This quiz works best with JavaScript enabled. Home > Finance > Accounting > Financial Statement Analysis > Financial Statement Analysis – Quiz 7 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Statement Analysis Quiz 7 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Revenue from Operations Rs.2, 00, 000; Inventory Turnover ratio 5; Gross Profit 25%. Find out the value of Closing Inventory, if Closing Inventory is Rs.8, 000 more than the Opening Inventory. A) Rs.26, 000. B) Rs.38, 000. C) Rs.22, 000. D) Rs.34, 000. Show Answer Correct Answer: D) Rs.34, 000. 2. Which of the following is not a current asset? A) Accounts payable. B) Accounts receivable. C) Inventory. D) Marketable securities. Show Answer Correct Answer: A) Accounts payable. 3. What does a current ratio tell us? A) A lower current ratio indicates better liquidity. B) A lowercurrent ratio indicates what portion of assets are tied up in slow moving inventory. C) A higher current ratio indicates what portion of assets are tied up in slow moving inventory. D) A higher current ratio indicates better liquidity. Show Answer Correct Answer: D) A higher current ratio indicates better liquidity. 4. Purpose of Financial Statement Analysis for investors A) Analyzing and checking the allocation of relevant resources of the enterprise. B) Analyzing the profitability, operational capacity, investment returns and risks. C) Analyzing the solvency of enterprises. D) Analyzing the structure (various ratios or indicators) and the trend. Show Answer Correct Answer: B) Analyzing the profitability, operational capacity, investment returns and risks. 5. Managers who want to control operating expenses will be more interested in the operating margin than the total operating expense ratio A) False. B) True. Show Answer Correct Answer: A) False. 6. What does the total assets turnover ratio measure? A) How many times inventory is turned over during the year. B) The average length of time the firm must wait after making a sale before it receives cash. C) How effectively the firm uses its plant and equipment. D) How effectively the firm uses its total assets. Show Answer Correct Answer: D) How effectively the firm uses its total assets. 7. Given item falls under direct expenses. A) Printing & Stationery. B) Carriage Outward. C) Office Rent. D) Carriage Inward. Show Answer Correct Answer: D) Carriage Inward. 8. Management could use the financial reports to determine the company's profitability A) False. B) True. Show Answer Correct Answer: B) True. 9. Financial ratios that tell how much of each rand of sales, assets, and owner's equity resulted in net profit. A) Leverage ratios. B) Profitability ratios. C) Liquidity ratios. D) Efficiency ratios. Show Answer Correct Answer: B) Profitability ratios. 10. What does the days sales outstanding ratio measure? A) How many times inventory is turned over during the year. B) The average length of time the firm must wait after making a sale before it receives cash. C) How effectively the firm uses its plant and equipment. D) How effectively the firm uses its total assets. Show Answer Correct Answer: B) The average length of time the firm must wait after making a sale before it receives cash. 11. If a company uses an inventory valuation basis using LIFO then this has an impact A) The current ratio presented is too low because inventory is presented too high. B) The current ratio presented is too high because inventory is presented too low. C) The current ratio presented is too high because inventory is presented too high. D) The current ratio presented is too low because inventory is presented too low. Show Answer Correct Answer: D) The current ratio presented is too low because inventory is presented too low. 12. The trade receivables balance is £19, 100. A debt of £400 is considered to be irrecoverable and is to be written off. The balance on the allowance for doubtful debts is currently £735 and the allowance is to be revised to 5% of trade receivables. The amount to be charged to the statement of profit or loss for the change in the doubtful debt allowance is: A) 935. B) 220. C) 735. D) 200. Show Answer Correct Answer: D) 200. 13. What does the return on common equity (ROE) ratio measure? A) Net income to common equity. B) Operating income per dollar of sales. C) Net income per dollar of sales. D) Net income to total assets. Show Answer Correct Answer: A) Net income to common equity. 14. Which of the following streams of income is not affected by how a firm is financed (whether with debt or equity)? A) Net working capital. B) Net profit after tax but before dividends. C) Operating income. D) Income before tax. Show Answer Correct Answer: C) Operating income. 15. Which of the basic financial statements is best used to answer the questions "Where did the company's money come from and how was it spent over the preceding year?" A) Balance sheet. B) Statement of shareholder's equity. C) Cash flow statement. D) Income statement. Show Answer Correct Answer: C) Cash flow statement. 