Table of Contents
NCERT MCQ ON Analysis of Financial Statements:
Question1: Financial Statement Analysis Objectives/Need is
- a) All of the options
- b) Measure the profitability of the business
- c) Measure the financial strength of the business
- d) Make comparative study within the firm and with other forms
Answer: All of the options
Question2: Significance or Importance of Financial Analysis is
- a) All of the options
- b) To know the profitability Condition
- c) To know the liquidity Condition
- d) To know the solvency Condition
Answer: All of the options
Question3: To whom Importance of Financial Analysis is
- a) All of the options
- b) For Management
- c) For Investors
- d) For Creditors
Answer: All of the options
Question4: Which is Types of financial Analysis
- a) Horizontal Analysis and Vertical Analysis
- b) Horizontal Analysis
- c) Vertical Analysis
- d) None of the options
Answer: Horizontal Analysis and Vertical Analysis
Question5: Horizontal Analysis is also known as
- a) Dynamic Analyses
- b) Vertical Analysis
- c) Dynamic Analyses and Vertical Analysis
- d) None of the options
Answer: Dynamic Analyses
Question6: In which analysis Financial Statement for a single year analysed
- a) Vertical Analysis
- b) Dynamic Analyses
- c) Vertical Analysis and Dynamic Analyses
- d) None of the options
Answer: Vertical Analysis
Question7: Tool of Financial Analysis is
- a) Comparative Statement and Common Size Statement
- b) Comparative Statement
- c) Common Size Statement
- d) None of the options
Answer: Comparative Statement and Common Size Statement
Question8: Comparative Statement is a form of
- a) Horizontal Analysis
- b) Vertical Analysis
- c) Horizontal Analysis and Vertical Analysis
- d) None of the options
Answer: Horizontal Analysis
Question9: Study of relationship between various items is known as
- a) Accounting Ratios
- b) Vertical Analysis
- c) Horizontal Analysis
- d) None of the options
Answer: Accounting Ratios
Question10: Operating Expenses is include
- a) All of the options
- b) Office and Administrative expenses
- c) Selling and Distribution expenses
- d) Provision for doubtful debts
Answer: All of the options
Question11: Non operating Expenses are
- a) All of the options
- b) Interest on long term debts
- c) Loss on sale of fixed assets
- d) Intangible assets written off such as goodwill, patents etc
Answer: All of the options
Question12: Importance of Comparative Statement is
- a) All of the options
- b) Make the data simple and more understandable
- c) Indicate the trend with respect to the previous year
- d) compare the firm performance with the performance of other firm in the same business
Answer: All of the options
Question13: Net Reserve and Surplus means total of all reserves less
- a) Miscellaneous Expenditure
- b) Office Expense
- c) Direct expenses
- d) All of the options
Answer: Miscellaneous Expenditure
Question14: Which of the following items appear in the Statement of Profit and Loss
- a) Sales
- b) Creditors
- c) Goodwill
- d) Trade payables
Answer: Sales
Question15: When analysis is made on the basis of Published statements, reports and information it is known as
- a) External analysis
- b) Horizontal analysis
- c) Vertical Analysis
- d) None of the options
Answer: External analysis
Question16: Who is interested in the analysis of financial statement?
- a) All of the options
- b) Creditors
- c) Government
- d) Investors
Answer: All of the options
Question17: The Real object of Analysis of Financial Statement is
- a) To measure the financial strength of the business
- b) To assess the total expenses of the firm
- c) To know about historical cost concept
- d) To assess the total liabilities of the firm
Answer: To measure the financial strength of the business
Question18: Limitations of financial analysis except
- a) All of the options
- b) Dont reflect changes in price level
- c) Affected by the personal ability and bias of the Analyst
- d) Single years Analysis of financial statement have limited use
Answer: All of the options
Question19: Shareholders are interested in the analysis of financial statement because
- a) They want to judge the present and future earning capacity of the business
- b) For the assessment of tax
- c) For Research
- d) All of the options
Answer: They want to judge the present and future earning capacity of the business
Question20: Horizontal Analysis is
- a) Time Series Analysis
- b) Cross Section Analysis
- c) Profitability Analysis
- d) All of the options
Answer: Time Series Analysis
Question21: The point where total of sales is exactly equal to the total of cost.
