effec- in the company
tively a company uses its resources to gen- C. It evaluates the company’s customer
erate sales. satisfaction
A. liquidity ratios D. It calculates the company’s total rev-
B. leverage ratios enue
86. C 87. C 88. B 89. D 90. B 91. A 92. C 93. A

94. The part of a company’s financial state- B. Relate to the need for investing in
ments produced in an accounting period property, plant, and equipment or expand-
that describes the elements of the coming by making investments in other com-
pany’s income and expenses to produce a panies
net profit (or loss) is called
C. Largest expense item, which reports
A. Cash flow statement the wholesale costs of inventory sold dur-
B. Balance sheet report ing the accounting period
C. Capital change report
NARAYAN CHANGDER
D. Relate to how a company finances its
D. Income statement assets with debt or stockholders’ equity
95. Your firm has the following income state- E. Relate to the operating activities of a
ment items:Sales of RM50, 250Cost of company
goods sold of RM35, 025Operating ex-
penses of RM10, 115Interest expense of 99. Deferred Tax Assets are to be classified
RM750; andIncome tax of RM1, 744What as?
is the amount of the firm’s EBIT?
A. Fixed Assets
A. RM15, 552
B. Non Current Assets
B. RM58, 000
C. RM5, 110 C. Current Assets
D. RM4, 630 D. Intangible Assets
96. A situation that indicates the existence of 100. What is the formula for calculating the
protection for creditors against possible current ratio?
liquidation is
A. Low debt ratio A. Current Ratio = Net Income / Total Li-
abilities
B. High debt ratio
B. Current Ratio = Fixed Assets / Cur-
C. Debt ratio = 0
rent Liabilities
D. Debt ratio > profit margin
C. Current Ratio = Current Assets / Cur-
97. Comparative statement show the changes rent Liabilities
in
D. Current Ratio = Total Assets / Total
A. Percentages
Liabilities
B. Absolute amounts
C. Both (a) and (b) 101. Whether Fund Flow Statement is part of
D. Ratios Financial Statements?
A. No
98. Businesses are generally involved in three
different kinds of activities, and one of B. Yes
them is financing activities. What does the
activity relate to? C. May be
A. Relate to a company’s main busi- D. Many not be
ness:selling products or services to earn
net income 102. Sales minus cost of sales is equal to
CHECK GOOGLE PLAY BOOKS FOR ANSWERS KEYS

107. Look at the question Sheet Attached

above and Calculate for Kehly1) Debtors
Collection Period in Days2) Liquid ra-

tio(answer correct to one decimal place)
A. Net Profit
B. Gross Profit
C. Profit after tax
D. Earnings before interest and tax
A. 10.95, 1.5:1
103. A corporation should compare its working B. 109, 1.5:1
capital to industry standards.
C. 109.5, 1.5:1
A. True
D. 109.5, 1.5:1.25
B. False
108. Analysis carried out by changing the num-
104. Which of the following is not a measure bers in the balance sheet and income state-
of short-term liquidity? ment into percentages based on certain
numbers is called
A. Quick ratio
A. Index analysis
B. Current ratio
B. Environmental impact analysis
C. Working capital
C. Analisis common size
D. Debt ratio
D. Financial ratio analysis
105. Kimchi Corporation had beginning inven- 109. The quick ratio is 1.8:1, the current ratio
tory P100, 000, cost of goods sold P750, is 2.7:1 and current liabilities are Rs 60,
000, and ending inventory P150, 000. 000. Determine the value of the stock.
What was Kimchi’s inventory turnover?
A. Rs 54, 000
A. 3 times
B. Rs 60, 000
B. 6.0 times C. Rs 1, 62, 000
C. 7.5 times D. None of the above
D. 5 times
110. In the beginning of the financial year, ABS
and Associates has acquired a machine at
106. Intangible assets are physical property,
a cost of Rs. 12 lakh. By applying the rate
plant and equipment that the hospitality
@ 20% under WDV method for charging
company has legal ownership of as result
depreciation, what will the amount of de-
of a past business transaction.
preciation to be debited to P&L account for
A. True the second year?
B. False A. Rs. 2.40 lakh

B. Rs. 1.92 lakh 115. What is not true about the Reserves?
C. Rs. 1.82 lakh A. Reserves are generally generated out
of profits
D. Rs. 1.86 lakh
B. Share Premium is not part of Reserves
111. Natalie reported assets of $12, 000 and C. Reserves are part of Net Worth
equity of $7, 200. What is Natalie’s debt
ratio? D. Share Premium is part of Reserves
NARAYAN CHANGDER
A. 60% 116. The primary goal of the financial manager
B. 40% is
A. minimizing risk.
C. 63%
B. maximizing profit.
D. Not enough information is provided
C. maximizing wealth.
112. Indicates a firm’s ability to quickly liqui- D. minimizing return.
date assets to pay off current debts.
A. asset turnover ratio 117. From the given items which is a part of
current liabilities
B. inventory turnover
A. Inventories
C. debt-to-assets ratio
B. Trade payables
D. acid test/ quick ratio C. Cash and cash equivalents
113. All of the following statements regarding D. Trade receivables
the purpose of the Statement of Financial
Position are correct except for? 118. Which of the following is not a short-
term borrowing
A. Shows assets, liabilities and owner’s
A. Deposits
equity
B. Loans repayable on demand
B. It is prepared at a point in time
C. Bank overdraft
C. It can assist users, such as bank man-
agers, with decisions D. Trade receivables
D. Shows revenue, expenses and profit 119. All are profitability ratios EXCEPT
A. Days debtors
114. Your firm has the following income state-
ment items:Sales of RM50, 250Cost of B. Gross profit margin
goods sold of RM35, 025Operating ex- C. Profit margin
penses of RM8, 750Interest expense
D. Return on equity
of RM750; and Income tax of RM1,
744What is the amount of the firm’s net 120. The following are the components in the
income? financial report
A. RM26, 616 A. Latest Exchange Rate Report
B. RM4, 731 B. Confiscated Goods Report
C. RM2, 616 C. Gold Price Report
D. RM7, 775 D. Capital Change Report

121. The materiality concept involves the rel- D. No accounting treatment is required
ative size and importance of an item to a as we have to pay tax as per Income Tax
firm. rules

A. True 126. What does liquidity mean?
B. False A. The company’s ability to pay its obliga-
tions.
122. A corporation’s earnings per share is com-
pared to its prior periods’ earnings per B. The company’s ability to collect its re-
share or the corporation’s projected earn- ceivables.
ings per share. C. The company’s ability to increase fi-
A. True nancing
B. False D. The company’s ability to obtain a new

loan
123. Which Statement provides a snapshot of
127. Comparability problems arise because
the financial position of the unit at a par-
ticular date and time? A. firms may use different generally ac-
cepted accounting principles.
A. Profit and Loss Account
B. inflation may affect firms differently
B. Balance Sheet due to accounting conventions used.
C. Auditor’s Report C. financial analysts do not know how to
D. Non of the above compare financial statements.
D. firms may use different generally ac-
124. In the Long Term Debt / EBIDTA ratio,
cepted accounting principles, and infla-
EBIDTA is considered as?
tion may affect firms differently due to ac-
A. EBIDTA as a whole counting conventions used.
B. EBIDTA less interest on Term Loans E. firms may use different generally ac-
C. EBIDTA less interest on working capi- cepted accounting principles, and finan-
tal funds cial analysts do not know how to compare
financial statements.
D. EBIDTA less interest on all borrowings
128. The formal process of developing ac-
125. The net tax liabilities for a particular FY counting principles that exist today in the
as calculated by the unit is Rs. 18.60 lakh, United States began with the Securities
whereas the tax payment is required to be Acts of 1933 and 1934
made as per Income Tax Rules is Rs. 23.50
A. True
lakh for that particular year. The differ-
ence is on account of rate of depreciation. B. False
How this difference of Rs. 4.90 lakh will
129. What does the cash flow statement
be accounted for?
show?
A. Deferred Tax Assets
A. The cash flow statement shows the
B. Deferred Tax Liability revenue and expenses of a company.
C. Will not be accounted for at all and will B. The cash flow statement shows the in-
be paid as and when asked by the Income flow and outflow of cash in a company
Tax Department over a specific period of time.

C. The cash flow statement shows the to- 136. Preliminary or Pre-operative expenses,
tal assets and liabilities of a company. outstanding balance in the Balance Sheet
D. The cash flow statement shows the should be classified as?
market value of a company’s stock. A. Current Assets
130. A company has set its gross margin B. Fixed Assets
benchmark at 40% to 42%. An increase
in the ratio from 38% to 39% is a positive C. Non-Current Assets
trend.
NARAYAN CHANGDER
D. Intangible Assets
A. True
B. False 137. Quick assets include cash and merchan-
131. Horizontal Analysis is a method to an- dise inventory.
alyze financial statements over two or A. True
more operating periods.
A. True B. False
B. False
138. The Cash Credit Limit of a unit was en-
132. Classify the following items under major hanced from Rs. 220 lakh to Rs. 250 lakh
head and sub-head (if any) in the Balance on 30.01.2017. On 11.01.2018, the unit
Sheet of a company as per Schedule III of has requested for enhancement in limit by
the Companies Act, 2013:(i) Capital Work- Rs. 50 lakh. Can it be sanctioned without
in-Progress:(ii) Provision for Warranties obtaining any approval for deviation con-
A. i) Fixed Asset & ii) Non current Liabili- sidering that the request of the Company
ties otherwise acceptable under all the param-
eters?
B. i) Fixed Asset & ii)Current Assets
A. Yes
133. Non-current Investments include all in-
vestments management plans to hold to B. No, approval for deviation is required
maturity. as the enhancement is more than 15%
A. True within 12 month from last sanction or in
next renewal, whichever is later
B. False
C. No need of any deviation as the en-
134. The entity is viewed as an economic unit hancement is acceptable in all the param-
that stands on its own eters
A. True
D. None of the above
B. False
135. What does the operating margin ratio 139. The accrual basis of accounting recognizes
measure? revenue when realized (realization con-
A. Operating income per dollar of sales cept) and expenses when incurred (match-
ing concept).
B. Net income per dollar of sales
C. Net income to total assets A. True
D. Net income to common equity B. False

140. The number of times during an operat- 144. Which statement is incorrect?
ing period that the average inventory was A. Decrease in the level of trade payables
sold.

