This quiz works best with JavaScript enabled. Home > Finance > Accounting > Financial Statement Analysis > Financial Statement Analysis – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Statement Analysis Quiz 2 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. A firm's financial obligations to short-term creditors, which must be repaid within one year. A) Current Liabilities. B) Current Assets. C) Accounts Payable. D) Accounts Receivable. Show Answer Correct Answer: A) Current Liabilities. 2. The gross profit margin is unchanged, but the net profit margin declined over the same period. This could have happened when A) Cost of goods sold increased relative to sales. B) The government has increased the tax rate. C) Dividends were decreased. D) Sales increased relative to expenses. E) All of above. Show Answer Correct Answer: B) The government has increased the tax rate. 3. In performing a vertical analysis, the base for prepaid expenses is A) Total assets. B) Total current assets. C) Total liabilities. D) Prepaid expenses in a previous year. Show Answer Correct Answer: A) Total assets. 4. How can financial statement analysis help in decision making? A) Financial statement analysis is not useful in decision making. B) Financial statement analysis is too complex and time-consuming to be useful in decision making. C) Financial statement analysis only provides historical data and is not relevant for decision making. D) Financial statement analysis provides insights into a company's financial performance and helps stakeholders make informed decisions. Show Answer Correct Answer: D) Financial statement analysis provides insights into a company's financial performance and helps stakeholders make informed decisions. 5. The operating income after interest of a manufacturing unit is Rs. 6.35 lakh. During the financial year, the unit has booked a profit of Rs. 1.15 lakh on sale of investment and amortised Rs. 0.35 lakh. What will be profit before tax and profit after tax assuming tax rate @ 20%? A) Rs. 7.50 lakh & Rs. 6.00 lakh. B) Both will be Rs. 7.15 lakh. C) Rs. 7.15 lakh & Rs. 5.74 lakh. D) Rs. 6.00 lakh and Rs. 4.80 lakh. Show Answer Correct Answer: C) Rs. 7.15 lakh & Rs. 5.74 lakh. 6. Potential investors use the financial reports as an aid in deciding whether to buy the stock A) False. B) True. Show Answer Correct Answer: B) True. 7. Why we prepare Fund Flow Statement? A) Its Bank's requirement. B) To know the movement of NWC, liquidity, sources and uses of long term funds, diversion, siphoning. C) To comply with the instructions. D) To know the availability of current assets. Show Answer Correct Answer: B) To know the movement of NWC, liquidity, sources and uses of long term funds, diversion, siphoning. 8. Accounting rules require companies with finance leases to report leased assets and lease liabilities on A) Financial Position Report. B) Notes to Financial Reports. C) Income statement. D) Cash flow statement. Show Answer Correct Answer: A) Financial Position Report. 9. If we reduce the Non Current Liabilities from the Non Current assets, then what we will get? A) Working Capital Gap. B) Other Current Liabilities. C) Net Working Capital. D) Long Term Surplus. Show Answer Correct Answer: C) Net Working Capital. 10. Current assets include all assets such as cash that are expected to be sold between one and 5 years. A) True. B) False. Show Answer Correct Answer: B) False. 11. Stock at the beginning of the year A) Opening Inventory. B) Sales. C) Purchases. D) Drawings. Show Answer Correct Answer: A) Opening Inventory. 12. Calculate the current ratio for a company with current assets of $ 500, 000 and current liabilities of $ 250, 000. A) 0.5. B) 2. C) 1.5. D) 3. Show Answer Correct Answer: B) 2. 13. If net sales is P200, 000 and cost of sales is P150, 000, how much is the gross profit margin in percent? A) 50.00%. B) 133.33%. C) NOT IN THE CHOICES. D) 75.00%. E) 25.00%. Show Answer Correct Answer: E) 25.00%. 14. The impact on long-term asset capitalization is except A) A reasonable solvency ratio in accordance with actual conditions. B) Reduced volatility of profit and return measurements. C) Delay recognition of income and expenses. D) Cash outflow from investment activities is too high. Show Answer Correct Answer: A) A reasonable solvency ratio in accordance with actual conditions. 