- a) Break-even Point
- b) Profit Point
- c) Loss Point
- d) All of the options
Answer: Break-even Point
Question22: Non-operating Incomes refers to
- a) Which are not from the main revenue producing activities
- b) Which are earned in the form of sales
- c) the indirect expenses relating to the principal revenue generating activities of the enterprise
- d) The expenses and losses which are not related to the operating activities
Answer: Which are not from the main revenue producing activities
Question23: Which is not a limitation of financial statement?
- a) Assess the financial position and profitability
- b) Qualitative aspect is ignored
- c) Ignores price level changes
- d) All of the options
Answer: Assess the financial position and profitability
Question24: Rent received, Profit on sale of fixed assets, Compensation for acquisition of land are example of
- a) Non-operating Incomes
- b) Operating Incomes
- c) Operating expenses
- d) None of the options
Answer: Non-operating Incomes
Question25: Statement of Profit and Loss is prepared to assess the
- a) Net Profit and Net Loss
- b) Net Profit
- c) Net Loss
- d) None of the options
Answer: Net Profit and Net Loss
Question26: If the different financial data is analysed and compared over a period of time it is called
- a) Intra firm analysis
- b) Inter firm analysis
- c) Trade analysis
- d) None of the options
Answer: Intra firm analysis
Question27: Comparison of two or more departments or divisions of the same business unit with the objective of meaningful analysis
- a) Intra-firm comparison
- b) Inter firm analysis
- c) Intra-firm comparison and Inter firm analysis
- d) None of the options
Answer: Intra-firm comparison
Question28: Internal analysis is done
- a) By Management
- b) By Shareholders
- c) By debenture holder
- d) None of the options
Answer: By Management
Question29: Financial year always begins on
- a) 1st April-31st March
- b) 1st January-31st December
- c) 1st August -31st July
- d) None of the options
Answer: 1st April-31st March
Question30: Comparative Financial Statement is an example of
- a) Horizontal analysis
- b) Vertical Analysis
- c) External analysis
- d) None of the options
Answer: Horizontal analysis
Question31: Shareholders fund is divided into
- a) All of the options
- b) Share Capital
- c) Reserves and Surplus
- d) Money received against share warrant
Answer: All of the options
Question32: A technique uses in comparative analysis of financial statement is
- a) Common size analysis
- b) Graphical analysis
- c) Preference analysis
- d) Returning analysis
Answer: Common size analysis
Question33: Formula such as net income available for common stockholders divided by total assets is used to calculate
- a) Return on total assets
- b) Return on total equity
- c) Return on debt
- d) Return on sales
Answer: Return on total assets
Question34: A techniques uses to identify financial statements trends are included
- a) Common size analysis and Percent change analysis
- b) Common size analysis
- c) Percent change analysis
- d) None of the options
Answer: Common size analysis and Percent change analysis
Question35: Price per ratio is divided by cash flow per share ratio which is used for calculating
- a) Price to cash flow ratio
- b) Dividend to stock ratio
- c) Sales to growth ratio
- d) Cash flow to price ratio
Answer: Price to cash flow ratio
Question36: A formula such as net income available to common stockholders divided by common equity is used to calculate
- a) Return on common equity
- b) Return on interest
- c) Return on earning power
- d) None of the options
Answer: Return on common equity
Question37: Companies that help to set benchmarks are classified as
- a) Benchmark companies
- b) Analytical companies
- c) Return companies
- d) None of the options
Answer: Benchmark companies
Question38: Total assets divided common equity is a formula uses for calculating
- a) Equity multiplier
- b) Graphical multiplier
- c) Turnover multiplier
- d) None of the options
Answer: Equity multiplier
Question39: Profit margin multiply assets turnover multiply equity multiplier is used to calculate
- a) Return on equity
- b) Return on turnover
- c) Return on stock
- d) None of the options
Answer: Return on equity
Question40: Company low earning power and high interest cost cause financial changes which have
- a) High return on assets
- b) Low return on assets
- c) Low return on equity
- d) None of the options
Answer: High return on assets
Question41: Financial analysis becomes significant because it:
a) Ignores price level changes
b) Measures the efficiency of business
c) Lacks qualitative analysis
d) Is effected by personal bias
Answer: B
Question42: When bad position of the business is tried to be depicted as good, it is known as …………….