is considered as inflow of cash from oper-
A. working capital ating activities under cash flow statement
B. return on investment B. Increase in the level of inventories is
considered to be short term use of funds
C. inventory turnover
C. Infusion of capital is considered to be
D. debt-to-assets ratio a long term source of funds
141. The debt ratio is an example of a D. Profit on sale of an old machine is clas-
sified as cash flow from investing activi-
A. solvency ratio ties under cash flow statement
145. What are the tools, techniques or meth-
C. liquidity ratio ods for analysis and interpretation of fi-
D. market ratio nancial statements?
A. Ratio Analysis
142. Return on shareholders’ funds would be
B. Trend Analysis
closest to:
C. Comparison with the previous year
data
D. All of the above
146. The Raw Materials holding level is com-

pared in terms of?
A. 6.66 % A. Months’ Purchase
B. 10.0 % B. Months’ Cost of Production
C. 12.0 % C. Months’ Cost of Sales
D. 20.0 % D. Months’ Consumption
143. from the data given above calculate the 147. Choose the appropriate ratio analy-
Trade Payable Payment Period? sis:Debt to assets ratio
A. Liquidity ratios
B. Profitability ratios
C. Solvency Ratios
D. Financial Ratios
148. What is the purpose of the Statement of

A. 32.01 Financial Position?
A. inform stakeholders the assets and li-
B. 12.80
abilities of business
C. 64.03
B. provides information on how re-
D. 18.25 sources are obtained and used and the

claim by the owner on the net assets of 153. Debentures redeemable after 10 years
the business at a point in time. from the date of issue are shown as
C. provides information on how re- A. Long-term borrowings
sources are obtained and used in the busi-
B. Other long-term liabilities
ness at a point in time.
C. Short-term borrowings
D. inform stakeholders the owner’s eq-
uity of business D. Other short-term liabilities
NARAYAN CHANGDER
149. Which suppliers of funds bear the great- 154. provides a snapshot of the financial
est risk and should therefore earn the condition of the firm at a particular time.
greatest return?
A. The balance sheet
A. common stockholders
B. The income statement
B. general creditors such as banks
C. The statement of cash flows
C. preferred shareholders
D. All of the options are correct.
D. bondholders
E. None of the options are correct.
150. What is the formula for calculation of Cur-
rent Ratio? 155. The following are examples of real as-
A. Current Assets + Current Liabilities sets except:
B. Current Assets / Current Liabilities A. Machinery
C. Current Assets-Current Liabilities B. Common stock
D. Current Liabilities / Current Assets C. Office buildings
151. Indicates the number of dollars in sales D. Patents
the firm generates from each dollar it has
invested in assets. 156. What is Multi-step income statement?
A. asset turnover ratio A. A multi-step income statement pro-
vides a subtotal for gross pro
B. acid test/ quick ratio
C. debt-to-assets ratio B. A multi-step income statement pro-
vides a revenue, profit
D. debt-to-equity ratio
C. The multi-step income statement de-
152. If there were 5 ordinary shares outstand- tails the gains or losses of a business
ing, the earnings per share would be clos-
D. A multi-step income statement, on the
est to:
other hand, separates operational rev-
enues and expenses from non-operational
ones
157. Your firm has the following balance sheet

statement items:Total current liabilities of
A. RM4 RM805, 000; Total assets of RM2, 655,
000Fixed and other assets of RM1, 770,
B. RM8
000; and Long-term debt of RM200, 000.
C. RM12 What is the amount of the firm’s total cur-
D. RM100 rent assets?

A. RM885, 000 D. All of the above

B. RM1, 550, 000
162. While preparing Common Size Statement,

C. RM600, 000 each item of income statement is ex-
D. RM325, 000 pressed as % of
A. Total Income
158. In order to increase ROIC, a business
should B. Revenue from operation
A. Find a business with large total ad- C. Other Income
dressable market
D. Profit before tax
B. Use more debt financing as source of
capital 163. The corporate governance mechanism is a
C. Increase the life cycle of its product mechanism for monitoring and implement-
portfolio ing all activities and policies within the
company. Indonesia itself uses a two-
D. Identify inefficiencies in the business tier corporate governance system which is
process and cut cost characterized by
159. A more recent issue that is causing major A. There is a Board of Directors and a
problems in the business community is Board of Commissioners
A. the privatization of ownership. B. There is a Board of Directors and an
B. short-term versus long-term financial Audit Committee
goals of C. The existence of an Independent
C. management. Board of Commissioners
D. ethical problems. D. The existence of an Audit Committee
160. Creditors or suppliers are interested to 164. Loan which is taken without any mort-
know the gage of asset is known as?
A. Profitability of the firm in relation to A. Secured Loan
turnover
B. Unsecured Loan
B. Profitability of the firm in relation to in-
vestors 165. Transfer to General Reserve will be
C. Short-term solvency/liquidation of the recorded under
concern A. Non-Operating Expenses
D. Effective utilisation of its (firm’s) re- B. Appropriations
sources
C. Profit & Loss A/C b/d
161. Reasons for reduction in Net Working D. none of above
Capital could be?
A. Losses in business 166. Non-current liabilities are business obli-
gations that are due within one year of a
B. Conversion of current assets into non-
company’s normal operating cycle.
current assets
C. Use of short term funds for long term A. True
purposes B. False

167. The major financial statement include all, A. 3 months

except B. 6 months
C. 1 year
D. 2 years
171. Which of these celestial bodies are plan-

ets?
NARAYAN CHANGDER
A. Venus
B. Neptune
C. Uranus
D. Pluto
A. income statement
172. Additional information expected in the
B. statement of change in financial posi- annual report
tion
C. statement of cash flow
D. statement of retained profits
168. is a report of the cash flow generated

by the firm’s operations, investments, and
financial activities.
A. The balance sheet A. statement of changes in equity
B. The income statement B. cash flow statement
C. The statement of cash flows C. report on the environment
D. All of the options are correct. D. statement of retained profits
173. The following includes an audit opinion
169. Adjusted Tangible Net Worth (TNW) rep-
A. Legal Opinion
resents the real / actual Promoters’ Con-
tribution. How Adjusted TNW is calcu- B. Second Opinion
lated? C. Unqualified Opinion
A. Net Worth-Investment in associates / D. Testified Opinion
subsidiaries / JVs etc.
174. If net sales are P1, 500, 000 and ac-
B. Net Worth-Intangibles
counts receivable amount to P300, 000,
C. Net Worth-Revaluation Reserve- how long is the average collection period?
Intangibles-Investment in associates /
A. 36.00 days
subsidiaries / JVs etc.
D. Net Worth-Non Current Assets B. 45.00 days
C. 64.00 days
170. Current assets include only those assets
which are expected to be realized within D. 72.00 days
E. NOT IN THE CHOICES

175. Explain the concept of the gross profit P9, 500, 000. The average collection pe-
margin and its relevance in financial state- riod of the receivables in terms of days
ment analysis. was?

A. The gross profit margin is a measure A. 37.6 days.
of a company’s total revenue
B. 36.5 days
B. The gross profit margin is irrelevant in
financial statement analysis C. 35.4 days
C. The gross profit margin only reflects a D. 34.8 days

company’s marketing strategy
179. Honest and Company has the following
D. The gross profit margin is a financial credit balances in its books at the end of
metric that measures a company’s effi- FY. What are the total long term liabili-
ciency in generating profit from its rev- ties? (i) Trade Payables Rs. 130 (ii) De-
enue. It is relevant in financial state- ferred Tax Rs. 40 (iii) Term Loan Rs. 240
ment analysis as it provides insight into (Due in 4 equal installments) (iv) Share
a company’s pricing strategy, production Premium Rs. 80 (v) Long Term Provision
efficiency, and overall financial health. for Pension Payment Rs. 210.
176. Annual report is issued by a company to A. Rs. 430
its: B. Rs. 490
A. Directors C. Rs. 450
B. Auditors
D. Rs. 510
C. Shareholders
180. The comparison of a firm’s current assets
D. Managers
to current liabilities. The ratio indicates
177. A Company has changed the method of the amount of current assets available to
applying Depreciation from WDV to SLM. pay off $1 of current debt.
What will the impact on the profit for A. acid test/ quick ratio
the particular year in which, change hap-
pened? B. asset turnover ratio
A. No impact C. current ratio
B. Profit will either increase or decrease, D. inventory turnover

depend upon the case to case basis
181. The difference between current assets
C. Profit will decrease for the particular and current liabilities at a point in time.
year in which, change happened The amount of money that would be left
D. Profit will increase for the particular over if all the current liabilities were paid
year in which, change happened off by current assets.
A. current ratio
178. Silver Clothing Store had a balance in the
Accounts Receivable account of P920, 000 B. working capital
at the beginning of the year and a balance
C. acid test/ quick ratio
of P980, 000 at the end of the year. Net
credit sales during the year amounted to D. asset turnover ratio

182. The percentage analysis of increases and 187. Which statements are involve personal
decreases in individual items in compara- judgement in certain cases?
tive financial statements is called:
A. Financial statements
A. vertical analysis
B. Income statement
B. solvency analysis
C. Profit and loss account statement
C. profitability analysis
D. horizontal analysis D. None of these
NARAYAN CHANGDER
183. Advance given for procurement of Ma- 188. Which of the following is not included in
chine should be classified as? computing EBT (earnings before taxes)?
A. Non-Current Assets A. Marketing expenses
B. Current Assets
B. Depreciation expense
C. Intangibles
C. Cost of goods sold
D. Fixed Assets
D. Dividends
184. What does the quick ratio measure?
A. The extent to which current liabilities 189. The amount of profit generated by the
are covered by current assets firm in relation to the amount invested by
B. The firm’s ability to pay off short-term the owners.
obligations without relying on the sale of A. return on investment
inventories
B. ratio
C. The firm’s ability to meet its annual in-
terest payments C. working capital
D. The rate of return on common stock- D. inventory turnover
holders’ investment
190. According to CIMB Niaga KAP SOP, which
185. Inventory turnover tier of KAPs does it allow for L/K audit
A. Short-term Solvency and Liquidity results without needing bank statement
B. Asset Liquidity and Management Effi- analysis?
ciency A. Tier 1
C. Long-term Financial Position or Stabil-
B. Tier 2
ity
D. Profitability and Returns to Investors C. Tier 3
E. NOT IN THE CHOICES D. Tier 4
186. The of business firm is measured by 191. Financial statements are prepared for the
its ability to satisfy its short term obliga- use of?
tions as they become due:
A. Management of the business concern
A. Activity
B. Liquidity B. Government Authorities
C. profitability C. Shareholders
D. Solvency D. All of the above

