Analysis Of Financial Statements Questions MCQs


analysis of financial statements Questions

Total Questions : 30

Page 1 of 2 pages
Question 1. Which of the following statements are true?
  1.    Common-size balance sheet shows relative value of the various items.
  2.    In the common size income statement, each product is represented as a percentage of the Revenue from Operations.
  3.    Both : Common-size balance sheet shows relative value of the various items. In the common size income statement, each product is represented as a percentage of theRevenue from Operations.
  4.    None of these
Answer: Option C
: C

The following statements are correct : Common-size balance sheet shows relative value of the various items. In the common size income statement, each product is represented as a percentage of the Revenue from Operations.
Question 2. Which of the following is used as base for preparation of common size statements of profit and loss?
  1.    Cost of Goods sold
  2.    Raw Materials consumed 
  3.    Revenue From Operations
  4.    Profit after Tax
Answer: Option C
: C

Revenue From Operations is used as base for preparation of common size statements of profit and loss.
Question 3. What is followed while preparing the financial statements?  
  1.    Accounting conventions
  2.    Accounting principles  
  3.    Accounting concepts
  4.    All of these
Answer: Option D
: D

Following things are followed while preparing financial statements :
Accounting conventions
Accounting principles
Accounting concepts
Question 4.  A technique that is used in comparative analysis of financial statement is
  1.    graphical analysis
  2.    preference analysis
  3.    common size analysis
  4.    returning analysis
Answer: Option C
: C

A technique that is used in comparative analysis of financial statement is common size analysis.
Question 5. The analysis and interpretations of the financial statement will reveal ________________.
  1.    The profitability only
  2.    The financial position only
  3.    Both the profitability and the financial position
  4.    None of these
Answer: Option C
: C

The analysis and interpretations of the financial statement will revealboththe profitability andthe financial position.
Question 6. In common size Balance Sheet , total of assets and liabilities is assumed to be equal to ________.
  1.    One
  2.    Ten
  3.    Fifty
  4.    Hundred
Answer: Option D
: D

In common size Balance Sheet , total of assets and liabilities is assumed to be equal to 100
Question 7. ___are also called year-to-year change statements.
  1.    Comparative statements
  2.    Common size statements
  3.    Cash flow statements
  4.    None of these
Answer: Option A
: A

Comparative statementsare also called year-to-year change statements.
Question 8. When financial statement figures for two or more years are placed side-by-side to facilitate comparison , these are called _________.
  1.    Common Size Analysis
  2.    Comparative Analysis
  3.    Ratio Analysis
  4.    None of these
Answer: Option B
: B

When financial statement figures for two or more years are placed side-by-side to facilitate comparison , these are called comparative analysis.
Question 9. Which financial statement presents a summary of the Assets, Liabilities, and Shareholders' Fund of a company?
  1.    General ledger
  2.    Cash Book
  3.    Balance sheet
  4.    Statement of Profit and Loss
Answer: Option C
: C

Balance sheetpresents a summary of the Assets, Liabilities, and Shareholders' Fund of a company
Question 10. Which of the following is the main objective/s of a financial statement?
  1.    To know the solvency
  2.    To know the debt capacity
  3.    To know the earning capacity
  4.    All of these
Answer: Option D
: D

The following arethe main objectives of a financial statement:
To know the solvency
To know the debt capacity
To know the earning capacity
Question 11. These are the statements which indicate the relationship of different items of a financial statement with a common item by expressing each item as a percentage of that common item.
  1.    Comparative statements
  2.    Common size statements 
  3.    Bank statements
  4.    None of these
Answer: Option B
: B

Common size statementsare the statements which indicate the relationship of different items of a financial statement with a common item by expressing each item as a percentage of that common item.
Question 12. Non current assets in 31.3.2016 is 21,30,000 and in 31.3.2017 is 36,30,000. What is the absolute change and percentage change?
  1.    15,00,000 decrease and 70.12 %
  2.    15,00,000 increase and 70.42 %
  3.    15,00,000 decrease and 76.12 %
  4.    5,00,000 increase and 70.42 %
Answer: Option B
: B

The absolute change is(Rs 36,30,000 - Rs 21,30,000 ) i.e.increase of Rs 15,00,000
and percentage change is (15,00,000/21,30,000) * 100 i.e. 70.42 %
Question 13. Which of the following statement is true?  

Statement A: Financial statements are prepared on the basis of accounting principles.  

Statement B: Any changes in the accounting principles or method will affect the utility of the financial statements.
  1.    Statement A is true but not B
  2.    Statement B is true but not A
  3.    Both statements A and B are true.
  4.    Both statements A and B are false
Answer: Option C
: C

Both statementsA and B are true. i.e
Financial statements are prepared on the basis of accounting principles.
Any changes in the accounting principles or method will affect the utility of the financial statements.
Question 14. This analysis is also known as ‘Vertical analysis’.
  1.    Comparative statements
  2.    Common size statements
  3.    Bank statements
  4.    None of these
Answer: Option B
: B

Common size statementsis also known as ‘Vertical analysis’.
Question 15. Techniques which are used to identify financial statements trends include -
  1.    Common size analysis
  2.    Percent change analysis
  3.    Returning ratios analysis
  4.    Both common size analysis and percent change analysis
Answer: Option D
: D

Bothcommon size analysis andpercent change analysis are used to identify financial statements trends
Question 16.  Which of the following is technique/s of financial statement analysis?
  1.    Common‐size statement
  2.    Comparative statement
  3.    Trend analysis
  4.    All of these
Answer: Option D
: D

The following aretechniques of financial statement analysis :
Common‐size statement
Comparative statement
Trend analysis
Question 17. The balance sheet shows …
  1.    The source of working capital only
  2.    The change in working capital only
  3.    Both the source of working capital and the change in working capital
  4.    None of these
Answer: Option D
: D

The balance sheet showsthe financial position.
Question 18. Which of the following statement/s are used for financial analysis?
  1.    Statement of Profit and Loss only
  2.    Statement of Financial Position i.e. Balance Sheet only
  3.    Both : Statement of Profit and Loss Statement of Financial Position i.e. Balance Sheet
  4.    None of these
Answer: Option D
: D

Both theStatement of Profit and Loss andStatement of Financial Position i.e. Balance Sheet are used for financial analysis.
Question 19. Which statement express all items of financial statement as a percentage of some common base such as total assets for balance sheet?
  1.    Comparative Statement
  2.    Common Size Statement
  3.    Statement of Profit and loss
  4.    None of these
Answer: Option B
: B

Common size statementexpress all items of financial statement as a percentage of some common base such as total assets for balance sheet
Question 20. Which of the following statements are true?
  1.    External analysis depends entirely on issued financial statements.
  2.    Interpretation and analysis both are different.
  3.    Financial analysis covers interpretation.
  4.    All of these
Answer: Option D
: D

The following statements are true :
External analysis depends entirely on issued financial statements.
Interpretation and analysis both are different.
Financial analysis covers interpretation.