This quiz works best with JavaScript enabled. Home > Finance > Accounting > Financial Statement Analysis > Financial Statement Analysis – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Statement Analysis Quiz 3 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What does the basic earning power (BEP) ratio measure? A) Net income per dollar of sales. B) Operating 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) Net income is greater than the amount of working capital. B) ROE has increased in each of the past five years. C) ROA is greater than the interest rate being paid to creditors. D) ROA consistently is higher than the industry average. Show Answer Correct Answer: A) Net income is greater than the amount of working capital. 4. Long Term Sources consist of? A) Current Liabilities + Term Liabilities. B) Total Liabilities. C) Net worth + Term Liabilities. D) Net Worth. Show Answer Correct Answer: C) Net worth + Term Liabilities. 5. Stockholders are most interested in evaluating A) Solvency. B) Marketability. C) Liquidity. D) Profitability. Show Answer Correct Answer: D) Profitability. 6. A comparison between two numbers showing how many times one number exceeds the other. A) Ratio. B) Return on investment. C) Efficiency ratios. D) Profitability ratios. Show Answer Correct Answer: A) Ratio. 7. True or False:When a firm improves (increases) its average collection period, it improves the firm's liquidity position A) False. B) True. Show Answer Correct Answer: A) 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) Capitalization method. D) Trend analysis. Show Answer Correct Answer: C) Capitalization method. 10. 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. 11. 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. 12. 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. 13. 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. 14. Financial ratios that indicate how effectively a company uses its resources to generate sales. A) Efficiency ratios. B) Leverage ratios. C) Profitability ratios. D) Liquidity ratios. Show Answer Correct Answer: A) Efficiency ratios. 15. The following statements correspond to changes in estimated asset life and/residual value, except A) The amount of depreciation expense will change. B) The depreciation method will change. C) The basis of the depreciation asset value changes. D) The amount of depreciation expense recorded in previous years has not changed. Show Answer Correct Answer: D) The amount of depreciation expense recorded in previous years has not changed. 16. 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. 17. How many clauses exist in the Companies (Auditor's Report) Order, 2016 ("the order")? A) 15. B) 16. C) 21. D) 12. Show Answer Correct Answer: B) 16. 18. Discuss the importance of the return on assets (ROA) ratio in evaluating a company's performance. A) It evaluates the company's customer satisfaction. B) It measures the number of employees in the company. C) It calculates the company's total revenue. D) It measures the efficiency of the company in using its assets to generate profit. Show Answer Correct Answer: D) It measures the efficiency of the company in using its assets to generate profit. 19. 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) Income statement. B) Cash flow statement. C) Balance sheet report. D) Capital change report. Show Answer Correct Answer: A) Income statement. 20. Your firm has the following income statement items:Sales of RM50, 250Cost of goods sold of RM35, 025Operating expenses of RM10, 115Interest expense of RM750; andIncome tax of RM1, 744What is the amount of the firm's EBIT? A) RM58, 000. B) RM15, 552. C) RM4, 630. D) RM5, 110. Show Answer Correct Answer: D) RM5, 110. 21. Comparative statement show the changes in A) Percentages. B) Absolute amounts. C) Both (a) and (b). D) Ratios. Show Answer Correct Answer: C) Both (a) and (b). 22. Businesses are generally involved in three different kinds of activities, and one of them is financing activities. What does the activity relate to? A) Relate to a company's main business:selling products or services to earn net income. B) Relate to the need for investing in property, plant, and equipment or expanding by making investments in other companies. C) Largest expense item, which reports the wholesale costs of inventory sold during the accounting period. D) Relate to how a company finances its assets with debt or stockholders' equity. E) Relate to the operating activities of a company. Show Answer Correct Answer: D) Relate to how a company finances its assets with debt or stockholders' equity. 23. Deferred Tax Assets are to be classified as? A) Current Assets. B) Non Current Assets. C) Fixed Assets. D) Intangible Assets. Show Answer Correct Answer: D) Intangible Assets. 24. What is the formula for calculating the current ratio? A) Current Ratio = Current Assets / Current Liabilities. B) Current Ratio = Fixed Assets / Current Liabilities. C) Current Ratio = Net Income / Total Liabilities. D) Current Ratio = Total Assets / Total Liabilities. Show Answer Correct Answer: A) Current Ratio = Current Assets / Current Liabilities. 25. Whether Fund Flow Statement is part of Financial Statements? A) Many not be. B) Yes. C) No. D) May be. Show Answer Correct Answer: B) Yes. 26. A corporation should compare its working capital to industry standards. A) True. B) False. Show Answer Correct Answer: B) False. 27. Which of the following is not a measure of short-term liquidity? A) Working capital. B) Current ratio. C) Debt ratio. D) Quick ratio. Show Answer Correct Answer: C) Debt ratio. 28. Kimchi Corporation had beginning inventory P100, 000, cost of goods sold P750, 000, and ending inventory P150, 000. What was Kimchi's inventory turnover? A) 3 times. B) 6.0 times. C) 7.5 times. D) 5 times. Show Answer Correct Answer: B) 6.0 times. 29. Intangible assets are physical property, plant and equipment that the hospitality company has legal ownership of as result of a past business transaction. A) True. B) False. Show Answer Correct Answer: B) False. 30. Analysis carried out by changing the numbers in the balance sheet and income statement into percentages based on certain numbers is called..... A) Environmental impact analysis. B) Index analysis. C) Analisis common size. D) Financial ratio analysis. Show Answer Correct Answer: C) Analisis common size. ← PreviousNext →Related QuizzesAccounting QuizzesFinance QuizzesFinancial Statement Analysis Quiz 1Financial Statement Analysis Quiz 2Financial 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