192. Alpha Company’s benchmark total oper- 197. What will be the EBIDTA if, Depreciation
ating expense ratio is between 32.0% is Rs. 12.50 lakh, Profit Before Tax is Rs.
and 34.0%. An increase in its operating 36.40 lakh, Interest cost is Rs. 16.55 lakh

expense ratio from 33.1% to 34.2% is a and tax expense is Rs. 10.92 lakh?
favorable trend. A. Rs. 65.45 lakh
A. True B. Rs. 54.53 lakh
B. False
C. Rs. 65.55 Lakh
193. Labor unions use the financial reports to D. Rs. 54.43 Lakh
help determine their demands when they
negotiate for employees 198. What will be the cash accrual of the a unit
if, Sales is Rs. 135 lakh, Loss is Rs. 0.10
A. True
lakh and Depreciation is Rs. 8 lakh. The
B. False unit has paid an interest of Rs. 4 lakh on
term loan.?
194. What does the inventory turnover ratio
measure? A. Rs. 2 lakh
A. How many times inventory is turned B. Rs. 18 lakh
over during the year C. (-) Rs. 2 lakh
B. The average length of time the firm D. Rs. 14 lakh
must wait after making a sale before it re-
ceives cash 199. Identify the major heads under which the
C. How effectively the firm uses its plant following items will be shown in the Bal-
and equipment ance Sheet of a company as per Schedule
III of Companies Act, 2013:(i) Provision
D. How effectively the firm uses its total for Tax.(ii) Loan payable on demand.
assets
A. Non Current Liabilities
195. If the Total of Current Assets is Rs. 168 B. Current Liabilities
lakh and Total Current Liabilities is Rs.
142.68 lakh, then what will the amount 200. What does the profit margin ratio mea-
of long term funds, which are supporting sure?
the financing of current assets?
A. Operating income per dollar of sales
A. Rs. 26.32 lakh
B. Net income per dollar of sales
B. Rs. 25.32 lakh
C. Net income to total assets
C. Rs. 24.32 lakh
D. Net income to common equity
D. Can’t be calculated from the given in-
formation 201. Financial ratios that tell how much of
each dollar of sales, assets, and owner’s
196. State any two items that are included in investments resulted in net profit.
the following major head under which lia-
A. liquidity ratios
bilities of a company are shown:(i) Short
term Borrowings. B. efficiency ratios
A. Loans repayable on demand C. profitability ratios
B. Unpaid dividends D. leverage ratios

202. In the long run, it is most important for 207. Below are methods of analyzing financial
a business to generate an inflow of cash statements except
from its: A. Index analysis
A. Operating activities. B. Environmental impact analysis
B. Investing activities. C. Analisis common size
C. Stockholders. D. .Financial ratio analysis
D. Creditors 208. Cash margin for issuance of LC for pur-
NARAYAN CHANGDER
chase of Machine, is to be classified as?
203. If you were given the components of cur-
A. Non-Current Assets
rent assets and of current liabilities, what
ratio(s) could you compute? B. Current Assets
A. Quick ratio or Acid test ratio C. Intangible Assets
B. Average collection period D. Fixed Assets
C. Current ratio 209. Revenue from Operations Rs.2, 00, 000;

Inventory Turnover ratio 5; Gross Profit
D. Both A and C 25%. Find out the value of Closing In-
E. All of the above ventory, if Closing Inventory is Rs.8, 000
more than the Opening Inventory.
204. Choose the appropriate ratio analy- A. Rs.38, 000
sis:Accounts receivable turnover
B. Rs.22, 000
A. Liquidity ratios
C. Rs.34, 000
B. Profitability ratios D. Rs.26, 000
C. Solvency Ratios
210. Which of the following is not a current
D. Financial Ratios asset?
A. Accounts payable
205. Total Fund Utilised = Fixed Assets + In-
vestment +? B. Marketable securities
A. Loan Fund C. Accounts receivable
B. Working Capital D. Inventory
C. Current Assets 211. What does a current ratio tell us?

D. Current Liabilities A. A higher current ratio indicates better
liquidity.
206. Which of the following generally is the B. A lower current ratio indicates better
most useful in analyzing companies of dif- liquidity
ferent sizes?
C. A higher current ratio indicates what
A. comparative statements portion of assets are tied up in slow mov-
ing inventory
B. common-sized financial statements
D. A lowercurrent ratio indicates what
C. price-level accounting
portion of assets are tied up in slow mov-
D. profitability index ing inventory

212. Purpose of Financial Statement Analysis 217. This document communicates what the
for investors entity owns in terms of assets, what it
owes in the terms of liabilities, and the

A. analyzing and checking the allocation
difference between those two which rep-
of relevant resources of the enterprise
resents what the owners o the company
B. analyzing the profitability, operational are entitled to.
capacity, investment returns and risks
A. Income Statement
C. analyzing the solvency of enterprises B. Balance Sheet
D. analyzing the structure (various ratios
218. Management could use the financial re-
or indicators) and the trend
ports to determine the company’s prof-
213. Managers who want to control operating itability
expenses will be more interested in the op- A. True
erating margin than the total operating ex- B. False
pense ratio
219. Financial ratios that tell how much of
A. True
each rand of sales, assets, and owner’s eq-
B. False uity resulted in net profit.
A. liquidity ratios
214. True or False. It is possible for a com-
pany to be profitable but have negative B. efficiency ratios
cash flows. C. profitability ratios
A. True D. leverage ratios
B. False 220. What does the days sales outstanding ra-
tio measure?
215. What does the total assets turnover ra-
tio measure? A. How many times inventory is turned
over during the year
A. How many times inventory is turned
over during the year B. The average length of time the firm
B. The average length of time the firm ceives cash
C. How effectively the firm uses its plant
ceives cash
and equipment
C. How effectively the firm uses its plant
D. How effectively the firm uses its total
and equipment
assets
D. How effectively the firm uses its total
assets 221. If a company uses an inventory valuation
basis using LIFO then this has an impact
216. Given item falls under direct expenses. A. The current ratio presented is too high
A. Printing & Stationery because inventory is presented too high
B. The current ratio presented is too high
B. Carriage Inward
because inventory is presented too low
C. Carriage Outward
C. The current ratio presented is too low
D. Office Rent because inventory is presented too low

D. The current ratio presented is too low C. Net income to total assets
because inventory is presented too high
222. The trade receivables balance is £19,
100. A debt of £400 is considered to 225. Which of the following streams of income
be irrecoverable and is to be written off. is not affected by how a firm is financed
The balance on the allowance for doubtful (whether with debt or equity)?
debts is currently £735 and the allowance A. Net profit after tax but before divi-
is to be revised to 5% of trade receivables.
NARAYAN CHANGDER
dends
The amount to be charged to the statement
of profit or loss for the change in the doubt- B. Net working capital
ful debt allowance is: C. Operating income
A. 935
D. Income before tax
B. 735
C. 200 226. Which of the basic financial statements
is best used to answer the questions
D. 220
“Where did the company’s money come
223. The objective of financial statements is to from and how was it spent over the pre-
prepare financial statements in accordance ceding year?”
with all applicable standards. A. Balance sheet
B. Statement of shareholder’s equity
C. Income statement
D. Cash flow statement
227. Gross margin is also referred to as

A. operating margin
A. To prepare a statement of financial po- B. gross profit margin
sition and statement of comprehensive in-
come. C. rate of return on sales
B. To present relevant, reliable compara- D. earnings per share
ble and understandable information.
C. To prepare financial statements in ac- 228. If the gearing ratio of a unit is less than
cordance with all applicable standards. 1, which statement is correct?
D. To provide information about the finan- A. Tangible Net Worth of the unit will be
cial position, financial performance and lower than the Total Outside Liabilities
changes in financial position useful to a B. The term liabilities will be less than the
wide range of users. Tangible Net Worth
224. What does the return on common equity C. Total Outside Liabilities of the unit will
(ROE) ratio measure? be lower than the Tangible Net Worth
A. Operating income per dollar of sales D. The term Liabilities will be more than
B. Net income per dollar of sales the Tangible Net Worth

229. When a firm improves (decreases) its 234. Finance can be defined as
days of inventory, it generally
A. the system of debits and credits.

A. requires additional cash investment in
inventory B. the science of the production, distribu-
tion, and consumption of wealth.
B. releases cash locked up in inventory
C. does not alter its cash position C. the art and science of managing
money.
D. cannot reduce its inventories
Explanation:The faster a firm sell off its in- D. the art of merchandising products and
ventories, the quicker they collect money. services.
230. Out of Operating Profit before Inter-

235. What does the fixed assets turnover ra-
est/Net Sales and Operating Profit after
tio measure?
Interest/Net Sales, which is a better indi-
cator for comparing two identical units? A. How many times inventory is turned
A. Operating Profit after Interest/Net over during the year
Sales B. The average length of time the firm
B. Operating Profit before Interest/Net must wait after making a sale before it re-
Sales ceives cash
C. Both can be used C. How effectively the firm uses its plant
D. None of the above and equipment
231. The going-concern assumption, that the D. How effectively the firm uses its total
entity in question will remain in business assets
for an indefinite period of time
A. True 236. Component percentages indicate the rel-
ative size of each item included in a total.
B. False Which of the following statements is true?
232. Calculate the Return on Equity if the Net A. Income statement items are ex-
income is $7, 009 and the shareholder’s pressed as a percentage of net income,
equity is $20, 316. while balance sheet items are expressed
A. 27.44% as a percentage of total assets.
B. 41.72% B. Income statement items are ex-
C. 34.5% pressed as a percentage of sales, while
balance sheet items are expressed as a
D. 39.42%
percentage of total assets.
E. 30.2%
C. Income statement items are ex-
233. A company has done everything possible pressed as a percentage of net income,
to control merchandise costs. To maintains while balance sheet items are expressed
its gross margin, its only altrnative is to as a percentage of net assets.
sell more merchandise
D. Both income statement and balance
A. True sheet items are expressed as a percent-
B. False age of net assets.

