CBSE Class 12 Accountancy Analysis of Financial Statement and Tools MCQs Set B

a) Purchases

b) Revenue from Operations

c) Opening Inventory

d) Closing Inventory

Answer: B

Question: Main objective of Common Size statement is :

a) To present the changes in various items

b) To provide for a common base for comparison

c) To establish relationship between various items

d) All of the Above

Answer: D

Question: Financial analysis become useless because it:

a) Measures the profitability

b) Measures the Solvency

c) Lacks Qualitative Analysis

d) Makes a comparative study

Answer: C

Question: Parties interested in financial analysis are :

a) Investors

b) Government

c) Financial Institutions

d) All of the Above

Answer: D

Question: Main limitation of financial analysis is :

a) To know earning capacity

b) To know financial strength

c) Do not reflect changes in price level

d) Comparative study with other firms

Answer: C

Question: Payment of Income Tax is considered as

a) Direct Expenses

b) Indirect Expenses

c) Operating Expenses

d) None of the Above

Answer: B

Question: Interest on Loans is

a) Direct Expenses

b) Indirect Expenses

c) Operating Expenses

d) None of the Above

Answer: B

Question: Ratios which relate firms stock to its book value per share, cash flow and earnings are classified as

a) Market value ratios

b) Marginal ratios

c) Return ratios

d) None of the options

Answer: Market value ratios

Question: An equation in which total assets are multiplied to profit margin is classified as

a) Du DuPont equation

b) Turnover equation

c) Preference equation

d) None of the options

Answer: du DuPont equation

Question: High price to earning ratio shows companys

a) High growth prospect

b) Low dividends paid

c) High marginal rate

d) None of the options

Answer: High growth prospect

Question: Analysis simply means ____________data

a) Simplification

b) Explaining

c) Simplification and Explaining

d) None of the options

Answer: Simplification

Question: Interpretation means _________data

a) Explaining

b) Simplification

c) Explaining and Simplification

d) None of the options

Answer: Explaining

Question: Common size analysis is also known as ______ Analysis

a) Vertical

b) Vertical

c) Vertical

d) None of the options

Answer: Vertical

Question: The analysis of actual movement of money inflow and outflow in an organization is called_________analysis.

a) Cash flow

b) Simplification

c) Explaining

d) None of the options

Answer: Cash flow

Question: The financial statements of a business enterprise include

a) All of the options

b) Balance sheet

c) Profit & Loss Account

d) None of the options

Answer: All of the options

Question: The most commonly used tools for financial analysis are

a) All of the options

b) Horizontal analysis

c) Vertical analysis

d) Ratio analysis

Answer: All of the options

Question: An Annual Report is issued by a company to its:

a) Management

b) Directors

c) Auditors

d) Management

Answer: Management 

Question: Balance Sheet provides information about financial position of the enterprise

a) At a point in time

b) At a point in time

c) For a period of time

d) None of the above

Answer: At a point in time

Question: Comparative statement are also known as

a) Horizontal analysis

b) Dynamic analysis

c) Vertical analysis

d) External analysis

Answer: Horizontal analysis

Question: Ratio analysis establishes relationship between

a) Two financial statements

b) Two Share Holder

c) Two Debentures Holder

d) None of the above

Answer: Two financial statements

Question: Common size statements and financial ratios are the two tools employed in

a) Vertical analysis

b) Horizontal analysis

c) Vertical analysis and Horizontal analysis

d) None of the options

Answer: Vertical analysis

Question: Ratio analysis is a total for analysing the

a) Financial statements of any enterprise and Income statements of any enterprise

b) Financial statements of any enterprise

c) Income statements of any enterprise

d) None of the options

Answer: Financial statements of any enterprise and Income statements of any enterprise

Question: Financial analysis helps an analyst to

a) Arrive at a decision and Making a decision

b) Arrive at a decision

c) Making a decision

d) None of the options

Answer: Arrive at a decision and Making a decision

Question: each item is expressed as a percentage of some common base in

a) Common size statement

b) Fund Flow Statement

c) Cash Flow Statement

d) Cash Flow Statement

Answer: Common size statement

Question: Bring out the importance of Financial Analysis

a) All of the options

b) Helps in evaluating the profit earning capacity and financial feasibility of a business

c) Helps in evaluating the profit earning capacity and financial feasibility of a business

d) Helps in evaluating the relative financial status of a firm comparison to other competitive firms

Answer: All of the options

Question: Those financial statements that enable intra-firm and comparisons of financial statements over a period of time are called

a) Comparative Financial Statements

b) Fund Flow Statement

c) Cash Flow Statement

d) Trend Analysis

Answer: Comparative Financial Statements

Question: These statements depict the relationship between various items of financial statements and some common items

a) Common Size Statements

b) Comparative Financial Statements

c) Trend Analysis

d) None of the options

Answer: Common Size Statements

Question: It is a technique of studying the operational results and financial position over a series of years.

