Analysis of Financial Statements MCQs with Answers
Multiple Choice Questions
37 Pages
SBJ
Contributed by
Sai Bhai Johal
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.inQuestion Bank - Multiple Choice Questions (MCQs)Unit 1: Financial Statement of Corporate Organisations1) Business finance includes........a) procurement of funds and utilization of fundsb) management of fundsc) allocationd) Insurance2) Funds are required for the..........a) purchase of land & buildingb) purchase of machineryc) purchase of another fixed assetd) all of the above3) Which report gives a review on the profitability of a business?a) Statement of changes in equityb) Cash flow statementc) Balance sheetd) Income statement4) The term ‘Financial Statement’ coversa) Profit & Loss Statementb) Balance sheet and Profit & Loss Statement appropriation accountc) Profit & Loss Statement and Balance sheetd) All of above are false5) Which of the following is true about financial statements?A) Financial statement gives a summary of accounts. B) Financial statements can be stated asrecorded facts.a) Only Ab) Only Bc) Both A and Bd) None of the above6) Schedules attached with the balance sheet forms a part of the financial statements.a) Trueb) False
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.in7) Which of the following statements are true?A) Financial statements are only interim report.B) Financial statements are also known as annual records.C) Financial statements are historic.a) Both A and Bb) Both A and Cc) Both B and Cd) A, B, C8) P&L statement is also known asa) Statement of operationsb) Statement of incomec) Statement of earningsd) All of the above9) Which statement shows the flow of cash and cash equivalents during the financial period?a) Statement of changes in equityb) Cash flow statementc) Balance sheetd) Income statement10) Subtracting all expenses from revenues yields?a) Net profit / Net Lossb) Carrying valuec) Long term assetsd) Net liabilities11) Balance sheet of a company is required to be prepared in the format given in ………………………a) Schedule III Part IIb) Schedule III Part Ic) Schedule III Part IIId) Table A12) As per Companies Act, the Balance Sheet of a company is required to be presented in ………………………a) Horizontal Formb) Vertical Formc) Either Horizontal or Vertical Formd) Neither of the above
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.in13) Which of the following is not required to be prepared under the Companies Act?a) Statement of Profit and Lossb) Balance Sheetc) Report of Director’s and Auditor’sd) Funds Flow Statement14) According to prescribed order of assets in a Company’s Balance Sheet ……………………… assets shouldbe shown first of all.a) Non-Current Assetsb) Current Assetsc) Current Investmentsd) Loans and Advances15) In a Company’s Balance Sheet …………………. appear under the head ‘non-current assets’.a) Goodwillb) Patentsc) Vehiclesd) All of the above16) Calls in Arrears appear in a Company’s Balance Sheet under ………………..a) Reserve & Surplusb) Shareholder’s Fundsc) Contingent Liabilitiesd) Short-term Borrowings17) Calls in advance appear in a Company’s Balance Sheet under ………………..a) Share Capitalb) Current Liabilityc) Long-term Borrowingsd) Reserve & Surplus18) Bills Receivables appear in a Company’s Balance Sheet under the Sub-head ……………………..a) Current Investmentsb) Cash Equivalentsc) Trade Receivablesd) Short term Loans and Advances
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.in19) Which of the following options is not recorded in the Balance sheet?a) Cashb) Rent expensesc) Buildingd) Goodwill20) Certain assumptions are essential to prepare financial statements.a) Trueb) False21) Which of the given area is NOT addressed by Business Finance?a) Financingb) Investingc) Managing day today expensesd) None of the given options22) Which of the following is measured by profit margin?a) Operating efficiencyb) Asset use efficiencyc) Financial policyd) Dividend policy23) Business Finance addresses which of the following?a) Capital budgetingb) Capital structurec) Working capital managementd) All of the given options24) Finance is vital for which of the following business activity (activities)?a) Marketing Researchb) Product Pricingc) Design of marketing and distribution channelsd) All of the given options25) The most important item that can be extracted from financial statements is the actual ________ of thefirm.a) Net Working Capitalb) Cash Flow
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.inc) Net Present Valued) None of the given options26) Which of the following refers to the difference between the sale price and cost of inventory?a) Net lossb) Net worthc) Markupd) Markdown27) Who of the following make a broader use of accounting information?a) Accountantsb) Financial Analystsc) Auditorsd) Marketers28) Which of the following statement is considered as the accountant’s snapshot of firm’s accounting valueas of a particular date?a) Income Statementb) Balance Sheetc) Cash Flow Statementd) Retained Earning Statement29) Balance Sheet is based upon which of the following formula?a) Assets = Liabilities – Stockholder’s equityb) Assets + Liabilities = Stockholder’s equityc) Assets + Stockholder’s equity = Liabilitiesd) Assets = Liabilities + Stockholder’s equity30) The conflict of interest between stockholders and management is known as:a) Agency problemb) Interest conflictc) Management conflictd) Agency cost31) Which from the following is NOT an example of intangible assets?a) Trademarksb) Patentsc) Buildingsd) Technical expertise