237. In a company’s Balance Sheet, Debit B. The balance sheet provides informa-
(Negative) balance of Statement of profit tion about a company’s customer satisfac-
and loss is shown as tion levels.
A. Non-current liabilities C. The balance sheet provides informa-
tion about a company’s employee salaries.
B. Current liabilities
D. The balance sheet provides informa-
C. Non-current assets
tion about a company’s marketing strate-
D. Reserves and surplus gies.
NARAYAN CHANGDER
238. Following item will not appear under 243. In the near term, the important ratios
Owner’s Fund in Balance Sheet that provide the information critical to the
A. Equity Share Capital short-run operation of the firm are:
B. Security Premium A. liquidity, activity, and profitability

B. liquidity, activity, and debt
C. Preference Share Capital
C. liquidity, activity, and equity
D. Debentures
D. activity, debt, and profitability
239. What does PPE stand for?
244. Cash Flow Statement consists the cash
A. Payable, Property, and Equipment
flows from the activities?
B. Prepaid, Property, and Expenses A. Operating Activities
C. Prepaid, Property, and Equipment B. Investing Activities
D. Plant, Property and Equipment C. Financing Activities
240. After receipt of Audited Financial State- D. All of above
ments, the first action required to be taken
by the credit officers is? 245. Cash and cash equivalents does not in-
clude
A. Confirm about the genuineness of the
financial statements A. Cheques
B. Balance with banks
B. Preparation of CMA
C. Bank deposits with more than 12
C. CRA Rating is to be carried out
months maturity
D. Discuss the performance with the unit
D. Inventories
241. Modifying a benchmark is an option for
246. All of the following are asset utilization
a business that fails to achieve its bench-
ratios except:
mark.
A. average collection period
A. True
B. inventory turnover
B. False
C. receivables turnover
242. What information does the balance sheet D. return on assets
provide?
A. The balance sheet provides informa- 247. Gross margin can be increased by
tion about a company’s financial position. A. selling more merchandise

B. buying less merchandise 253. Tandon Committee had prescribed three

methods of lending. What will the current
C. increasing unit sales prices
ratio under 2nd Method of lending?

D. reducing operating expenses
A. 1.28
248. Horizontal analysis is also known as B. 1.33
A. linear analysis. C. More than 1.33
B. vertical analysis. D. It depends on case to case basis
C. trend analysis. 254. The gross profit ratio is also referred to

as the gross margin.
D. common size analysis.
A. True
249. True or False:DuPont analysis can help in- B. False
vestors understand how a company is gen-
erating its ROE 255. Under which heads the following items
are classified or shown on the Assets
A. True part of the Balance Sheet of a company:(i)
B. False Loose Tools
Explanation:Dupont Analysis can help in- A. Non current assets and Trade Receiv-
vestors understand how the company gen- ables
erate its ROE-whether it’s through effi- B. Current Assets & Trade Receivables
cient use of assets, high profit margins, or
leverage. C. Current assets & Inventories
D. none of above
250. Below are the users of financial state-
ments except 256. If the operating cycle cannot be identified,
it is assumed to be a period of
A. Salesman
A. 10 months
B. Investor B. 11 months
C. Government C. 9 months
D. Creditors D. 12 months
251. Working Capital = Current Assets Less? 257. IMT Industries has a debt-to-equity ratio
of 1.6 compared with the industry aver-
A. Quick Liabilities age of 1.4. This indicates that the com-
B. Non-Quick Liabilities pany
C. Current Liabilities A. has less liquidity than other firms in
the industry
D. Loan Fund
B. will not experience any difficulty with
252. Financial statements are: its creditors
A. Anticipated facts C. has greater than average financial risk
compared to other firms in its industry
B. Estimated facts
D. will be viewed as having high credit-
C. Recorded facts worthiness
D. Forecasted values E. None of above

258. A firm has a higher asset turnover ratio 262. Rate of return on assets
than the industry average, which implies A. Short-term Solvency and Liquidity
A. the firm has a higher P/E ratio than B. Asset Liquidity and Management Effi-
other firms in the industry. ciency
B. the firm is more likely to avoid insol- C. Long-term Financial Position or Stabil-
vency in the short run than other firms in ity
the industry.
D. Profitability and Returns to Investors
NARAYAN CHANGDER
C. the firm is more profitable than other
firms in the industry. E. NOT IN THE CHOICES
D. the firm is utilizing assets more effi- 263. Which ratio tells us if a business might
ciently than other firms in the industry. struggle to pay off its short term debts
E. the firm has higher spending on new if they cannot sell off their inventory
fixed assets than other firms in the indus- quickly?
try. A. Acid test (quick) ratio
259. Below are the objectives of analyzing fi- B. Current ratio

nancial statements except C. Gross profit margin
A. Know the company’s financial condi- D. YEARS
tion
264. What are various sources for financing
B. As a testing tool for the bookkeeping Current Assets?
department
A. Other Current Liabilities, Short Term
C. Assess the company’s financial posi- Bank Borrowing, Net Working Capital
tion
B. Current Liabilities, Short Term Bank
D. Test employee loyalty to the company Borrowing, Net Working Capital
260. If your current ratio is above this number C. Other Current Liabilities, Net Working
you are considered to have good liquidity. Capital
A. 0 D. Current Liabilities
B. 1 265. Liquidity ratios measure
C. 2 A. the ability of a business to meet its fi-
D. 10 nancial obligations
B. the view or opinion of the financial mar-
261. While calculating Return on Capital Em- kets about the company
ployed (ROCE) ratio, what do you mean
by Capital Employed? 266. Name the item out of the following which
A. Total Liabilities less intangible assets is shown as short-term provision
B. Total Assets A. Provision for tax
C. Net Worth less investment in asso- B. Interest accrued but not due
ciate / JVs etc. C. Employees’ provident fund
D. Promoters own contribution D. Interest accrued and due

267. Premium on redemption of debentures is C. leverage ratios

shown as D. profitability ratios

A. Long-term borrowings
272. What is the full form of EBIDTA?
B. Short-term borrowings
A. Expenses before Interest, Deprecia-
C. Other long-term liabilities tion, Tax and Amortisation
D. Short-term provisions B. Earnings before Interest, Deprecia-
tion, Tax and Amortisation
268. Which is not a form of KAP opinion?
C. Earnings before Interest, Deposits
A. Profitable with Bank, Tax and Actual non operating
B. Unqualified expenses
C. Qualified D. Non of the above
D. Adverse 273. The Current Ratio of a unit has declined
from 1.65 to 1.35. What could be the pos-
269. State the following statement is True
sible reasons for decline?
or False.Ratios help in comparisons of a
firm’s results over a number of accounting A. Investment in fixed assets without
periods as well as with other business en- availing any Term Loan
terprises. B. Increase in Current Liabilities
A. True C. A major portion of trade receivables
B. False converted into Non-current assets
D. All of the above
270. If we have to calculate the cost of sale or
goods sold, what adjustment is required to 274. What is another name for the debtor’s
be done in the cost of production? turnover ratio?
A. We have to add the value of opening A. Debt to assets ratio
stock of finished goods and deduct the B. Debt to equity ratio
value of closing stock of finished goods
C. Accounts receivables turnover ratio
B. We have to add the value of opening
D. Acid-test ratio
stock of SIP and deduct the value of clos-
ing stock of SIP 275. How does net loss affect owner’s equity?
C. We have to add the value of open- A. increases
ing stock of finished goods & SIP and B. decreases
deduct the value of closing stock of fin-
ished goods & SIP C. no change
D. indirectly
D. No adjustment is required, both are
same 276. Which of the following is not shown as
non-current liabilities
271. Financial ratios that tell how well a com-
pany can pay off its short-term debts and A. Trade payables
meet unexpected needs for cash. B. Long-term borrowings
A. liquidity ratios C. Deferred tax liabilities
B. efficiency ratios D. Long-term provisions

277. Which of the following organizations is C. Abnormal delays are there in realisa-
least likely involved with enforcing compli- tion of trade receivables
ance with financial reporting standards?. D. All the above
A. Financial Conduct Authority
281. If inventory were determined in one pe-
B. SecCurities and Exchange Commis- riod on one basis and in the next period
sion. on a different basis, the resulting inven-
C. International Accounting Standards tory and profits would not be comparable
NARAYAN CHANGDER
Board? from period to period
D. none of above A. True
278. What is ratio analysis? B. False
A. Ratio analysis is a method of analyzing 282. Who will not be considered as Related
and interpreting non-financial data to eval- Party for a Company?
uate a company’s performance. A. Lenders / Financers
B. Ratio analysis is a method of analyz- B. Buyers or Suppliers
ing and interpreting financial statements
to evaluate a company’s marketing strate- C. Government Departments
gies. D. All above are not considered as Re-
C. Ratio analysis is a method of analyz- lated Party
283. Market value ratios indicate
to evaluate a company’s stock price.
A. whether the firm is using its asset pro-
D. Ratio analysis is a method of analyz-
ductively
to evaluate a company’s performance and B. whether the firm is liquid
financial health. C. whether the firm is profitable
279. Below are all the components of financial D. how highly the firm is valued by in-
statements except: vestors
A. Statement of comprehensive income Explanation:Compared to other ratios,
market value ratios considers a com-
B. Statement of financial position pany’s potential
C. Statement of debt
284. Working Capital formula?
D. Statement of cash flow
A. Current assets-current liabilities
280. In the Cash Flow Statement, net cash B. Current assets-non current liabilities
flow from the Operating Activities is neg-
ative. What could be the possible reasons C. stock +prepaid expense
for the same? D. none of above
A. The unit is growing very fast and its 285. During the years 2009 through 2011,
current assets requirement is increasing Pop Co reporting the following amounts of
at a very high pace net income (dollars in thousands).Relative
B. Holding level of inventories has in- to the prior year, the percentage change in
creased substantially net income

290. Return on total assets is the product of

A. interest rates and pre-tax profits.

B. the debt-equity ratio and P/E ratio.
A. Was the same in 2010 and 2011
C. the after-tax profit margin and the as-
B. Was larger in 2011 than in 2010 set turnover ratio.
C. Was smaller in 2011 than in 2010 D. sales and fixed assets.
D. Cannot be determined E. None of the options are correct.
286. A Company’s liquid assets are Rs.5, 00, 291. What is the difference between Current
000 and its current liabilities are Rs.3, 00, Tax and Deferred Tax?
000. Thereafter, it paid Rs.1, 00, 000 to
A. Current tax is the amount which is
its trade payables. Quick ratio will be:
payable as per IT Act whereas deferred
A. 1.33:1 tax is the amount which arises due to tim-
B. 2.5:1 ing difference and payable / recoverable
in future.
C. 1.67:1
B. No difference, only a way of presenta-
D. 2:1 tion of tax amount
287. A company having earnings per share of C. Current tax is for current year and de-
$5.67 is more profitable than a ocmpany ferred tax is for income, estimated for fu-
having earnings per share of $4.32 ture period
A. True D. current tax is payable by the unit
whereas deferred tax is the amount,
B. False which the unit is not suppose to pay at all
288. If current liabilities are P100, 000 and 292. Candy Corporation had pretax profits of
current assets are P200, 000, what is the RM1.2 million, an average tax rate of 34
current ratio? percent, and it paid preferred stock divi-
A. 0.50 dends of RM50, 000. There were 100,
000 shares outstanding and no interest ex-
B. 1.20
pense. What were Candy Corporation’s
C. 1.50 earnings per share?
D. 2.00 A. RM3.91
E. NOT IN THE CHOICES B. RM4.52
C. RM7.42
289. is a summary of the profitability of
the firm over a period of time, such as a D. RM7.59
year.
293. Common size statements are an example
A. The balance sheet of
B. The income statement
C. The statement of cash flows
D. All of the options are correct.