15. What are profitability ratios used for? A) Evaluating the firm's ability to pay its current debts. B) Measure the firm's ability to retain revenues as earnings. C) Gauge the company's effectiveness in its use of assets. D) Assessing the cash holdings of the company. Show Answer Correct Answer: B) Measure the firm's ability to retain revenues as earnings. 16. What do we deduct from the current asset to calculate the quick asset ratio? A) Short-term investment. B) Inventory. C) Prepaid expense. D) Receivables. Show Answer Correct Answer: B) Inventory. 17. A firm has an ROE of 2%, a debt/equity ratio of 1.0, a tax rate of 0%, and an interest rate on debt of 10%. The firm's ROA is A) 2%. B) 4%. C) 6%. D) 8%. E) None of the options are correct. Show Answer Correct Answer: B) 4%. 18. Following is deducted while calculating COGS. A) Opening Stock. B) Closing Stock. C) Direct Expenses. D) None of above. Show Answer Correct Answer: B) Closing Stock. 19. Which one of the following is not a Current Liability? A) Statutory Dues Payable. B) Long Term Deposits received from dealer. C) Term Loan Installment payable within next one year. D) All are current liabilities. Show Answer Correct Answer: B) Long Term Deposits received from dealer. 20. The ratio that measures the relationship between cash and current assets is the quick ratio. A) True. B) False. Show Answer Correct Answer: B) False. 21. Which one of the following ratios would most likely not be used by a short-term creditor in evaluating whether to sell on credit to a company? A) Account receivable turnover. B) Total asset turnover. C) Current ratio. D) Quick ratio. Show Answer Correct Answer: B) Total asset turnover. 22. As on 31.03.2018, Adjusted TNW was Rs. 243 lakh, Deferred Tax Assets outstanding was Rs. 6 lakh, Investment in associates was Rs. 60 lakh. Work out the Net Worth of the unit? A) Rs. 249 lakh. B) Rs. 177 lakh. C) Rs. 309 lakh. D) Rs. 303 lakh. Show Answer Correct Answer: C) Rs. 309 lakh. 23. A financial report that shows an organization's profitability over a period of time-month, quarter, or year. A) Cost of Goods Sold. B) Statements of Cash Flow. C) Statement of the Comprehensive Income. D) Statement of Financial Position. Show Answer Correct Answer: C) Statement of the Comprehensive Income. 24. Disclosure for Related Party Transactions is mandatory on the Audited Financial Statements under which Accounting Standard (AS)? A) AS-18. B) AS-15. C) AS-3. D) None of the above. Show Answer Correct Answer: A) AS-18. 25. State whether each of the following is True or False:Statement of profit and loss account shows the operating performance of an enterprise for a period of time. A) False. B) True. Show Answer Correct Answer: B) True. 26. Financial statements are prepared based on A) Past data. B) Historical cost. C) Terminal cost. D) Future cost. Show Answer Correct Answer: B) Historical cost. 27. Compares the total debt of the firm with the owner's equity. A) Debt-to-equity ratio. B) Asset turnover ratio. C) Debt-to-assets ratio. D) Efficiency ratio. Show Answer Correct Answer: A) Debt-to-equity ratio. 28. All of the following are assets, except for? A) Patents. B) Loans to other businesses. C) Goodwill. D) Loans from other businesses. Show Answer Correct Answer: D) Loans from other businesses. 29. The trade receivables period will be impacted under which scenario? A) The unit is offering additional discounts for bulk purchases. B) Sales are increased on the existing terms. C) The competitors in the market have increase the credit period. D) Invoicing are now being done through computers in place of manual. Show Answer Correct Answer: C) The competitors in the market have increase the credit period. 30. Assertion (A):Current ratio is computed to assess the short-term financial position of the enterprise. Reason (R):Current ratio explains the relation between long term assets and current liabilities of a business. A) Both (A) and (R) are correct and (R) is the correct explanation of (A). B) Both (A) and (R) are correct and (R) is not the correct explanation of (A). C) (A) is correct, but (R) is incorrect. D) (A) is incorrect, but (R) is correct. Show Answer Correct Answer: C) (A) is correct, but (R) is incorrect. ← PreviousNext →Related QuizzesAccounting QuizzesFinance QuizzesFinancial Statement Analysis Quiz 1Financial 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