Analysis of Financial Statements MCQs with Answers

Multiple Choice Questions 37 Pages
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  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    Question Bank - Multiple Choice Questions (MCQs)
    Unit 1: Financial Statement of Corporate Organisations
    1) Business finance includes........
    a) procurement of funds and utilization of funds
    b) management of funds
    c) allocation
    d) Insurance
    2) Funds are required for the..........
    a) purchase of land & building
    b) purchase of machinery
    c) purchase of another fixed asset
    d) all of the above
    3) Which report gives a review on the profitability of a business?
    a) Statement of changes in equity
    b) Cash flow statement
    c) Balance sheet
    d) Income statement
    4) The term ‘Financial Statement’ covers
    a) Profit & Loss Statement
    b) Balance sheet and Profit & Loss Statement appropriation account
    c) Profit & Loss Statement and Balance sheet
    d) All of above are false
    5) Which of the following is true about financial statements?
    A) Financial statement gives a summary of accounts. B) Financial statements can be stated as
    recorded facts.
    a) Only A
    b) Only B
    c) Both A and B
    d) None of the above
    6) Schedules attached with the balance sheet forms a part of the financial statements.
    a) True
    b) False

    Page 1

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    7) 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 B
    b) Both A and C
    c) Both B and C
    d) A, B, C
    8) P&L statement is also known as
    a) Statement of operations
    b) Statement of income
    c) Statement of earnings
    d) All of the above
    9) Which statement shows the flow of cash and cash equivalents during the financial period?
    a) Statement of changes in equity
    b) Cash flow statement
    c) Balance sheet
    d) Income statement
    10) Subtracting all expenses from revenues yields?
    a) Net profit / Net Loss
    b) Carrying value
    c) Long term assets
    d) Net liabilities
    11) Balance sheet of a company is required to be prepared in the format given in ………………………
    a) Schedule III Part II
    b) Schedule III Part I
    c) Schedule III Part III
    d) Table A
    12) As per Companies Act, the Balance Sheet of a company is required to be presented in ………………………
    a) Horizontal Form
    b) Vertical Form
    c) Either Horizontal or Vertical Form
    d) Neither of the above

    Page 2

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    13) Which of the following is not required to be prepared under the Companies Act?
    a) Statement of Profit and Loss
    b) Balance Sheet
    c) Report of Director’s and Auditor’s
    d) Funds Flow Statement
    14) According to prescribed order of assets in a Company’s Balance Sheet ……………………… assets should
    be shown first of all.
    a) Non-Current Assets
    b) Current Assets
    c) Current Investments
    d) Loans and Advances
    15) In a Company’s Balance Sheet …………………. appear under the head ‘non-current assets’.
    a) Goodwill
    b) Patents
    c) Vehicles
    d) All of the above
    16) Calls in Arrears appear in a Company’s Balance Sheet under ………………..
    a) Reserve & Surplus
    b) Shareholder’s Funds
    c) Contingent Liabilities
    d) Short-term Borrowings
    17) Calls in advance appear in a Company’s Balance Sheet under ………………..
    a) Share Capital
    b) Current Liability
    c) Long-term Borrowings
    d) Reserve & Surplus
    18) Bills Receivables appear in a Company’s Balance Sheet under the Sub-head ……………………..
    a) Current Investments
    b) Cash Equivalents
    c) Trade Receivables
    d) Short term Loans and Advances

    Page 3

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    19) Which of the following options is not recorded in the Balance sheet?
    a) Cash
    b) Rent expenses
    c) Building
    d) Goodwill
    20) Certain assumptions are essential to prepare financial statements.
    a) True
    b) False
    21) Which of the given area is NOT addressed by Business Finance?
    a) Financing
    b) Investing
    c) Managing day today expenses
    d) None of the given options
    22) Which of the following is measured by profit margin?
    a) Operating efficiency
    b) Asset use efficiency
    c) Financial policy
    d) Dividend policy
    23) Business Finance addresses which of the following?
    a) Capital budgeting
    b) Capital structure
    c) Working capital management
    d) All of the given options
    24) Finance is vital for which of the following business activity (activities)?
    a) Marketing Research
    b) Product Pricing
    c) Design of marketing and distribution channels
    d) All of the given options
    25) The most important item that can be extracted from financial statements is the actual ________ of the
    firm.
    a) Net Working Capital
    b) Cash Flow

    Page 4

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    c) Net Present Value
    d) None of the given options
    26) Which of the following refers to the difference between the sale price and cost of inventory?
    a) Net loss
    b) Net worth
    c) Markup
    d) Markdown
    27) Who of the following make a broader use of accounting information?
    a) Accountants
    b) Financial Analysts
    c) Auditors
    d) Marketers
    28) Which of the following statement is considered as the accountant’s snapshot of firm’s accounting value
    as of a particular date?
    a) Income Statement
    b) Balance Sheet
    c) Cash Flow Statement
    d) Retained Earning Statement
    29) Balance Sheet is based upon which of the following formula?
    a) Assets = Liabilities – Stockholder’s equity
    b) Assets + Liabilities = Stockholder’s equity
    c) Assets + Stockholder’s equity = Liabilities
    d) Assets = Liabilities + Stockholder’s equity
    30) The conflict of interest between stockholders and management is known as:
    a) Agency problem
    b) Interest conflict
    c) Management conflict
    d) Agency cost
    31) Which from the following is NOT an example of intangible assets?
    a) Trademarks
    b) Patents
    c) Buildings
    d) Technical expertise