16. Gross margin is also referred to as A) Gross profit margin. B) Earnings per share. C) Operating margin. D) Rate of return on sales. Show Answer Correct Answer: A) Gross profit margin. 17. If the gearing ratio of a unit is less than 1, which statement is correct? A) The term Liabilities will be more than the Tangible Net Worth. B) The term liabilities will be less than the Tangible Net Worth. C) Tangible Net Worth of the unit will be lower than the Total Outside Liabilities. D) Total Outside Liabilities of the unit will be lower than the Tangible Net Worth. Show Answer Correct Answer: D) Total Outside Liabilities of the unit will be lower than the Tangible Net Worth. 18. When a firm improves (decreases) its days of inventory, it generally A) Does not alter its cash position. B) Cannot reduce its inventories . C) Requires additional cash investment in inventory. D) Releases cash locked up in inventory. Show Answer Correct Answer: D) Releases cash locked up in inventory. 19. Out of Operating Profit before Interest/Net Sales and Operating Profit after Interest/Net Sales, which is a better indicator for comparing two identical units? A) Operating Profit after Interest/Net Sales. B) Operating Profit before Interest/Net Sales. C) Both can be used. D) None of the above. Show Answer Correct Answer: B) Operating Profit before Interest/Net Sales. 20. The going-concern assumption, that the entity in question will remain in business for an indefinite period of time A) True. B) False. Show Answer Correct Answer: A) True. 21. Calculate the Return on Equity if the Net income is $ 7, 009 and the shareholder's equity is $ 20, 316. A) 27.44%. B) 39.42%. C) 41.72%. D) 30.2%. E) 34.5%. Show Answer Correct Answer: E) 34.5%. 22. A company has done everything possible to control merchandise costs. To maintains its gross margin, its only altrnative is to sell more merchandise A) False. B) True. Show Answer Correct Answer: A) False. 23. Finance can be defined as A) The system of debits and credits. B) The science of the production, distribution, and consumption of wealth. C) The art and science of managing money. D) The art of merchandising products and services. Show Answer Correct Answer: C) The art and science of managing money. 24. What does the fixed assets turnover ratio measure? A) How many times inventory is turned over during the year. B) The average length of time the firm must wait after making a sale before it receives cash. C) How effectively the firm uses its plant and equipment. D) How effectively the firm uses its total assets. Show Answer Correct Answer: C) How effectively the firm uses its plant and equipment. 25. Component percentages indicate the relative size of each item included in a total. Which of the following statements is true? A) Income statement items are expressed as a percentage of net income, while balance sheet items are expressed as a percentage of total assets. B) Income statement items are expressed as a percentage of sales, while balance sheet items are expressed as a percentage of total assets. C) Income statement items are expressed as a percentage of net income, while balance sheet items are expressed as a percentage of net assets. D) Both income statement and balance sheet items are expressed as a percentage of net assets. Show Answer Correct Answer: B) Income statement items are expressed as a percentage of sales, while balance sheet items are expressed as a percentage of total assets. 26. Following item will not appear under Owner's Fund in Balance Sheet A) Security Premium. B) Equity Share Capital. C) Preference Share Capital. D) Debentures. Show Answer Correct Answer: D) Debentures. 27. What does PPE stand for? A) Payable, Property, and Equipment. B) Prepaid, Property, and Expenses. C) Prepaid, Property, and Equipment. D) Plant, Property and Equipment. Show Answer Correct Answer: D) Plant, Property and Equipment. 28. After receipt of Audited Financial Statements, the first action required to be taken by the credit officers is? A) Discuss the performance with the unit. B) Confirm about the genuineness of the financial statements. C) CRA Rating is to be carried out. D) Preparation of CMA. Show Answer Correct Answer: B) Confirm about the genuineness of the financial statements. 29. Modifying a benchmark is an option for a business that fails to achieve its benchmark. A) True. B) False. Show Answer Correct Answer: A) True. 30. What information does the balance sheet provide? A) The balance sheet provides information about a company's financial position. B) The balance sheet provides information about a company's customer satisfaction levels. C) The balance sheet provides information about a company's employee salaries. D) The balance sheet provides information about a company's marketing strategies. Show Answer Correct Answer: A) The balance sheet provides information about a company's financial position. ← 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 8Financial Statement Analysis Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books