This quiz works best with JavaScript enabled. Home > Accounting > Financial Statement Analysis > Financial Statement Analysis – Quiz 19 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Statement Analysis Quiz 19 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Errors in recording depreciation costs are an example of this type of error A) Non Counterbalancing Errors. B) Counterbalancing Errors. Show Answer Correct Answer: A) Non Counterbalancing Errors. 2. Generally accepted accounting principles (GAAP) are accounting principles that have substantial authoritative support A) True. B) False. Show Answer Correct Answer: A) True. 3. If you wish to compute economic earnings and are trying to decide how to account for inventory, A) LIFO is better than FIFO. B) FIFO and LIFO are equally good. C) FIFO and LIFO are equally bad. D) FIFO is better than LIFO. E) None of the options are correct. Show Answer Correct Answer: A) LIFO is better than FIFO. 4. Firm ABC had operating profits of RM100, 000, taxes of RM17, 000, interest expense of RM34, 000 and preferred dividends of RM5, 000. What was the firm's net profit after taxes? A) RM66, 000. B) RM49, 000. C) RM44, 000. D) RM83, 000. Show Answer Correct Answer: B) RM49, 000. 5. What ratio shows how well a business can turn revenue into gross profit? A) Net profit margin. B) Gross profit margin. C) Current ratio. D) Acid test ratio. Show Answer Correct Answer: B) Gross profit margin. 6. Which of the basic financial statements is best used to answer the questions "What does the company own and how is it financed?" A) Balance sheet. B) Statement of shareholder's equity. C) Income statement. D) Cash flow statement. Show Answer Correct Answer: A) Balance sheet. 7. Which one of the following is a long term asset? A) Market Beef. B) Breeding Beef. C) Land. D) Lance's goats. Show Answer Correct Answer: C) Land. 8. Given an accounts receivable turnover of 8 and annual credit sales of RM362, 000, the average collection period (360-day year) is A) 90 days. B) 45 days. C) 5 days. D) 60 days. Show Answer Correct Answer: B) 45 days. 9. Explain the significance of the quick ratio in financial statement analysis. A) The quick ratio is only relevant for non-profit organizations. B) The quick ratio has no significance in financial statement analysis. C) The quick ratio is significant in financial statement analysis because it provides insight into a company's short-term liquidity and ability to cover immediate liabilities. D) The quick ratio is used to measure long-term solvency of a company. Show Answer Correct Answer: C) The quick ratio is significant in financial statement analysis because it provides insight into a company's short-term liquidity and ability to cover immediate liabilities. 10. The dividend ratio is the most widely recognized measure of a corporation's financial performance. A) True. B) False. Show Answer Correct Answer: B) False. 11. The primary concern of short-term creditors when assessing the strength of a firm is the entity's A) Short-term liquidity. B) Profitability. C) Market price of stock. D) Leverage. Show Answer Correct Answer: A) Short-term liquidity. 12. What does the total debt to total capital ratio measure? A) The percentage of the firm's capital provided by debtholders. B) The firm's ability to pay off short-term obligations without relying on the sale of inventories. C) The firm's ability to meet its annual interest payments. D) The rate of return on common stockholders' investment. Show Answer Correct Answer: A) The percentage of the firm's capital provided by debtholders. 13. Financial ratios that show how and to what degree a company has financed its assets. A) Leverage ratios. B) Liquidity ratios. C) Efficiency ratios. D) Profitability ratios. Show Answer Correct Answer: A) Leverage ratios. 14. Choose the appropriate ratio analysis:Asset turnover A) Liquidity ratios. B) Profitability ratios. C) Solvency Ratios. D) Financial Ratios. Show Answer Correct Answer: B) Profitability ratios. 15. What could be the reasons for negative cash flows from operating activities? A) Increase in the level of Current Assets. B) Decrease in the level of Current Liabilities. C) Delays in the realisation of receivables. D) All the above. Show Answer Correct Answer: D) All the above. 16. Slow Moving / Non Moving / Obsolete stocks should be classified as? A) Current Assets. B) Fixed Assets. C) Non-current Assets. D) Intangible Assets. Show Answer Correct Answer: C) Non-current Assets. 17. The net tax liabilities for a particular FY as calculated by the unit is Rs. 163.50 lakh, whereas the tax payment is required to be made as per Income Tax Rules is Rs. 175 lakh for that particular year. The difference in the tax liability was on account of some expenses, which has been disallowed by the Income Tax Department. How this difference of Rs. 11.50 lakh will be accounted for? A) Deferred Tax Assets. B) Deferred Tax Liability. C) Will not be accounted for at all as the difference was due to permanent difference. D) Can not say. Show Answer Correct Answer: C) Will not be accounted for at all as the difference was due to permanent difference. 18. Net income after taxes divided by net sales A) Net profit margin. B) Net sales margin. C) Net profit and sales margin. D) Profit-sales ratio. E) NOT IN THE CHOICES. Show Answer Correct Answer: A) Net profit margin. 19. How is the cash flow statement different from the income statement? A) The cash flow statement shows the net income or loss, while the income statement shows the cash inflows and outflows. B) The cash flow statement shows the revenues and expenses, while the income statement shows the inflows and outflows of cash. C) The cash flow statement shows the assets and liabilities, while the income statement shows the revenues and expenses. D) The cash flow statement shows the inflows and outflows of cash during a specific period, while the income statement shows the revenues, expenses, and net income or loss for a specific period. Show Answer Correct Answer: D) The cash flow statement shows the inflows and outflows of cash during a specific period, while the income statement shows the revenues, expenses, and net income or loss for a specific period. 20. What is the purpose of an income statement? A) To track the company's stock prices and market value. B) To calculate the company's total assets and liabilities. C) To determine the company's customer satisfaction and loyalty. D) To provide a summary of a company's revenues, expenses, and net income over a specific period of time. Show Answer Correct Answer: D) To provide a summary of a company's revenues, expenses, and net income over a specific period of time. ← 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