A. Vertical analysis C. debt ratio, times interest earned, and

B. Horizontal analysis quick ratio
D. debt ratio, times interest earned, and
C. Both
cash flow to debt
D. Neither
297. If you want to assess the profitability of
294. The ratio that gives the best indication a business, which ratio is the most appro-
of how effectively a business is earning a priate?
NARAYAN CHANGDER
profit from its normal business operations A. Net profit margin
is the
B. Return on assets
A. debt ratio
C. Return on equity
B. quick ratio
D. Return on capital
C. gross margin
298. What are the different methods used in
D. operating margin
financial statement analysis?
295. A firm, engaged in the manufacturing of A. qualitative analysis, quantitative anal-
Plastic Bottles, invested Rs. 35 lakh dur- ysis, regression analysis
ing FY 2015-16 in one of its associate con- B. income statement analysis, balance
cern. During FY 2017-18, the firm has re- sheet analysis, statement of cash flows
ceived an income of Rs. 2.86 lakh from analysis
these investments. What should be the
treatment of this income while preparing / C. vertical analysis, horizontal analysis,
validating the operating statement of the cash flow analysis
firm? D. ratio analysis, trend analysis, compar-
A. The income generated from invest- ative analysis, and common size analysis
ment should be considered as Non- 299. Total equity divided by total assets
Operating Income
A. Equity ratio
B. The income generated from invest-
ment should be considered as Operating B. Debt ratio
Income C. Debt-to-equity ratio
C. It should not be considered at all as D. Equity-to-debt ratio
it is not related to the core activity of the E. NOT IN THE CHOICES
firm
300. Revenue from operation is not taken
D. It is already considered in the revenue
as100 in preparing common-size state-
generated by the firm, therefore no sepa-
ment of profit and loss.
rate treatment is required
A. True
296. The set of ratios that is most useful in
B. False
evaluating solvency is
A. debt ratio, current ratio, and times in- 301. You can get this information by reading
terest earned financial reports, except
B. debt ratio, times interest earned, and A. Financial Position

return on assets B. Entity Cash Flows

C. Financial performance A. Notes payable

D. When is Debt Due B. Accounts payable

302. State whether each of the following is C. Bonds
True or FalseIn a Common size statement D. Accumulated Depreciation
each item is expressed as a percentage of
some common base. 308. Investors are willing to pay a higher P/E
ratio for growth stocks than for income
A. True
stocks.
B. False
A. True
303. If at year end Cash is $5, 460, Accounts B. False
Receivable is $3, 505, Current Assets are
$18, 475, and Current Liabilities are $18, 309. Below are all the advantages of financial
860; what is the current ratio? ratio except:
A. 0.48:1 A. Simplifies the comprehension of finan-
cial statements
B. 0.98:1
B. Help in planning and forecasting
C. 0.45:1
D. 1.45:1 C. Adjusting cost of capital for different
risk
304. Comparisons of financial statements high- D. Help in investment decision
lights the trend of the of the business.
A. Financial position 310. If Nico Corporation has cost of goods sold
of RM300, 000 and inventory of RM30,
B. Performance 000, then the inventory turnover is
C. Profitability and the average age of inventory is
D. All of the above A. 36.5; 10
B. 10; 36.5
305. Calls-in-advance and interest thereon is
shown as C. 36.0; 10
A. Shareholders’ funds D. 10; 36.0
B. Other non-current liabilities 311. Return on assets measures the efficiency
C. Other current liabilities with which management
D. Trade payables A. Generates earnings from the assets
under its control, regardless of how these
306. Under which major head will the follow- assets are financed
ing be shown:(i) Share Capital; and (ii)
Money Received Against Share Warrants? B. Generates earnings from the assets
under its control, giving consideration to
A. Shareholders Fund any costs of financing these assets
B. Reserves and Surplus C. Generates cash from the assets under
307. Which of the following would NOT be in- its control, regardless of accrual-based
cluded as a liability in a corporate balance measures of profitability
sheet? D. Converts its current assets into cash

312. Liabilities means D. Cost of Production + Opening Stock of

A. Liabilities must pay FG-Closing Stock of FG
B. Long-term liabilities 318. Management is a user of financial analy-
C. Short-term debt sis. Which of the following comments does
not represent a fair statement as to the
D. none of above management perspective?
313. Calculate the debt-to-equity ratio for a A. Management is always interested in
company with total debt of $1, 000, 000
NARAYAN CHANGDER
maximum profitability.
and total equity of $500, 000.
B. Management is interested in the view
A. 2 of investors.
B. 0.5 C. Management is interested in the finan-
C. 1.5 cial structure of the entity.
D. 3 D. Management is interested in the asset
structure of the entity.
314. What does a high debt-to-equity ratio in-
dicate about a company’s financial health? 319. If revenue for 2021 is25, 000 and rev-
enue for 2020 is 23, 000, the variance
A. Strong financial position
percentage is 7%
B. Financial instability
A. True
C. High profitability
B. False
D. Low risk
320. A business with operating expenses that
315. Which of the following is a liquidity ra- exceed its benchmark should always begin
tio? by reducing the number of employees, the
A. Times debtors turnover largest operating expense for most busi-
B. Current ratio nesses.
C. Days debtors A. True
D. Equity ratio B. False
316. How do you find Working Capital? 321. Where the Trade Payables will be classi-
fied in the Balance Sheet?
A. Assets-Liabilities
A. Current Liabilities
B. Current Assets-Owner’s Capital
B. Term Liabilities
C. Current Assets-Current Liabilities
C. Net Worth
D. Long Term Assets-Long Term Liabili-
ties D. Non of the above
317. Cost of Sales can be arrived as? 322. In periods of inflation, accounting depre-
A. Cost of Production + SGA Expenses ciation is relative to replacement cost,
and real economic income is
B. Cost of Production + Non Operating
Expenses A. overstated; overstated
C. Cost of Production + Opening Stock of B. overstated; understated

SIP-Closing Stock of SIP C. understated; overstated

D. understated; understated C. The firm is losing qualified customers

E. correctly stated; correctly stated D. The credit policy is too lenient

323. Operating margin is also referred to as 328. What is the formula for Gross Profit Mar-
A. rate of return on sales gin
B. operating income A. Profit / Net sales revenue X 100
C. gross margin B. Gross profit / Net sales revenue X 100
D. earnings per share C. Gross profit / Sales revenue X 100

D. Profit / Cost of sales X 100
324. Which of the following legal forms of or-
ganization is most expensive to organize? 329. A unit is enjoying CC limit of Rs. 20 lakh
A. Sole proprietorships. and turnover for FY 2017-18 was 110
lakh. The unit has approached for enhance-
B. Partnerships. ment of Rs. 10 lakh in CC limit with esti-
C. Corporations. mated turnover of Rs. 150 lakh for FY
D. Limited partnership. 2018-19. Whether the Audited Financial
Statements are required?
325. If Long Term Uses are more than the Long A. Yes, as the enhanced exposure will be
Term Sources, what will be resultant figure more than Rs. 25 lakh
called?
B. No, because the turnover is less than
A. Long Term Surplus Rs. 200 lakh
B. Long Term Deficit C. Depends upon the relationship with
C. Working Capital Gap the borrower
D. Non of the above D. Not at all required
326. Which of these is the largest planet in the 330. Analyses changes in financial statement
Solar System? for 2 or more accounting periods using his-
A. Earth torical data
B. Mars
C. Mercury
D. Jupiter
E. Pluto
327. In analyzing the financial statements of

A. Financial ratio analysis
a client’s business, you notice that the col-
lection period for accounts receivable has B. Industry analysis
been increasing. What does this increase C. Horizontal analysis
suggest about the firm’s credit policy?
D. Vertical analysis
A. The firm’s current ratio is also increas-
ing 331. Which is an example of tangible fixed As-
B. The collection period has no relation- sets?
ship to a firm’s credit policy A. Copyrights

B. Pre-paid expenses B. A firm’s competitors

C. land & Building C. A firm’s creditors
D. Pre-operating expenses D. Analysts for investment companies
332. The provides a financial summary of 336. What does the current ratio measure?
the firm’s operating results during a spec- A. The extent to which current liabilities
ified period. are covered by current assets
A. income statement
NARAYAN CHANGDER
B. The firm’s ability to pay off short-term
B. balance sheet obligations without relying on the sale of
C. statement of cash flows inventories
D. statement of retained earnings C. The firm’s ability to meet its annual in-
terest payments
333. Which is not a component of an Audited D. The rate of return on common stock-
Financial Report? holders’ investment
A. Neraca
337. Interest Coverage Ratio is to be calcu-
B. Income statement
lated as?
C. Statement of Changes in Equity
A. EBITDA / Interest
D. Deed of General Meeting of Sharehold-
B. PAT / Interest
ers
C. Cash Accruals / Interest
334. A conceptual framework for financial re-
D. EBIDT / Interest
porting is:
338. Interest Coverage Ratio (ICR) is calcu-
lated by dividing EBIDTA from Interest
expenses. What does ‘A’ represents in
EBIDTA?
A. Adjustments
B. Amortization
C. Accruals
D. Actual income
A. a set of financial reporting standards
B. a set of items which make up an en- 339. Who owns the retained earnings of a pub-
tity’s financial statements lic firm?
C. a set of principles which underpin fi- A. Inland Revenue Board Of Malaysia
nancial reporting B. Common stockholders
D. a set of regulations which govern fi- C. Bondholders
nancial reporting
D. Preferred stockholders
335. Which of the following parties would per-
form an internal financial analysis? 340. The current ratio is also known as the:
A. A financial analyst forecasting the next A. Quick ratio

period’s borrowing needs B. Working capital ratio

C. Cash flow ratio C. average collection period

D. Capital structure ratio D. current asset turnover

341. Which analysis is considered as static 347. A company’s financial position would
A. Horizontal analysis best be evaluated using the:
B. Vertical analysis A. balance sheet.
C. Internal analysis B. income statement.
D. External analysis C. statement of cash flows.
D. auditor’s report.
342. The main source of revenue for a trading
business 348. Patents and trademarks are examples of
A. Sales A. Intangible fixed assets
B. Dividends B. Tangible fixed assets
C. Fees received C. Intangible assets under development
D. Capital D. Capital work-in-capital
343. The gross profit margin ratio is calculated 349. Identify the item which is not a part of
by dividing: shareholders’ funds
A. Profit by sales A. Share application money pending allot-
B. Profit by shareholders’ equity ment
C. Gross profit by sales B. Share capital
D. Sales by cost of sales C. Reserves and surplus
D. Money received against share war-
344. Which of the following is not a non-
rants
current asset
A. Fixed assets 350. Balance sheet shows:
B. Share capital A. Financial position of the company
C. Long-term loans and advances B. Profit or loss of the company
D. Non-current investments C. Cash flow of the company
345. Profit on sale of investments is shown in D. Assets, Liabilities and Profits

which section of the Cash Flow Statement? 351. What are the different types of ratios
A. Non-Operating Activities used in financial statement analysis?
B. Operating Activities A. liquidity ratios, profitability ratios, sol-
C. Investing Activities vency ratios, and efficiency ratios
D. Financing Activities B. liquidity ratios, profitability ratios, effi-

ciency ratios, and market ratios
346. The is useful in evaluating credit and C. income ratios, expense ratios, debt ra-
collection policies. tios, and turnover ratios
A. average payment period D. current ratios, quick ratios, leverage
B. current ratio ratios, and activity ratios