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.in32) The following are the examples of financial assets except?a) Stocksb) Bank loanc) Bondd) Raw material33) Business finance refers to ...... and ........ employed in a business.a) moneyb) creditc) both a & bd) none of the above34) Business finances is concerned with _________ funds and _______ funds from different sources.a) estimation of fundsb) raising of fundsc) short term financed) both a & b35) Which of the following is not a function of finance manager?a) Mobilization of fundsb) Deployment of fundsc) Control over use of fundsd) Manipulate share price of the Company36) Which is the following main decision taken by the financial manager in a company?a) Income decisionb) Financing decisionc) Appraisal decisiond) Budget decision37) Finance Function comprisesa) Safe custody of funds onlyb) Expenditure of funds onlyc) Procurement of finance onlyd) Procurement & effective use of funds38) Financial management mainly focuses ona) Efficient management of every businessb) Brand dimension
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.inc) Arrangement of fundsd) All elements of acquiring and using means of financial resources for financial activities39) The finance manager is accountable for.a) Earning capital assets of the companyb) Effective management of a fundc) Arrangement of financial resourcesd) Proper utilization of funds40) The focal point of financial management in a firm is:a) The number and types of products or services provided by the firm.b) The minimization of the amount of taxes paid by the firm.c) The creation of value for shareholders.d) The dollars profits earned by the firm.Answer Key:1 - a 2 - d 3 - d 4 - c 5 - c 6 - a 7 - c 8 - b 9 - b 10 - a11 - b 12 - b 13 - d 14 - a 15 - d 16 - b 17 - b 18 - c 19 - b 20 - a21 - d 22 - a 23 - d 24 - d 25 - b 26 - c 27 - b 28 - b 29 - d 30 - a31 - c 32 - d 33 - c 34 - d 35 - d 36 - b 37 - d 38 - d 39 - c 40 - c
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.inUnit 2: Introduction to Analysis and Interpretation of Financial Statements1) The term financial statement refers to…a) Income statementb) Cash flow and Fund Flowc) Balance sheetd) All2) Which of the following is the main objective of a financial statement?a) to know the solvencyb) to know the debt capacityc) to know the earning capacityd) All3) In financial statements, the fixed assets are shown at …a) Market priceb) Cost pricec) Replacement priced) None4) What is followed while preparing the financial statements?a) Accounting conventionsb) Accounting principlesc) Accounting conceptsd) All5) In financial statement the stock is valued at cost or market price whichever is less on the basis of…a) Accounting conceptsb) Accounting conventionsc) Accounting principlesd) None6) Which of the following statement is true?Statement (I): Financial statements are prepared on the basis of accounting principles.Statement (II): Any changes in the accounting principles or method will affect the utility of the financialstatements.a) I is true but not IIb) II is true but not I
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.inc) Both are trued) Both are false7) The balance sheet shows …a) the source of working capitalb) the change in working capitalc) Bothd) None8) The analysis and interpretations of the financial statement will reveal …a) the financial positionb) the profitabilityc) Noned) Both9) The process of explaining the meaning, significance and relationship between two financial factors iscalled …a) Summarizationb) Analysisc) Interpretationd) None10) The process of comparing various financial factors of a company over a period of time is known as …a) Inter‐firm comparisonb) Ratio Analysisc) Intra‐firm comparisond) Inter‐industry comparison11) Which of the following is technique of financial statement analysis?a) Common‐size statementb) Comparative statementc) Trend analysisd) All12) Which technique used for figures of two or more periods are placed side by side to facilitate easy andmeaningful comparisons?a) Comparative statementb) Common‐size statement
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- DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)PROF. KAVITA PAREEK www.dacc.edu.inc) Trend Analysisd) None13) ________is a simply the amount of cash coming in to a business.a) cash flowb) inflowc) both a and bd) None of the above.14) If value of opening inventories increases, what happens to the value of gross profit?a) decreasesb) increasesc) stays the samed) gets closer to net profit15) Which of these is NOT a limitation of ratio analysis:a) They are calculated on past data and there is may not be a true reflection of the business currentperformanceb) Financial records may have been manipulated and there are the ratios calculated could be based onpotentially mis leakedc) Ratios only consider qualitative matters, making than hard to calculated) Inter-firm comparisons can be difficult to not firms report their performance/ generate accounts inthe Way16) Incorrect cash flow planning can lead to ________a) solvencyb) insolvencyc) bankruptcyd) failure17) The 3 Ps, i.e. the three objectives of analysis and interpretation of financial statements are : Progress,Position and Prospects.a) Trueb) False18) Comparison of financial statements highlights the trend of the _________ of the business.a) Financial positionb) Performance
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