Financial Statements – 40 Easy MCQs

Here are the 40 Solved MCQs of the Analysis and Interpretation of Financial Statements. These MCQs will develop your concept and help to improvise your exams preparation. A soft copy of these MCQs is also available.

Financial Statements (1-20 MCQs)

  1. Liquid assets include
    1. Cash
    1. Debtors-less bad debts
    1. Marketable securities
    1. All of the above
  2. Liquid liabilities in include
    1. Creditors
    1. Bank overdraft
    1. Creditors and other in paid amounts
    1. None of these
  3. Current ratio is a
    1. Profit and loss ratio
    1. Balance sheet ratio
    1. Combined ratio
    1. Nominal ratio
  4. Stock turnover ratio is a
    1. Activity ratio
    1. Solvency ratio
    1. Liquidity ratio
    1. Activity ratio
  5. Which of the following asset is not a quick current asset for the purpose of calculating acid text ratio?
    1. Stock
    1. Cash
    1. Net debtors
    1. Short-term bill receivables
  6. Which of the following is normally treated as a satisfactory ratio of current assets to current liabilities?
    1. 3:1
    1. 1:1
    1. 2:1
    1. 1:2
  7. Which of the following is a satisfactory liquid or acid test ratio?
    1. 1:1
    1. 1:2
    1. 2:1
    1. 3:1
  8. Which of the following items is not taken into account while computing current ratio?
    1. Building
    1. Secondary debtors
    1. Bank overdraft
    1. Secondary creditors
  9. While calculating quick ratio, which of the following items is not taken into account?
    1. Bank overdraft
    1. Bank balance
    1. Cash
    1. Secondary creditors
      1. A
  10. Which of the following item is not on operating expense?
    1. Advertising
    1. General management salaries
    1. Loss on the sale of motor car
    1. Depreciation of office equipment
  11. Which of the following is the best of long-term liquidity of a business?
    1. Current ratio
    1. Interest coverage ratio
    1. Stock turnover ratio
    1. Operating ratio
  12. Gross profit ratio is the ratio of gross profit to
    1. Net cash sales
    1. Net total sales
    1. Net credit sales
    1. Net purchases
  13. Gross capital employed is equal to
    1. Fixed assets
    1. Current assets
    1. Both of the above
    1. None of the above
  14. The statement “higher the ratio the lower the profitability” represents which ratio
    1. Operating ratio
    1. Gross profit ratio
    1. Net profit ratio
    1. Return on equity ratio
  15. All of the following are operating expenses, except
    1. Postage
    1. Office expense
    1. Interest
    1. Selling overhead
  16. When net sales are divided by average debtors, the resulting yield would be
    1. Debtors turnover ratio
    1. Acid test ratio
    1. Return on sales ratio
    1. Net profit ratio
  17. Which one of the following transactions change the current ratio?
    1. Purchase of goods for cash
    1. Sold goods on credit
    1. Plant required on account
    1. None of the above
  18. Net worth of business means
    1. Total assets
    1. Equity capital
    1. Fixed assets minus current assets
    1. Total assets minus total liabilities
  19. All of the following transaction has effects on the current ratio except
    1. Preference shares redeem
    1. Bills receivable collected
    1. Motor car sold for cash
    1. Machinery purchased
  20. Sale of inventory on credit will cause the quick ratio to
    1. Increase
    1. Reduced to zero
    1. Decrease
    1. Remain unchanged

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Quiz with Answers

0

Analysis of Financial Statements

Quiz with Answers

1 / 40

Liquid assets include

2 / 40

Liquid liabilities in include

3 / 40

The current ratio is a

4 / 40

Stock turnover ratio is a

5 / 40

Which of the following asset is not a quick current asset for the purpose of calculating the acid text ratio?

6 / 40

Which of the following is normally treated as a satisfactory ratio of current assets to current liabilities?

7 / 40

Which of the following is a satisfactory liquid or acid test ratio?

8 / 40

Which of the following items is not taken into account while computing current ratio?

9 / 40

While calculating the quick ratio, which of the following items is not taken into account?

10 / 40

Which of the following item is not on operating expense?

11 / 40

Which of the following is the best long-term liquidity of a business?

12 / 40

Gross profit ratio is the ratio of gross profit to

13 / 40

Gross capital employed is equal to

14 / 40

The statement “higher the ratio the lower the profitability” represents which ratio

15 / 40

All of the following are operating expenses, except

16 / 40

When net sales are divided by average debtors, the resulting yield would be

17 / 40

Which one of the following transactions changes the current ratio?