    Page 5

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    32) The following are the examples of financial assets except?
    a) Stocks
    b) Bank loan
    c) Bond
    d) Raw material
    33) Business finance refers to ...... and ........ employed in a business.
    a) money
    b) credit
    c) both a & b
    d) none of the above
    34) Business finances is concerned with _________ funds and _______ funds from different sources.
    a) estimation of funds
    b) raising of funds
    c) short term finance
    d) both a & b
    35) Which of the following is not a function of finance manager?
    a) Mobilization of funds
    b) Deployment of funds
    c) Control over use of funds
    d) Manipulate share price of the Company
    36) Which is the following main decision taken by the financial manager in a company?
    a) Income decision
    b) Financing decision
    c) Appraisal decision
    d) Budget decision
    37) Finance Function comprises
    a) Safe custody of funds only
    b) Expenditure of funds only
    c) Procurement of finance only
    d) Procurement & effective use of funds
    38) Financial management mainly focuses on
    a) Efficient management of every business
    b) Brand dimension

    Page 6

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    c) Arrangement of funds
    d) All elements of acquiring and using means of financial resources for financial activities
    39) The finance manager is accountable for.
    a) Earning capital assets of the company
    b) Effective management of a fund
    c) Arrangement of financial resources
    d) Proper utilization of funds
    40) 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 - a
    11 - b 12 - b 13 - d 14 - a 15 - d 16 - b 17 - b 18 - c 19 - b 20 - a
    21 - d 22 - a 23 - d 24 - d 25 - b 26 - c 27 - b 28 - b 29 - d 30 - a
    31 - c 32 - d 33 - c 34 - d 35 - d 36 - b 37 - d 38 - d 39 - c 40 - c

    Page 7

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    Unit 2: Introduction to Analysis and Interpretation of Financial Statements
    1) The term financial statement refers to
    a) Income statement
    b) Cash flow and Fund Flow
    c) Balance sheet
    d) All
    2) Which of the following is the main objective of a financial statement?
    a) to know the solvency
    b) to know the debt capacity
    c) to know the earning capacity
    d) All
    3) In financial statements, the fixed assets are shown at …
    a) Market price
    b) Cost price
    c) Replacement price
    d) None
    4) What is followed while preparing the financial statements?
    a) Accounting conventions
    b) Accounting principles
    c) Accounting concepts
    d) All
    5) In financial statement the stock is valued at cost or market price whichever is less on the basis of…
    a) Accounting concepts
    b) Accounting conventions
    c) Accounting principles
    d) None
    6) 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 financial
    statements.
    a) I is true but not II
    b) II is true but not I

    Page 8

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    c) Both are true
    d) Both are false
    7) The balance sheet shows …
    a) the source of working capital
    b) the change in working capital
    c) Both
    d) None
    8) The analysis and interpretations of the financial statement will reveal …
    a) the financial position
    b) the profitability
    c) None
    d) Both
    9) The process of explaining the meaning, significance and relationship between two financial factors is
    called …
    a) Summarization
    b) Analysis
    c) Interpretation
    d) None
    10) The process of comparing various financial factors of a company over a period of time is known as …
    a) Inter‐firm comparison
    b) Ratio Analysis
    c) Intra‐firm comparison
    d) Inter‐industry comparison
    11) Which of the following is technique of financial statement analysis?
    a) Common‐size statement
    b) Comparative statement
    c) Trend analysis
    d) All
    12) Which technique used for figures of two or more periods are placed side by side to facilitate easy and
    meaningful comparisons?
    a) Comparative statement
    b) Common‐size statement

    Page 9

  • DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
    Subject: Analysis of Financial Statements (505 A) CLASS: TYBBA (Sem-V) (2013 PATTERN)
    PROF. KAVITA PAREEK www.dacc.edu.in
    c) Trend Analysis
    d) None
    13) ________is a simply the amount of cash coming in to a business.
    a) cash flow
    b) inflow
    c) both a and b
    d) None of the above.
    14) If value of opening inventories increases, what happens to the value of gross profit?
    a) decreases
    b) increases
    c) stays the same
    d) gets closer to net profit
    15) 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 current
    performance
    b) Financial records may have been manipulated and there are the ratios calculated could be based on
    potentially mis leaked
    c) Ratios only consider qualitative matters, making than hard to calculate
    d) Inter-firm comparisons can be difficult to not firms report their performance/ generate accounts in
    the Way
    16) Incorrect cash flow planning can lead to ________
    a) solvency
    b) insolvency
    c) bankruptcy
    d) failure
    17) The 3 Ps, i.e. the three objectives of analysis and interpretation of financial statements are : Progress,
    Position and Prospects.
    a) True
    b) False
    18) Comparison of financial statements highlights the trend of the _________ of the business.
    a) Financial position
    b) Performance

    Page 10

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