This quiz works best with JavaScript enabled. Home > Finance > Accounting > Financial Statement Analysis > Financial Statement Analysis – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Statement Analysis Quiz 4 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. The quick ratio is 1.8:1, the current ratio is 2.7:1 and current liabilities are Rs 60, 000. Determine the value of the stock. A) Rs 54, 000. B) Rs 60, 000. C) Rs 1, 62, 000. D) None of the above. Show Answer Correct Answer: A) Rs 54, 000. 2. In the beginning of the financial year, ABS and Associates has acquired a machine at a cost of Rs. 12 lakh. By applying the rate @ 20% under WDV method for charging depreciation, what will the amount of depreciation to be debited to P&L account for the second year? A) Rs. 1.92 lakh. B) Rs. 1.82 lakh. C) Rs. 1.86 lakh. D) Rs. 2.40 lakh. Show Answer Correct Answer: A) Rs. 1.92 lakh. 3. Natalie reported assets of $ 12, 000 and equity of $ 7, 200. What is Natalie's debt ratio? A) 60%. B) 63%. C) Not enough information is provided. D) 40%. Show Answer Correct Answer: D) 40%. 4. Indicates a firm's ability to quickly liquidate assets to pay off current debts. A) Asset turnover ratio. B) Debt-to-assets ratio. C) Inventory turnover. D) Acid test/ quick ratio. Show Answer Correct Answer: D) Acid test/ quick ratio. 5. All of the following statements regarding the purpose of the Statement of Financial Position are correct except for? A) Shows assets, liabilities and owner's equity. B) It is prepared at a point in time. C) It can assist users, such as bank managers, with decisions. D) Shows revenue, expenses and profit. Show Answer Correct Answer: D) Shows revenue, expenses and profit. 6. Your firm has the following income statement items:Sales of RM50, 250Cost of goods sold of RM35, 025Operating expenses of RM8, 750Interest expense of RM750; and Income tax of RM1, 744What is the amount of the firm's net income? A) RM2, 616. B) RM4, 731. C) RM26, 616. D) RM7, 775. Show Answer Correct Answer: A) RM2, 616. 7. What is not true about the Reserves? A) Reserves are generally generated out of profits. B) Share Premium is not part of Reserves. C) Reserves are part of Net Worth. D) Share Premium is part of Reserves. Show Answer Correct Answer: B) Share Premium is not part of Reserves. 8. The primary goal of the financial manager is A) Minimizing risk. B) Maximizing profit. C) Maximizing wealth. D) Minimizing return. Show Answer Correct Answer: C) Maximizing wealth. 9. Which of the following is not a short-term borrowing A) Deposits. B) Loans repayable on demand. C) Bank overdraft. D) Trade receivables. Show Answer Correct Answer: D) Trade receivables. 10. All are profitability ratios EXCEPT A) Return on equity. B) Profit margin. C) Days debtors. D) Gross profit margin. Show Answer Correct Answer: C) Days debtors. 11. The following are the components in the financial report A) Gold Price Report. B) Confiscated Goods Report. C) Capital Change Report. D) Latest Exchange Rate Report. Show Answer Correct Answer: C) Capital Change Report. 12. The materiality concept involves the relative size and importance of an item to a firm. A) True. B) False. Show Answer Correct Answer: A) True. 13. A corporation's earnings per share is compared to its prior periods' earnings per share or the corporation's projected earnings per share. A) False. B) True. Show Answer Correct Answer: B) True. 14. Which Statement provides a snapshot of the financial position of the unit at a particular date and time? A) Profit and Loss Account. B) Balance Sheet. C) Auditor's Report. D) Non of the above. Show Answer Correct Answer: B) Balance Sheet. 15. In the Long Term Debt / EBIDTA ratio, EBIDTA is considered as? A) EBIDTA as a whole. B) EBIDTA less interest on Term Loans. C) EBIDTA less interest on working capital funds. D) EBIDTA less interest on all borrowings. Show Answer Correct Answer: C) EBIDTA less interest on working capital funds. 16. The net tax liabilities for a particular FY as calculated by the unit is Rs. 18.60 lakh, whereas the tax payment is required to be made as per Income Tax Rules is Rs. 23.50 lakh for that particular year. The difference is on account of rate of depreciation. How this difference of Rs. 4.90 lakh will be accounted for? A) Deferred Tax Assets. B) Deferred Tax Liability. C) Will not be accounted for at all and will be paid as and when asked by the Income Tax Department. D) No accounting treatment is required as we have to pay tax as per Income Tax rules. Show Answer Correct Answer: A) Deferred Tax Assets. 