352. Given entry falls under Non-Operating In- A. Earnings will not be changes as the De-
come preciation is a non cash charge
A. Sales B. Earnings are inflated
B. Goodwill Written Off C. Earnings will be decreased
C. Dividend (Cr.) D. Depreciation is only an book entry for
D. Dividend (Dr.) debiting P&L account and crediting fixed
assets, therefore will not impact at all on
NARAYAN CHANGDER
353. The following is an example of a ratio earnings
A. Return of the Jedi
357. A financial report that shows a com-
B. Return on Asset
pany’s cash coming in and out is called
C. Return on Equilibrium
A. Cash flow statement
D. Return of The King
B. Income statement
354. Cost of goods sold divided by average in-
C. Capital change report
ventory
D. Balance sheet report
A. Inventory turnover
B. Cost of goods sold margin 358. Financial analysis is significant because
C. Inventory margin it:
D. Days sales in receivables A. Ignores qualitative aspect
E. NOT IN THE CHOICES B. Judges financial position and opera-
tional efficiency
355. The Net Worth (Capital and Reserves)
of a company as on 31.03.2017 was Rs. C. Suffers from the limitations of finan-
965 lakh. During FY 2017-18, the Com- cial statement
pany had issued bonus shares of Rs. 135 D. Is affected by personal ability and bias
lakh, out of reserves. What will the im- of the analysis
pact on net worth of the Company as on
31.03.2018, assuming that there will be 359. Capital intensity ratio
no fresh infusion of capital and no other
A. Total capital divided by total assets
increase in reserves during FY 17-18?
A. Net Worth will increase by Rs. 135 B. Total assets divided by total liabilities
lakh C. Net sales divided by total capital
B. Net Worth will decrease by Rs. 135 D. Total assets divided by net sales
lakh
C. Cannot be assessed from the given in-
formation 360. The gross profit margin gives investors
D. No impact the best indication of how effectively a
business is earning a profit from its nor-
356. A Company has forgot to record the de- mal business operations.
preciation in the its books. What could
A. True
be the effects on the earnings of the Com-
pany? B. False

361. Total Outside Liabilities are? 365. Below are all the components of financial
statements except:
A. Total Liabilities-Term Liabilities

A. Statement of comprehensive income
B. Total of current and term liabilities
B. Statement of financial position
C. Total Liabilities-Current Liabilities
C. Statement of debt
D. Total Assets-Current Liabilities
D. Statement of cash flow
362. The ratio that shows the existence of pro- 366. An accounts receivable ratio above the
tection for creditors against the possibility target range may indicate that ThreeGreen
of liquidation is called is too liberal in extending credit to its cus-
A. Debt ratio tomers
B. Quick ratio A. True
C. Current ratio B. False
D. Solvability ratio 367. Which of the following companies is

most likely to have the highest inventory
363. Which of the following stakeholder care turnover?
most about a company’s current ratio? A. Subway, a fast food company
A. Its shareholders B. Books-A-Million, a bookstore chain
B. Its suppliers C. Whole Foods, a grocery chain
C. Its competitors D. British Airways, an airline
Explanation:High inventory turnover mea-
D. Its customers
sures how fast a company sells its inven-
Explanation:Current ratio measures the
tory. Food companies typically sell out in-
company’s ability to repay short-term debt
ventory fastest. Other companies have
with its short-term assets. Its important
nonfood items (e.g. grocery stores has
to suppliers because they want to be paid
nonfood items)
on time.
368. COGS Stands for?
364. Look at the data above and calculate the
Liquid (acid test) ratio A. Cost Out of Goods Sold
B. Closing Opening Goods Stock
C. Cost Of Goods Sold
D. none of above
369. What is the purpose of ratio analysis?

A. To standardize numbers and facilitate
comparisons
A. 3.4:1 B. To highlight weaknesses and

strengths
B. 0.91:1
C. To make ratio comparisons through
C. 1.09:1 time and with competitors
D. none of above D. All of the above

370. Which of the basic financial statements C. Fund Flow Statement

is best used to answer questions about
D. Cash Flow Statement
changes in owner’s equity that are not ex-
plained by the income statement? 376. What is a Financial Report?
A. Balance sheet
A. Wife’s shopping report to husband
B. Statement of shareholder’s equity
B. Reports used in banking transactions
C. Income statement
C. Reports containing financial informa-
NARAYAN CHANGDER
D. Cash flow statement tion about business entities
371. Which of the following is not a liquidity D. Reports containing debts and receiv-
ratio? ables of business entities only
A. Defensive interval ratio
B. Cash ratio Trade Receivable collection Period?
C. Rate of return on equity
D. Quick ratio
372. All of the following items are typical of

a multiple-step income statement except
for:
A. 64.03
A. Total costs and expenses.
B. 32.01
B. Gross profit
C. 13.68
C. Net sales
D. 22.81
D. Operating income
373. Common size analysis is also known as 378. The debt ratio is a measure of a firm’s
Analysis
A. Vertical A. leverage.
B. Horizontal B. profitability.
C. Parallel C. liquidity.
D. None D. efficiency.
374. Competitive ratio is comparing ratio of 379. Records of a company’s financial infor-
the firm with the another firm within the mation in an accounting period that can
same industry. be used to describe the company’s perfor-
A. True mance are called
B. False A. Financial statements
375. Form-II of CMA format is named as? B. Audit report
A. Operating Statement C. Management reports
B. Analysis of Balance Sheet D. Accountability Report

380. Which of the following financial state- 385. If a firm has a positive tax rate, a posi-
ments should have the highest credibility? tive ROA, and the interest rate on debt is
the same as ROA, then ROA will be

A. In-House Financial Reports
A. greater than the ROE.
B. Audited Financial Reports
B. equal to the ROE.
C. Pro Forma Financial Report
C. less than the ROE.
D. Management Financial Report
D. greater than zero, but it is impossible
381. What does the return on total assets to determine how ROA will compare to
(ROA) ratio measure? ROE.
E. negative in all cases.
A. Operating income per dollar of sales
B. Net income per dollar of sales 386. The components of an auditor’s report
are:
C. Net income to total assets
382. Net Working Capital (NWC) can be calcu-

lated as?
A. Total Current Assets-Total Current Lia-
bilities
B. Long Term Sources-Long Term uses
C. (Net Worth + Term Liabilities)-(Total
Assets-current assets) A. introductory section
D. Any of the above B. required supplemental section
C. financial section
383. Limitation of financial analysis is
D. all above
A. Dressing
387. What are cash equivalents?
B. window
A. An investment which can be realised
C. Window Dressing within a short period of time (upto 90
D. None days) without deterioration in the value of
assets
384. Classify the following item under major B. Any assets which can be converted
head and sub-head in the Balance Sheet of into cash easily
a company as per Schedule III of the Com-
C. Bank Balances
panies Act, 2013:i) Income received in Ad-
vance D. Long term investments
A. Current Liabilities 388. Under which major head and sub-head
of the Assets part of the Balance Sheet
B. Short term provision
will the following be shown:Stores and
C. Other current liabilities Spares.
D. Short term borrowings A. Current Investments

B. Current Assets 393. Mining rights

C. Inventories A. Tangible fixed assets
D. Other Current Assets B. Intangible fixed assets
389. Which is not a profitability ratio? C. Intangible assets under development
A. Earnings per share D. Capital work-in-progress
B. Dividend yield
NARAYAN CHANGDER
394. Which of the following ratios represents
C. Price/earnings ratio dividends per common share in relation to
D. Rate of return on net sales market price per common share?
E. NOT IN THE CHOICES A. dividend payout
390. Term loans are to be repaid out of future B. dividend yield

earnings of the unit. Working capital loans C. price/earnings
are to be repaid out of ?
D. book value per share
A. Realisation of fixed assets
B. Profits 395. Audited Financial Reports must be sub-
C. Realisaiton of non core assets mitted for Debtors with what total assets
and/or sales?
D. Realisation of current assets
A. Total Assets and/or Sales ≥ IDR 0 Bn
391. A Company has changed the method of
applying Depreciation from WDV to SLM. B. Total Assets and/or Sales ≥ IDR 25 Bn
What will the impact on the Cash Accru- C. Total Assets and/or Sales ≥ IDR 50 Bn
als for the particular year in which, change
happened?
D. none of above
A. No impact
B. Cash Accruals will either increase or 396. The percent of property, plant and equip-
decrease, depend upon the case to case ment to total assets is an example of:
basis
A. vertical analysis
C. Cash Accruals will decrease for the
B. solvency analysis
particular year in which, change happened
D. Cash Accruals will increase for the par- C. profitability analysis
ticular year in which, change happened D. horizontal analysis
392. The allocation of the costs of acquiring
397. All of the following are revenues, except
natural resource assets based on the level
for?
of processing or production is called
A. Depreciation A. Accounts receivable
B. Depletion B. Dividends received

