This quiz works best with JavaScript enabled. Home > Accounting > Financial Statement Analysis > Financial Statement Analysis – Quiz 12 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Statement Analysis Quiz 12 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Financial statements are: A) Anticipated facts. B) Estimated facts. C) Recorded facts. D) Forecasted values. Show Answer Correct Answer: C) Recorded facts. 2. Tandon Committee had prescribed three methods of lending. What will the current ratio under 2nd Method of lending? A) 1.28. B) 1.33. C) More than 1.33. D) It depends on case to case basis. Show Answer Correct Answer: B) 1.33. 3. The gross profit ratio is also referred to as the gross margin. A) True. B) False. Show Answer Correct Answer: A) True. 4. Under which heads the following items are classified or shown on the Assets part of the Balance Sheet of a company:(i) Loose Tools A) Non current assets and Trade Receivables. B) Current Assets & Trade Receivables. C) Current assets & Inventories. D) None of above. Show Answer Correct Answer: C) Current assets & Inventories. 5. If the operating cycle cannot be identified, it is assumed to be a period of A) 10 months. B) 11 months. C) 9 months. D) 12 months. Show Answer Correct Answer: D) 12 months. 6. IMT Industries has a debt-to-equity ratio of 1.6 compared with the industry average of 1.4. This indicates that the company ..... A) Has less liquidity than other firms in the industry. B) Will not experience any difficulty with its creditors. C) Has greater than average financial risk compared to other firms in its industry. D) Will be viewed as having high creditworthiness. E) None of above. Show Answer Correct Answer: C) Has greater than average financial risk compared to other firms in its industry. 7. A firm has a higher asset turnover ratio than the industry average, which implies A) The firm has a higher P/E ratio than other firms in the industry. B) The firm is more likely to avoid insolvency in the short run than other firms in the industry. C) The firm is more profitable than other firms in the industry. D) The firm is utilizing assets more efficiently than other firms in the industry. E) The firm has higher spending on new fixed assets than other firms in the industry. Show Answer Correct Answer: D) The firm is utilizing assets more efficiently than other firms in the industry. 8. Below are the objectives of analyzing financial statements except..... A) Know the company's financial condition. B) As a testing tool for the bookkeeping department. C) Assess the company's financial position. D) Test employee loyalty to the company. Show Answer Correct Answer: D) Test employee loyalty to the company. 9. If your current ratio is above this number you are considered to have good liquidity. A) 0. B) 1. C) 2. D) 10. Show Answer Correct Answer: B) 1. 10. While calculating Return on Capital Employed (ROCE) ratio, what do you mean by Capital Employed? A) Total Liabilities less intangible assets. B) Total Assets. C) Net Worth less investment in associate / JVs etc. D) Promoters own contribution. Show Answer Correct Answer: B) Total Assets. 11. Rate of return on assets A) Short-term Solvency and Liquidity. B) Asset Liquidity and Management Efficiency. C) Long-term Financial Position or Stability. D) Profitability and Returns to Investors. E) NOT IN THE CHOICES. Show Answer Correct Answer: D) Profitability and Returns to Investors. 12. Which ratio tells us if a business might struggle to pay off its short term debts if they cannot sell off their inventory quickly? A) Acid test (quick) ratio. B) Current ratio. C) Gross profit margin. D) YEARS. Show Answer Correct Answer: A) Acid test (quick) ratio. 13. What are various sources for financing Current Assets? A) Other Current Liabilities, Short Term Bank Borrowing, Net Working Capital. B) Current Liabilities, Short Term Bank Borrowing, Net Working Capital. C) Other Current Liabilities, Net Working Capital. D) Current Liabilities. Show Answer Correct Answer: A) Other Current Liabilities, Short Term Bank Borrowing, Net Working Capital. 14. Liquidity ratios measure A) The ability of a business to meet its financial obligations. B) The view or opinion of the financial markets about the company. Show Answer Correct Answer: A) The ability of a business to meet its financial obligations. 15. Premium on redemption of debentures is shown as A) Long-term borrowings. B) Short-term borrowings. C) Other long-term liabilities. D) Short-term provisions. Show Answer Correct Answer: C) Other long-term liabilities. 16. Which is not a form of KAP opinion? A) Profitable. B) Unqualified. C) Qualified. D) Adverse. Show Answer Correct Answer: A) Profitable. 17. State the following statement is True or False.Ratios help in comparisons of a firm's results over a number of accounting periods as well as with other business enterprises. A) True. B) False. Show Answer Correct Answer: A) True. 18. If we have to calculate the cost of sale or goods sold, what adjustment is required to be done in the cost of production? A) We have to add the value of opening stock of finished goods and deduct the value of closing stock of finished goods. B) We have to add the value of opening stock of SIP and deduct the value of closing stock of SIP. C) We have to add the value of opening stock of finished goods & SIP and deduct the value of closing stock of finished goods & SIP. D) No adjustment is required, both are same. Show Answer Correct Answer: A) We have to add the value of opening stock of finished goods and deduct the value of closing stock of finished goods. 19. What is the full form of EBIDTA? A) Expenses before Interest, Depreciation, Tax and Amortisation. B) Earnings before Interest, Depreciation, Tax and Amortisation. C) Earnings before Interest, Deposits with Bank, Tax and Actual non operating expenses. D) Non of the above. Show Answer Correct Answer: B) Earnings before Interest, Depreciation, Tax and Amortisation. 20. The Current Ratio of a unit has declined from 1.65 to 1.35. What could be the possible reasons for decline? A) Investment in fixed assets without availing any Term Loan. B) Increase in Current Liabilities. C) A major portion of trade receivables converted into Non-current assets. D) All of the above. Show Answer Correct Answer: D) All of the above. ← PreviousNext →Related QuizzesAccounting QuizzesFinancial Statement Analysis Quiz 1Financial Statement Analysis Quiz 2Financial Statement Analysis Quiz 3Financial Statement Analysis Quiz 4Financial Statement Analysis Quiz 5Financial Statement Analysis Quiz 6Financial Statement Analysis Quiz 7Financial Statement Analysis Quiz 8Financial Statement Analysis Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books