a) Personal Bias
b) Price Level Changes
c) Window Dressing
d) All of the Above
Answer: C
Question43: For whom the analysis of financial statements is not significant?
a) Investor
b) Government
c) Ambassador of India
d) Company’s Employee
Answer: C
Question44: While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of
a) Non-current Assets.
b) Current Assets,
c) Non-current Liabilities.
d) Total Assets.
Answer: D
Question45: Which analysis is considered as dynamic?
a) Horizontal Analysis
b) Vertical Analysis
c) Internal Analysis
d) External Analysis
Answer: A
Question46: Which analysis is considered as static?
a) Horizontal Analysis
b) Vertical Analysis
c) Internal Analysis
d) External Analysis
Answer: B
Question47: Comparative Statement of Profit & Loss provides information about:
a) Rate of increase or decrease in revenue from operations
b) Rate of increase or decrease in cost of revenue from operations
c) Rate of increase or decrease in net profit
d) All of the above
Answer: D
Question48: Which analysis depicts the relationship between two figures :
a) Ratio Analysis
b) Trend Analysis
c) Cumulative figures and averages
d) Dividend Analysis
Answer: A
Question49: In which analysis total cost are equal to total revenue from Operations :
a) Trend Analysis
b) Ratio Analysis
c) Break-Even Point Analysis
d) Fund Flow Statement Analysis
Answer: C
Question50: If net revenue from operations of a firm are Rs. 1,20,000; cost of revenue from operations is Rs.66,000 and operating expenses are Rs.21,600, what will be the percentage of operating income on net revenue from operations?
a) 55%
b) 45%
c) 73%
d) 27%
Answer: D
Question51: If net revenue from operations of a firm are Rs. 15,00,000; Gross Profit is Rs.9,00,000 and operating expenses are Rs.75,000, what will be percentage of operating income on net revenue from operations?
a) 45%
b) 55%
c) 35%
d) 65%
Answer: B
Question52: Main objective of Trend Analysis is
a) To make comparative study of the financial statements for a number of years
b) To indicate the direction of movement
c) To help in forecasts of various items
d) All of the Above
Answer: D
Question53: While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of
a) Current Assets
b) Non-current Assets
c) Non-current Liabilities
d) Total Assets
Answer: D
Question54: Under which tool of financial analysis, 100% is taken as base and all other related amounts are expressed as a percentage of base?
a) Comparative Statement
b) Common-size Statement
c) Ratio Analysis
d) Cash Flow Statement
Answer: B
Question55: The most commonly used tools for financial analysis are :
a) Comparative Statements
b) Common Size Statements
c) Accounting Ratios
d) All of the above
Answer: D
Question56: This item is not used as a tool for Analysis of Financial Statements :
a) Cash Flow Statement
b) Fund Flow Statement
c) Ratio Analysis
d) No. of Employees Statement
Answer: D
Question57: Which one of the following items is not a tool used for financial analysis?
a) Comparative Statements
b) Ratio Analysis
c) Common Size Statements
d) Statement of Dividend Distribution
Answer: D
Question58: Amount left after deducting gross profit from Revenue from Operations is generally :
a) Cost of Revenue from Operations
b) Material consumed
c) Opening Inventory + Purchases – Closing Inventory
d) All of the above
Answer: D
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