C. Accretion C. Rent Revenue
D. Amortization D. Commission Revenue

398. What does the times-interest-earned ra- 402. Leverage ratio is

tio measure? A. The ratio is used to measure how much

A. The percentage of the firm’s capital a company is financed with assets
provided by debtholders B. The ratio is used to measure how much
B. The firm’s ability to pay off short-term a company is financed with capital
obligations without relying on the sale of C. The ratio is used to measure how much
inventories a company is financed with profits
C. The firm’s ability to meet its annual in- D. The ratio is used to measure how much
terest payments a company is financed with debt
D. The rate of return on common stock-
holders’ investment 403. Expenses on the income statement may
be grouped by:
399. Comparative analysis is also known as A. nature, but not by function.
Analysis.
B. function, but not by nature.
A. Horizontal
C. either function or nature.
B. Vertical
C. Parallel
D. None 404. Operating Profit Before Interest & Tax =
Gross Profit-?
400. Ratios are used as tools in financial anal- A. Non-Operating Expenses
ysis
B. Operating Expenses
A. instead of horizontal and vertical anal-
yses. C. Direct Expenses
B. because they can provide information D. Interest

that may not be apparent from inspection 405. Unsecured Loans from friends and rela-
of the individual components of a particu- tives, repayable after one year, should be
lar ratio. classified as?
C. because even single ratios by them- A. Current Liabilities
selves are quite meaningful.
B. Term Liabilities
D. because they are prescribed by GAAP.
C. Net Worth
401. A company’s cost of merchandise sold D. Anywhere
increased by 6.7% over the prior year.
Management 406. Which condition is the most favorable?
A. considers this to be an unfavorable A. Debtors with bank financing <100%,
trend. but AR+INV<AP+STBD
B. cannot evaluate this change without B. Debtors with bank financing <100%,
knowing the change in sales. and AR+INV>AP+STBD
C. should reduce the amount of merchan- C. Debtors with bank financing >100%,
dise purchased during the next year. but AR+INV<AP+STBD
D. should reduce operating costs to main- D. Debtors with bank financing >100%,
tain a constant operating margin. and AR+INV<AP+STBD

407. If the rental agreement meets the financ- 410. COGS= Beginning Inventory + Purchases-
ing rental criteria, then at the beginning Ending Inventory.
of the rental agreement the lessee (lessee)
notes
A. Assets (Dr) and Cash (Kr)
B. Rental Fees (Dr) and Cash (Kr)
C. Rent Payable (Dr), Interest Costs (Dr),
NARAYAN CHANGDER
and Cash (Kr)
D. Assets-Finance Lease (Dr) and A. True
Liabilities-Finance Lease (Kr) B. False
408. The above given format will be called as 411. The current ratio assumes a business
could sell its merchandise inventory
quickly.
A. True
B. False
412. A firm’s financial statements show that

the Accounts Receivable (AR) Days ratio
for the firm was 15, and the Accounts
Payable (AP) Days ratio was 20. Based on
this information, should investors include
Accounts Receivables in their assessment
of the liquidity of the firm?
A. Yes, because AR is converted to cash
faster than AP is paid out
A. 1 + 2 Column B. No, because AP Days is higher than AR
B. 1 + 3 Column Days
C. 2 Column C. No, because it takes longer to convert
AR to cash than AP is paid out
D. 3 Column
D. Unsure, as these ratios do not relate
409. . The objective of financial reporting, ac- to the firm’s liquidity.
cording to the IASB framework, is to:
413. When the carrying amount of property,
A. provide information about the firm to
plant and equipment exceeds its recover-
current and potential investors.
able amount, the company will carry out a
B. decide the acceptable standards for recovery
presenting financial performance.
A. Asset Revaluation
C. minimize management discretion in
B. Asset Identification
presenting the financial results of a firm.
C. Impairment of Asset Value
D. none of above D. Asset Reclassification

414. Which one of the following is a current A. 105.88 %

asset?
B. 69.47%

A. Bank Account
C. 35.29%
B. Operating Note
D. 38.82%
C. Land
D. Machinery 420. Market ratios
415. What are the components of an income A. measure the ability of the company to
statement? meet its daily financial needs.
A. assets, liabilities, and equity B. measure a company’s financial perfor-
B. cash flow from operating activities, in- mance in relative to the market value of
vesting activities, and financing activities the stock
C. revenue, expenses, gains, and losses 421. How the sales growth is calculated?
D. balance sheet, statement of cash A. (Last Year Sales-Current Year Sales) /
flows, and statement of retained earnings Last Year Sales
416. From financial statement analysis the B. (Last Year Sales-Current Year Sales) /
creditors are interested to know Current Year Sales
A. Liquidity C. (Current Year Sales-Last Year Sales) /
B. Profit Current Year Sales
C. Efficiencies D. (Current Year Sales-Last Year Sales) /
D. Share capital Last Year Sales
417. Following is not a Non-Quick Assets 422. Errors in recording depreciation costs are
A. Prepaid Expenses an example of this type of error
B. Advance Payments A. Non Counterbalancing Errors
C. Closing Stock B. Counterbalancing Errors
D. Debtors
423. Generally accepted accounting principles
418. Variance analysis is done as part of ver- (GAAP) are accounting principles that have
tical analysis substantial authoritative support
A. True A. True
B. False B. False
424. Which of the following is not a limitation
percentage return on capital employed
of financial statement analysis
A. Ignores the qualitative elements
B. Not free from personal bias
C. Intra-firm comparison
D. Ignores the price level changes

425. If you wish to compute economic earnings 430. What does COGS stand for?
and are trying to decide how to account for A. cost of goals scored
inventory,
B. cost of goods stocked
A. LIFO is better than FIFO.
C. cost of goods sold
B. FIFO and LIFO are equally good.
D. cost of goods solvent
C. FIFO and LIFO are equally bad.
D. FIFO is better than LIFO. 431. Which one of the following is a long term
NARAYAN CHANGDER
asset?
A. Market Beef
426. Firm ABC had operating profits of B. Breeding Beef
RM100, 000, taxes of RM17, 000, inter-
est expense of RM34, 000 and preferred C. Land
dividends of RM5, 000. What was the D. Lance’s goats
firm’s net profit after taxes?
432. Given an accounts receivable turnover
A. RM66, 000
of 8 and annual credit sales of RM362,
B. RM49, 000 000, the average collection period (360-
C. RM44, 000 day year) is
D. RM83, 000 A. 90 days.
B. 45 days.
427. What ratio shows how well a business
can turn revenue into gross profit? C. 5 days.
A. Net profit margin D. 60 days.
B. Gross profit margin 433. Explain the significance of the quick ratio
C. Current ratio in financial statement analysis.
D. Acid test ratio A. The quick ratio is only relevant for non-
profit organizations
428. Bills payable is shown as
B. The quick ratio has no significance in
A. Long-term borrowings financial statement analysis
B. Short-term borrowings C. The quick ratio is significant in finan-
C. Other current liabilities cial statement analysis because it pro-
vides insight into a company’s short-term
D. Trade payables liquidity and ability to cover immediate li-
429. Which of the basic financial statements is abilities.
best used to answer the questions “What D. The quick ratio is used to measure
does the company own and how is it fi- long-term solvency of a company
nanced?”
434. The dividend ratio is the most widely rec-
A. Balance sheet ognized measure of a corporation’s finan-
B. Statement of shareholder’s equity cial performance.
C. Income statement A. True
D. Cash flow statement B. False

435. The primary concern of short-term credi- 440. slow Moving / Non Moving / Obsolete
tors when assessing the strength of a firm stocks should be classified as?
is the entity’s

A. Current Assets
A. short-term liquidity
B. Fixed Assets
B. profitability
C. Non-current Assets
C. market price of stock
D. Intangible Assets
D. leverage
441. The net tax liabilities for a particular FY
436. What does the total debt to total capital as calculated by the unit is Rs. 163.50
ratio measure? lakh, whereas the tax payment is required
A. The percentage of the firm’s capital to be made as per Income Tax Rules is
provided by debtholders Rs. 175 lakh for that particular year. The
B. The firm’s ability to pay off short-term difference in the tax liability was on ac-
obligations without relying on the sale of count of some expenses, which has been
inventories disallowed by the Income Tax Department.
How this difference of Rs. 11.50 lakh will
C. The firm’s ability to meet its annual in- be accounted for?
terest payments
A. Deferred Tax Assets
D. The rate of return on common stock-
holders’ investment B. Deferred Tax Liability
C. Will not be accounted for at all as the
437. Financial ratios that show how and to
difference was due to permanent differ-
what degree a company has financed its
ence
assets.
A. leverage ratios D. Can not say
B. liquidity ratios 442. Net income after taxes divided by net

C. efficiency ratios sales
D. profitability ratios A. Net profit margin
B. Net sales margin
438. Choose the appropriate ratio analy-
sis:Asset turnover C. Net profit and sales margin
A. Liquidity ratios D. Profit-sales ratio
B. Profitability ratios E. NOT IN THE CHOICES
C. Solvency Ratios
443. How is the cash flow statement different
D. Financial Ratios from the income statement?
439. What could be the reasons for negative A. The cash flow statement shows the net
cash flows from operating activities? income or loss, while the income state-
ment shows the cash inflows and out-
A. Increase in the level of Current Assets
flows.
B. Decrease in the level of Current Liabil-
ities B. The cash flow statement shows the
revenues and expenses, while the income
C. Delays in the realisation of receivables statement shows the inflows and outflows
D. All the above of cash.

