This quiz works best with JavaScript enabled. Home > Finance > Accounting > Financial Statement Analysis > Financial Statement Analysis – Quiz 12 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Statement Analysis Quiz 12 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. If a firm has a positive tax rate, a positive ROA, and the interest rate on debt is the same as ROA, then ROA will be A) Greater than the ROE. B) Equal to the ROE. C) Less than the ROE. D) Greater than zero, but it is impossible to determine how ROA will compare to ROE. E) Negative in all cases. Show Answer Correct Answer: A) Greater than the ROE. 2. What are cash equivalents? A) Any assets which can be converted into cash easily. B) Long term investments. C) An investment which can be realised within a short period of time (upto 90 days) without deterioration in the value of assets. D) Bank Balances. Show Answer Correct Answer: C) An investment which can be realised within a short period of time (upto 90 days) without deterioration in the value of assets. 3. Which is not a profitability ratio? A) Dividend yield. B) Rate of return on net sales. C) Price/earnings ratio. D) NOT IN THE CHOICES. E) Earnings per share. Show Answer Correct Answer: D) NOT IN THE CHOICES. 4. Term loans are to be repaid out of future earnings of the unit. Working capital loans are to be repaid out of ..... ? A) Profits. B) Realisation of current assets. C) Realisaiton of non core assets. D) Realisation of fixed assets. Show Answer Correct Answer: B) Realisation of current assets. 5. A Company has changed the method of applying Depreciation from WDV to SLM. What will the impact on the Cash Accruals for the particular year in which, change happened? A) Cash Accruals will decrease for the particular year in which, change happened. B) No impact. C) Cash Accruals will increase for the particular year in which, change happened. D) Cash Accruals will either increase or decrease, depend upon the case to case basis. Show Answer Correct Answer: B) No impact. 6. The allocation of the costs of acquiring natural resource assets based on the level of processing or production is called A) Depletion. B) Amortization. C) Accretion. D) Depreciation. Show Answer Correct Answer: A) Depletion. 7. Which of the following ratios represents dividends per common share in relation to market price per common share? A) Book value per share. B) Price/earnings. C) Dividend yield. D) Dividend payout. Show Answer Correct Answer: C) Dividend yield. 8. Audited Financial Reports must be submitted for Debtors with what total assets and/or sales? A) Total Assets and/or Sales $\geq$ IDR 0 Bn. B) Total Assets and/or Sales $\geq$ IDR 25 Bn. C) Total Assets and/or Sales $\geq$ IDR 50 Bn. D) None of above. Show Answer Correct Answer: C) Total Assets and/or Sales $\geq$ IDR 50 Bn. 9. The percent of property, plant and equipment to total assets is an example of: A) Profitability analysis. B) Horizontal analysis. C) Vertical analysis. D) Solvency analysis. Show Answer Correct Answer: C) Vertical analysis. 10. All of the following are revenues, except for? A) Dividends received. B) Rent Revenue. C) Accounts receivable. D) Commission Revenue. Show Answer Correct Answer: C) Accounts receivable. 11. What does the times-interest-earned ratio measure? A) The firm's ability to meet its annual interest payments. B) The percentage of the firm's capital provided by debtholders. C) The rate of return on common stockholders' investment. D) The firm's ability to pay off short-term obligations without relying on the sale of inventories. Show Answer Correct Answer: A) The firm's ability to meet its annual interest payments. 12. Comparative analysis is also known as ..... Analysis. A) Horizontal. B) Vertical. C) Parallel. D) None. Show Answer Correct Answer: A) Horizontal. 13. Ratios are used as tools in financial analysis A) Instead of horizontal and vertical analyses. B) Because they can provide information that may not be apparent from inspection of the individual components of a particular ratio. C) Because even single ratios by themselves are quite meaningful. D) Because they are prescribed by GAAP. Show Answer Correct Answer: B) Because they can provide information that may not be apparent from inspection of the individual components of a particular ratio. 