18 / 40

The net worth of business means

19 / 40

All of the following transaction has effects on the current ratio except

20 / 40

Sale of inventory on credit will cause the quick ratio to

21 / 40

Purchase of inventory on credit will cause the quick ratio is

22 / 40

The return on capital employed shows how well the management has used the funds specialized by

23 / 40

The immediate solvency ratio is

24 / 40

The ratio of earning that are distributed through dividends is termed as

25 / 40

ROI is the ratio between

26 / 40

The statement “higher the ratio, the more favorable it is” does not apply to

27 / 40

Which of the following is the most rigorous test of liquidity?

28 / 40

Current ratio may be increased by

29 / 40

A person interested in investing for growth in the market price of shares should invest in a company with

30 / 40

Issue of equity capital in exchange for land and building will cause the return on equity capital to

31 / 40

Collection of cash from debtors will cause the current ratio to

32 / 40

Selling inventory on account will cause the quick ratio to

33 / 40

In computing debt equity ratio, debt means

34 / 40

Which of the following ratio indicates a favorable position, if it is high?

35 / 40

Which of the following ratios is a favorable indication if it is low?

36 / 40

For judging the long-term solvency of a firm, which of the following ratios is most important?

37 / 40

In a common size balance sheet, each item is expressed as a percentage of

38 / 40

In common size balance sheet, each item is expressed as a percentage of

39 / 40

Comparative financial statements are prepared at the end of

40 / 40

Which of the following is the most popular and commonly used tool of financial statement analysis?

Financial Statements (21 – 40MCQs)

  1. Purchase of inventory on credit will cause the quick ratio is
    1. Increase
    1. Decrease
    1. Reduced to zero
    1. Remain unchanged
  2. The return on capital employed shows how well the management has used the funds specialized by
    1. Shareholders and creditors
    1. Equity shareholders
    1. Equity and preference shareholders
    1. Creditors
  3. The immediate solvency ratio is
    1. Current ratio
    1. Stocks turn ratio
    1. Quick ratio
    1. Debtors turnover ratio
  4. Ratio of earning that are distributed through dividends is termed as
    1. Payout ratio
    1. Current ratio
    1. Quick ratio
    1. None of the above
  5. ROI is the ratio between
    1. Investment and profit
    1. Turnover and capital employed
    1. Net profit and capital employed
    1. All of the above
  6. The statement “higher the ratio, the more favorable it is” does not apply to
    1. Operating profit ratio
    1. Return on investment
    1. Operating ratio
    1. Stock turnover ratio
  7. Which of the following is the most rigorous test of the liquidity?
    1. Stock turnover ratio
    1. Current ratio
    1. Absolute ratio
    1. Acid test ratio
  8. Current ratio may be increased by
    1. Understating current assets
    1. Understating current liabilities
    1. Overstating current assets
    1. Overstating current liabilities
  9. A person interested in investing for growth in the market price of shares should invest in a company with
    1. High gross profit ratio
    1. Low payout ratio
    1. High net profit ratio
    1. High payout ratio
  10. Issue of equity capital in exchange of land and building will cause the return on equity capital to
    1. Decrease
    1. Increase
    1. Remain unchanged
    1. Reduce to zero
  11. Collection of cash from debtors will cause the current ratio to
    1. Decrease
    1. Increase
    1. Reduce to zero
    1. Remain unchanged
  12. Selling inventory on account will cause the quick ratio to
    1. Decrease
    1. Increase
    1. Reduce to zero
    1. Remain unchanged
  13. In computing debt equity ratio, debt means
    1. Short-term creditors
    1. Long-term creditors
    1. Debentures only
    1. Both of the above
  14. Which of the following ratio indicates a favorable position, if it is high?
    1. Inventory turnover ratio
    1. Capital turnover ratio
    1. Return on investment
    1. All of the above
  15. Which of the following ratios is a favorable indication if it is low?
    1. Operating ratio
    1. Fixed assets turnover ratio
    1. Operating profit ratio
    1. Inventory turnover ratio
  16. For judging the long-term solvency of a firm, which of the following ratios in most important?
    1. Stock turnover ratio
    1. Return on investments
    1. Debt equity ratio
    1. Fixed assets turnover ratio
  17. In a common size balance sheet, each item is expressed as a percentage of
    1. Debt capital
    1. Total assets
    1. Equity capital
    1. Fixed assets
  18. In common size balance sheet, each item is expressed as a percentage of
    1. Capital
    1. Liabilities
    1. Fixed assets
    1. Both of the above
  19. Comparative financial statements are prepared at the end of
    1. Every quarter
    1. Every size month
    1. At the will of management
    1. Each financial year
  20. Which of the following is the most popular and commonly used tool of financial statement analysis?
    1. Cash flow statement
    1. Ratio analysis
    1. Comparative statements
    1. Common size statements
Financial Statements
Financial Statements

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