This quiz works best with JavaScript enabled. Home > Accounting > Financial Statement Analysis > Financial Statement Analysis – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Statement Analysis Quiz 4 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What does the basic earning power (BEP) ratio measure? A) Operating income per dollar of sales. B) Net income per dollar of sales. C) Net income to total assets. D) EBIT per total assets. Show Answer Correct Answer: D) EBIT per total assets. 2. Who is responsible for compliance of various Accounting Standards, Principles, Policies etc. in preparation and finalising the financial statements? A) The Auditors of the entity. B) The management of the entity. C) The Shareholders / Investors. D) All the above. Show Answer Correct Answer: B) The management of the entity. 3. From the viewpoint of a stockholder, which of the following relationships do you consider of the least significance? A) ROA consistently is higher than the industry average. B) ROA is greater than the interest rate being paid to creditors. C) ROE has increased in each of the past five years. D) Net income is greater than the amount of working capital. Show Answer Correct Answer: D) Net income is greater than the amount of working capital. 4. Long Term Sources consist of? A) Net worth + Term Liabilities. B) Net Worth. C) Current Liabilities + Term Liabilities. D) Total Liabilities. Show Answer Correct Answer: A) Net worth + Term Liabilities. 5. Stockholders are most interested in evaluating A) Liquidity. B) Solvency. C) Profitability. D) Marketability. Show Answer Correct Answer: C) Profitability. 6. A comparison between two numbers showing how many times one number exceeds the other. A) Return on investment. B) Profitability ratios. C) Ratio. D) Efficiency ratios. Show Answer Correct Answer: C) Ratio. 7. True or False:When a firm improves (increases) its average collection period, it improves the firm's liquidity position A) True. B) False. Show Answer Correct Answer: B) False. 8. Agency costs are: A) Costs incurred resulting from conflicts of interest between the shareholders and the managers of a corporation. B) Costs of monitoring the managers' actions. C) Both A and B. D) None of the above. Show Answer Correct Answer: C) Both A and B. 9. Which of these are not the methods of financial statement analysis? A) Ratio analysis. B) Comparative analysis. C) Trend analysis. D) Capitalization method. Show Answer Correct Answer: D) Capitalization method. 10. Which condition is the most favorable? A) Debtors with DSCR <0.5x. B) Debtors with DSCR <1x. C) Debtors with DSCR > 2x. D) Debtors with DSCR > 3x. Show Answer Correct Answer: D) Debtors with DSCR > 3x. 11. What is the balance sheet? A) The balance sheet is a report that shows a company's revenue and profit. B) The balance sheet is a statement that displays a company's cash flow and investments. C) The balance sheet is a document that lists all the expenses of a company. D) The balance sheet is a financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time. Show Answer Correct Answer: D) The balance sheet is a financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time. 12. The least likely factor a business will use to determine a benchmark is A) Government economic standards. B) Actual ratios from the prior year. C) Industry standards. D) Its business plan. Show Answer Correct Answer: A) Government economic standards. 13. When an auditor issues an unqualified opinion of a company's financial statements, this means that: A) The accounting estimates are the same as those used in the previous years. B) The financial statements are presented fairly and, therefore, are free from error. C) The auditor is unaware of any material misstatements affecting the financial statements. D) A financial analyst does not need to make adjustments to the financial statements before computing financial ratios. Show Answer Correct Answer: C) The auditor is unaware of any material misstatements affecting the financial statements. 14. Which of the following is not an assumption in accounting? A) Separate entity. B) Going concern or Continuity. C) Market value in determining the cost of asset. D) None of the above. Show Answer Correct Answer: C) Market value in determining the cost of asset. 15. Financial ratios that indicate how effectively a company uses its resources to generate sales. A) Liquidity ratios. B) Leverage ratios. C) Profitability ratios. D) Efficiency ratios. Show Answer Correct Answer: D) Efficiency ratios. 16. The following statements correspond to changes in estimated asset life and/residual value, except A) The amount of depreciation expense will change. B) The amount of depreciation expense recorded in previous years has not changed. C) The depreciation method will change. D) The basis of the depreciation asset value changes. Show Answer Correct Answer: B) The amount of depreciation expense recorded in previous years has not changed. 17. Which of the following is the correct choice? A) Asset = Liabilities + Owner's Equity. B) Asset = Liabilities-Owner's Equity. C) Asset + Liabilities = Owner's Equity. D) Asset-Liabilities = Owner's Equity. Show Answer Correct Answer: A) Asset = Liabilities + Owner's Equity. 18. How many clauses exist in the Companies (Auditor's Report) Order, 2016 ("the order")? A) 12. B) 15. C) 16. D) 21. Show Answer Correct Answer: C) 16. 19. Discuss the importance of the return on assets (ROA) ratio in evaluating a company's performance. A) It measures the efficiency of the company in using its assets to generate profit. B) It measures the number of employees in the company. C) It evaluates the company's customer satisfaction. D) It calculates the company's total revenue. Show Answer Correct Answer: A) It measures the efficiency of the company in using its assets to generate profit. 20. The part of a company's financial statements produced in an accounting period that describes the elements of the company's income and expenses to produce a net profit (or loss) is called..... A) Cash flow statement. B) Balance sheet report. C) Capital change report. D) Income statement. Show Answer Correct Answer: D) Income statement. ← PreviousNext →Related QuizzesAccounting QuizzesFinancial Statement Analysis Quiz 1Financial Statement Analysis Quiz 2Financial Statement Analysis Quiz 3Financial Statement Analysis Quiz 5Financial Statement Analysis Quiz 6Financial Statement Analysis Quiz 7Financial Statement Analysis Quiz 8Financial Statement Analysis Quiz 9Financial Statement Analysis Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books