14. A company's cost of merchandise sold increased by 6.7% over the prior year. Management A) Considers this to be an unfavorable trend. B) Cannot evaluate this change without knowing the change in sales. C) Should reduce the amount of merchandise purchased during the next year. D) Should reduce operating costs to maintain a constant operating margin. Show Answer Correct Answer: B) Cannot evaluate this change without knowing the change in sales. 15. Leverage ratio is ..... A) The ratio is used to measure how much a company is financed with assets. B) The ratio is used to measure how much a company is financed with profits. C) The ratio is used to measure how much a company is financed with capital. D) The ratio is used to measure how much a company is financed with debt. Show Answer Correct Answer: D) The ratio is used to measure how much a company is financed with debt. 16. Operating Profit Before Interest & Tax = Gross Profit-? A) Operating Expenses. B) Non-Operating Expenses. C) Direct Expenses. D) Interest. Show Answer Correct Answer: A) Operating Expenses. 17. Unsecured Loans from friends and relatives, repayable after one year, should be classified as? A) Current Liabilities. B) Net Worth. C) Anywhere. D) Term Liabilities. Show Answer Correct Answer: D) Term Liabilities. 18. If the rental agreement meets the financing rental criteria, then at the beginning 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), and Cash (Kr). D) Assets-Finance Lease (Dr) and Liabilities-Finance Lease (Kr). Show Answer Correct Answer: D) Assets-Finance Lease (Dr) and Liabilities-Finance Lease (Kr). 19. . The objective of financial reporting, according to the IASB framework, is to: A) Provide information about the firm to current and potential investors. B) Decide the acceptable standards for presenting financial performance. C) Minimize management discretion in presenting the financial results of a firm. D) None of above. Show Answer Correct Answer: B) Decide the acceptable standards for presenting financial performance. 20. The current ratio assumes a business could sell its merchandise inventory quickly. A) True. B) False. Show Answer Correct Answer: A) True. 21. 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. B) No, because it takes longer to convert AR to cash than AP is paid out. C) No, because AP Days is higher than AR Days. D) Unsure, as these ratios do not relate to the firm's liquidity. Show Answer Correct Answer: A) Yes, because AR is converted to cash faster than AP is paid out. 22. When the carrying amount of property, plant and equipment exceeds its recoverable amount, the company will carry out a recovery A) Impairment of Asset Value. B) Asset Reclassification. C) Asset Revaluation. D) Asset Identification. Show Answer Correct Answer: A) Impairment of Asset Value. 23. Which one of the following is a current asset? A) Bank Account. B) Operating Note. C) Land. D) Machinery. Show Answer Correct Answer: A) Bank Account. 24. What are the components of an income statement? A) Assets, liabilities, and equity. B) Cash flow from operating activities, investing activities, and financing activities. C) Revenue, expenses, gains, and losses. D) Balance sheet, statement of cash flows, and statement of retained earnings. Show Answer Correct Answer: C) Revenue, expenses, gains, and losses. 25. Following is not a Non-Quick Assets A) Closing Stock. B) Prepaid Expenses. C) Debtors. D) Advance Payments. Show Answer Correct Answer: C) Debtors. 26. Variance analysis is done as part of vertical analysis A) True. B) False. Show Answer Correct Answer: B) False. 27. How the sales growth is calculated? A) (Last Year Sales-Current Year Sales) / Current Year Sales. B) (Current Year Sales-Last Year Sales) / Current Year Sales. C) (Last Year Sales-Current Year Sales) / Last Year Sales. D) (Current Year Sales-Last Year Sales) / Last Year Sales. Show Answer Correct Answer: D) (Current Year Sales-Last Year Sales) / Last Year Sales. 28. 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. 29. Generally accepted accounting principles (GAAP) are accounting principles that have substantial authoritative support A) False. B) True. Show Answer Correct Answer: B) True. 30. 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. ← PreviousNext →Related QuizzesAccounting QuizzesFinance 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 8 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books