C. The cash flow statement shows the as- 448. Which category of ratios helps answer
sets and liabilities, while the income state- the question ‘Can we make required pay-
ment shows the revenues and expenses. ments?’
D. The cash flow statement shows the in- A. Liquidity ratios
flows and outflows of cash during a spe-
cific period, while the income statement B. Asset management ratios
shows the revenues, expenses, and net in-
C. Debt management ratios
come or loss for a specific period.
NARAYAN CHANGDER
D. Profitability ratios
444. What is the purpose of an income state-
ment?
449. At the end of FY, the inventory holding
A. To track the company’s stock prices level of a unit has increased from 69 days
and market value. to 103 days. What could be the possible
B. To calculate the company’s total as- reasons for substantial increase in the in-
sets and liabilities. ventory holding level?
C. To determine the company’s customer A. The unit had procured raw material in
satisfaction and loyalty. bulk to complete the orders
D. To provide a summary of a company’s
B. The unit was holding the substantial
revenues, expenses, and net income over
amount of finished goods, waiting for
a specific period of time.
clearance from the buyers to dispatch the
445. Financial analysis is used only by the cred- material
itors.
C. The unit has bought substantial
A. True amount of raw material in the month of
B. False march as the prices are going upside
446. All of the following are included in the D. All the above
Statement of Financial Position, except
for? 450. The definition of Current Assets & Cur-
A. Profit rent Liabilities are available in?
B. Vehicle A. Accounting Standards
C. Vehicle expenses
B. RBI Master Circular
D. Capital
C. Companies Act 2013
447. Why is the price-earnings (P/E) ratio con-
sidered important in financial analysis? D. No where available, current assets are
to be identified as per prevailing practice
A. It is used to determine the company’s
marketing strategy
451. Generally, a corporation is owned by its:
B. It has no impact on the company’s per-
formance A. Managers
C. It is only relevant for small businesses B. Board of Directors
D. It provides insight into the valuation of
C. Shareholders
a company’s stock and its potential for fu-
ture growth. D. All of the above

452. Asset turnover measures 457. The two basic measures of liquidity are:
A. how often a company replaces its as- A. inventory turnover and current ratio

sets. B. current ratio and acid test ratio
B. how efficiently a company uses its as- C. gross profit Ratio and operating ratio
sets to generate sales.
D. current ratio and average collection
C. the portion of the assets that have period
been financed by creditors.
D. the overall rate of return on assets. 458. Which of the following ratios assess the
firm’s ability to pay the debt interest and
453. Examples may include salaries, utilities, maturities as they become due?
rent, insurance, and office supplies. A. Current Ratio
A. Revenue B. Times Interest earned
B. Expenses C. Net Profit Margin
C. Net Income D. Quick Ratio
D. Net Loss 459. The financial statement that reports
whether the business earned a profit and
454. The long term surplus / deficit in a funds
also lists the revenues and expenses is
flow statement depicts?
called the:
A. Profitability of the unit
A. Balance Sheet
B. Excess Money available at Manage-
B. Statement of Retained Earnings
ment disposal
C. Statement of Cash Flows
C. Change in Net Working Capital
D. Income Statement
460. One borrower is availing various credit
455. The financial statements of a business en- facility from various Banks and provided
terprise include: separate securities to each Bank on differ-
A. Balance sheet ent terms and conditions. What type of
banking arrangement is this?
B. Statement of Profit and loss
A. Multiple Banking Arrangement
C. Cash flow statement
B. Consortium Banking Arrangement
D. All the above
C. Sole Banking Arrangement
456. ChaCha Corporation has current assets of D. Any of the above
RM11, 400, inventories of RM4, 000, and
a current ratio of 2.6. What is ChaCha’s 461. Share application money (refundable) is
quick or acid test ratio? shown as
A. 1.69 A. Other long-term liabilities
B. 0.54 B. Other current liabilities
C. 0.74 C. Short-term provisions
D. 1.35 D. Short-term borrowings

462. A specific example of return is in the in- 467. Choose the appropriate ratio analy-
surance industry sis:Times interest earned
A. Premium Ratio Only A. Liquidity ratios
B. Premium Ratio to Number of Directors B. Profitability ratios
C. Rasio Decidendi C. Solvency Ratios
D. Own/ Risk Retention
D. Financial Ratios
463. Which of the following are part of Finan-
NARAYAN CHANGDER
cial Statement Analysis? 468. What information do you need for the
Current Ratio?
A. Compare the firm against itself
through time A. Current Assets
B. Compare the firm to other, similar B. Current Liabilities
firms C. Total Assets
C. Compare firms of different sizes D. Total Liabilities
D. All of the above
469. The consistency concept requires the en-
464. What does a low inventory turnover ra- tity to give the same treatment to compa-
tio suggest about a company’s operations? rable transactions from period to period
A. The company is efficiently managing
A. True
its inventory and has no excess or obso-
lete inventory. B. False
B. The company is not efficiently manag- 470. Under which main head and sub-head of
ing its inventory and may have excess or Equity and Liabilities part of the Balance
obsolete inventory. Sheet are the following item classified or
C. The company is experiencing high de- shown:(i) Bonds; (ii) Debentures
mand for its products and is selling inven-
A. Long term borrowings & Long term
tory quickly.
provision
D. The company is not managing its inven-
tory well and has a shortage of inventory. B. Non current Liabilities & other Current
Liabilities
465. A measure of asset utilization is
C. Non current liabilities and long term
A. sales divided by working capital. borrowings
B. return on total assets. D. none of above
C. return on equity capital.
471. On the income statement, sales revenue,
D. operating profit divided by sales.
minus cost of goods sold and operating ex-
E. None of the options are correct. penses, equals which of the following?
466. Marketable Securities will appear under? A. Net profit
A. Investment B. Retained earnings
B. Fixed Assets C. Net income available to preferred
C. Non Quick Assets shareholders
D. Quick Assets D. Earning Before Interest and Tax

472. A “snapshot” of an organization’s finan- 476. Which supplier of funds bears the great-
cial position at a given time. est risk and should earn the greatest re-
turn?

A. Statement of Financial Position
A. Bondholder
B. Statement of the Comprehensive In-
come B. Banks
C. Statements of Cash Flow C. Common shareholders

D. Preferred shareholders
D. Cost of Goods Sold
Explanation:The suppliers that has the
473. Which of the following is the correct cal- most to lose should earn the greatest re-
culation for OCF (operating cash flow)? turn. Common shareholders may get noth-
ing if the company goes bankrupt
477. The average trade receivables period of

a unit has increased from 65 days to 80
days. Is there any change in the require-
ment of working capital?
A. A only
A. No, the unit has to manage its receiv-
B. B and C able in an efficient manner
C. A and B B. Yes, the working capital requirement
will decrease
D. All of the above.
C. No, the working capital requirement
474. Which of the following best describes will remain at existing level
why the notes that accompany the finan- D. Yes, the working capital requirement
cial statements are required? The notes: will go up
A. permit flexibility in statement prepara- 478. Money owed to a company by its clients
tion. or customers who have promised to pay
B. standardize financial reporting across for products at a later date.
companies. A. Current Assets
C. provide information necessary to un- B. Account Receivable
derstand the financial statements.
C. Current Liabilities
D. notes to the financial statements.
D. Account Payable
475. If total assets are P1, 000, 000 and to- 479. Vertical analysis ratios are an example
tal equity is P650, 000, how much is the of a
debt ratio?
A. solvency ratio
A. 35.00%
B. 45.00% C. liquidity ratio
C. 55.00% D. market ratio
D. 65.00%
480. Which are some general features of finan-
E. NOT IN THE CHOICES cial statement according to IAS NO.1 are:

A. Fair presentationGoing concernAc- 485. Allocation of the costs of acquiring nat-

crual accounting ural resource assets is more appropriate
B. Consistency. Materiality. Aggrega- using the method
tion. A. Sum of Years
C. No offsetting. Reporting frequency. B. Double Declining Balance
Comparative information.
C. Unit of Production / Activity Unit
D. Going concern Accrual accounting.
D. Straight-Line
NARAYAN CHANGDER
Consistency.
486. Analysis of Financial Statements com-
481. Which is not a quick asset?
prises, analysis and interpretation of?
A. Cash equivalents
A. Profit and Loss Account
B. Notes receivable
B. Balance Sheet
C. Inventories
C. Cash Flow Statement
D. Cash substitutes
D. All of the above
487. Which ratio tells us if a business might
482. From the given items which is not shown
struggle to pay off its short term debts?
under current liabilities
A. Profit margin
A. Trade payables
B. Current ratio
B. Short-term provisions
C. Acid test ratio
C. Short-term borrowings
D. YEARS
D. Inventories
483. A transaction that will increase the quick 488. The ratios that are used to determine a
ratio but cause the current ratio to decline company’s short-term debt paying ability
is: are
A. Short-term borrowing A. asset turnover, times interest earned,

current ratio, and receivables turnover.
B. Investing cash in plant assets
B. times interest earned, inventory
C. Sale of inventory at a price below cost turnover, current ratio, and receivables
D. Collection of an accounts receivable turnover.
484. What is the purpose of preparing the C. times interest earned, acid-test ratio,
Statement of Financial Performance? current ratio, and inventory turnover.
A. inform stakeholders the profitability of D. current ratio, acid-test ratio, receiv-
business ables turnover, and inventory turnover.
B. inform stakeholders the income and 489. The acid test ratio is also known as
expenses of business
A. Current ratio
C. inform stakeholders the nature of busi-
B. Quick/ Liquid ratio
ness
D. inform stakeholders the size of busi- C. Holding ratio
ness D. Operating ratio

490. While preparing fund flow statement, in- with the lower dividend payout ratio is
crease in capital will be considered as? most likely to have:

A. Short Term Source A. Lower stock price
B. Long Term Surplus B. Higher debt/equity ratio
C. Long Term Source C. Less rapid growth of earnings per
D. Any of the above share
D. More rapid growth of earnings per
491. Which of the following is not a long-term share
borrowing
A. Bonds 495. Standard-setting bodies are responsible
for:
B. Debentures
A. establishing financial reporting stan-
C. Public deposits dards only
D. Trade payables B. establishing and enforcing standards
for financial reporting.
492. International Accounting Standard (IAS)
No. 1 least likely requires which of the C. enforcing compliance with financial re-
following? porting standards only.
A. Neither assets and liabilities, nor in- D. none of above
come and expenses, may be offset unless
required or permitted by a financial re- 496. To rate the ability of a business to pay its
porting standard. current and long-term liabilities, investors
use
B. Audited financial statements and dis-
closures, along with updated information A. solvency ratios
about the firm and its management, must B. profitability ratios
be filed at least quarterly C. liquidity ratios
C. Fair presentation of financial state- D. market ratios
ments means faithfully representing the
firm’s events and transactions according 497. Income stocks typically have a higher div-
to the financial reporting standards. idend yield than growth stocks.
D. none of above A. True
493. Financial Statement that shows final fi- B. False
nancial position of the company as on the
498. True of False:Financial ratios can help you
last day of the year is called
ask the right questions but they rarely an-
A. Income Statement swer these questions on their own
B. Balance Sheet A. True
C. Profit & Loss Account B. False
D. Trading Account Explanation:Financial ratios provides nu-
meric information but no reasons behind
494. Two companies are identical except for these numbers. For example, if profit mar-
substantially different dividend payout ra- gin is-4%, it does not explain why a decline
tios. After several years, the company in profit is happening

499. Following is an Intangible Fixed Asset? 500. Cost of Goods Sold are direct costs of pro-
A. Plant & Machinery ducing products and services.
B. Land
A. True
C. Copyright
D. Furniture B. False
NARAYAN CHANGDER

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