17. What does liquidity mean? A) The company's ability to increase financing. B) The company's ability to pay its obligations. C) The company's ability to collect its receivables. D) The company's ability to obtain a new loan. Show Answer Correct Answer: B) The company's ability to pay its obligations. 18. Comparability problems arise because A) Firms may use different generally accepted accounting principles. B) Inflation may affect firms differently due to accounting conventions used. C) Financial analysts do not know how to compare financial statements. D) Firms may use different generally accepted accounting principles, and inflation may affect firms differently due to accounting conventions used. E) Firms may use different generally accepted accounting principles, and financial analysts do not know how to compare financial statements. Show Answer Correct Answer: D) Firms may use different generally accepted accounting principles, and inflation may affect firms differently due to accounting conventions used. 19. The formal process of developing accounting principles that exist today in the United States began with the Securities Acts of 1933 and 1934 A) True. B) False. Show Answer Correct Answer: A) True. 20. What does the cash flow statement show? A) The cash flow statement shows the revenue and expenses of a company. B) The cash flow statement shows the inflow and outflow of cash in a company over a specific period of time. C) The cash flow statement shows the total assets and liabilities of a company. D) The cash flow statement shows the market value of a company's stock. Show Answer Correct Answer: B) The cash flow statement shows the inflow and outflow of cash in a company over a specific period of time. 21. A company has set its gross margin benchmark at 40% to 42%. An increase in the ratio from 38% to 39% is a positive trend. A) True. B) False. Show Answer Correct Answer: A) True. 22. Horizontal Analysis is a method to analyze financial statements over two or more operating periods. A) False. B) True. Show Answer Correct Answer: B) True. 23. Classify the following items under major head and sub-head (if any) in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013:(i) Capital Work-in-Progress:(ii) Provision for Warranties A) I) Fixed Asset & ii) Non current Liabilities. B) I) Fixed Asset & ii)Current Assets. Show Answer Correct Answer: A) I) Fixed Asset & ii) Non current Liabilities. 24. Non-current Investments include all investments management plans to hold to maturity. A) False. B) True. Show Answer Correct Answer: B) True. 25. The entity is viewed as an economic unit that stands on its own A) False. B) True. Show Answer Correct Answer: B) True. 26. What does the operating margin ratio measure? A) Operating income per dollar of sales. B) Net income to common equity. C) Net income to total assets. D) Net income per dollar of sales. Show Answer Correct Answer: A) Operating income per dollar of sales. 27. Preliminary or Pre-operative expenses, outstanding balance in the Balance Sheet should be classified as? A) Intangible Assets. B) Non-Current Assets. C) Fixed Assets. D) Current Assets. Show Answer Correct Answer: A) Intangible Assets. 28. Quick assets include cash and merchandise inventory. A) False. B) True. Show Answer Correct Answer: A) False. 29. The Cash Credit Limit of a unit was enhanced from Rs. 220 lakh to Rs. 250 lakh on 30.01.2017. On 11.01.2018, the unit has requested for enhancement in limit by Rs. 50 lakh. Can it be sanctioned without obtaining any approval for deviation considering that the request of the Company otherwise acceptable under all the parameters? A) Yes. B) No, approval for deviation is required as the enhancement is more than 15% within 12 month from last sanction or in next renewal, whichever is later. C) No need of any deviation as the enhancement is acceptable in all the parameters. D) None of the above. Show Answer Correct Answer: B) No, approval for deviation is required as the enhancement is more than 15% within 12 month from last sanction or in next renewal, whichever is later. 30. The accrual basis of accounting recognizes revenue when realized (realization concept) and expenses when incurred (matching concept). A) True. B) False. Show Answer Correct Answer: A) True. ← PreviousNext →Related QuizzesAccounting QuizzesFinance 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 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books