a) Trend Analysis

b) Common Size Statements

c) Comparative Financial Statements

d) Trend Analysis

Answer: Trend Analysis

Question: Trend analysis can be observe the financial position percentage changes over time in the selected data using with

a) Previous years data

b) Next years data

c) Previous years data and Next years data

d) None of the options

Answer: Previous years data

Question: Importance of Trend Analysis

a) All of the options

b) Assists in Forecasting

c) Percentage Terms

d) Presents a Broader Picture

Answer: All of the options

Question: Importance of Comparative Statements

a) All of the options

b) Make Presentation Simpler

c) Help in Drawing Conclusion

d) Help in Detection of Problems

Answer: All of the options

Question: The reasons that advocate in favour of Financial Analysis

a) All of the options

b) Helps in assessing the long-term solvency of the business

c) helps in evaluating the profit earning capacity and financial feasibility of a business

d) Assists management in decision making process, drafting various plans and also in establishing an effective controlling system

Answer: All of the options

Question: Common size statements can be classified into which broad categories

a) Common size statements can be classified into two broad categories and Common Size Balance Sheet

b) Common size statements can be classified into two broad categories

c) Common Size Balance Sheet

d) None of the options

Answer: Common size statements can be classified into two broad categories and Common Size Balance Sheet

Question: Columns prepared in a Common Size Statement

a) All of the options

b) Particulars Column

c) Amount Columns

d) Percentage or Ratio Columns

Answer: All of the options

Question: The comparison of financial data of same time period of different organizations engaged in similar business.

a) Cross-sectional analysis

b) Spatial data analysis

c) Time series analysis

d) None of the options

Answer: Cross-sectional analysis

Question: The symptom of large inventory accumulation in anticipation of price rise in future will be indicated by

a) Inventory turnover ratio

b) Working Capital turnover ratio

c) Asset turnover ratio

d) All of the options

Answer: Inventory turnover ratio

Question: For a healthy business the current ratio lies between

a) 1.5 to 3

b) 0 to 1.5

c) 3 to 4.5

d) 4.5 to 6

Answer: 1.5 to 3

Question: Revenue from Operations less cost of Revenue from Operations is called :

a) Net Profit

b) Operating Profit

c) Gross Profit

d) Total Profit

Answer: C

Question: Which objective is not fulfilled by comparative Statement of Profit & Loss :

a) To compare the items of Statement of Profit & Loss of two years

b) To know the absolute changes in items of Statement of Profit & Loss

c) To show the change in financial position

d) To know the percentage changes in items of Statement of Profit & Loss

Answer: C

Question: What will be the trend percentage, if the Inventory of a firm is Rs.2,00,000; Rs.2,40,000; Rs.3,00,000 and Rs.4,00,000 respectively?

a) 1, 1.2, 1.5,2

b) 10, 12, 15,20

c) 100, 120, 150, 200

d) None of the Above

Answer: C

Question: In a common size Balance Sheet, total liabilities are assumed to be equal to

a) 1

b) 10

c) 100

d) 1,000

Answer: C

Question: In a common size Statement of Profit & Loss, the amount of net revenue from operations is assumed to be equal to

a) 1

b) 10

c) 100

d) 1,000

Answer: C

Question: Comparison of actual values of one firm with those of another firm belonging to the same industry is

a) inter-firm Comparison.

b) intra-firm Comparison.

c) Pattern Comparison.

d) Standard Comparison.

Answer: A

Question: While preparing Common-size income Statement, each item of income Statement is expressed as % of

a) Revenue from Operations.

b) Other income.

c) Total Income.

d) Profit before Tax.

Answer: A

Question: Feature of financial analysis is to present the data contained in financial statements in

a) Easy form

b) Convenient and rational groups

c) Comparable form

d) All of the Above

Answer: D

Question: Which analysis is considered as dynamic :

a) Horizontal Analysis

b) Vertical Analysis

c) Internal Analysis

d) External Analysis

Answer: A

Question: Which analysis is considered as static :

a) Horizontal Analysis

b) Vertical Analysis

c) Internal Analysis

d) External Analysis

Answer: B

Question: Creditors or Suppliers are interested to know the

a) Profitability of the firm in relation to turnover.

b) Profitability of the firm in relation to investments.

c) Short-term solvency/liquidity of the concern.

d) Effective utilisation of its (firm's) resources.

 Answer: C

Question: Comparison of values of one period with those of another period for the same firm is

a) Intra-firm comparison.

b) Inter-firm comparison.

c) Pattern comparison.

d) Trend comparison.

Answer: A

Question: Which of the following is not a limitation of Financial Statement Analysis?

a) Ignores the Qualitative Elements

b) Not free from personal bias

c) Intra-firm Comparison

d) Ignores the price level changes

Answer: C

Question: A company’s Revenue from Operations are Rs.20,00,000; Cost of Revenue from Operations is Rs. 14,00,000 and indirect expenses are Rs.2,00,000. What is the amount of Gross Profit?

a) Rs. 18,00,000

b) Rs.4,00,000

c) Rs. 8,00,000

d) Rs.6,00,000

Answer: D

Question: Revenue from Operations Rs.4,00,000; Cost of Revenue from Operations 60% of Revenue from Operations; Operating expenses Rs. 30,000 and rate of income tax is 40%. What will be amount of profit after tax?

a) Rs.64,000

b) Rs.78,000

c) Rs.52,000

d) Rs.96,000

Answer: B

Question: Revenue from Operations Rs. 8,00,000; Gross Profit Ratio 32%; Indirect Exp. 10% of Gross Profit and income tax 40%. What will be the amount of profit after tax?

a) Rs. 1,38,240

b) Rs. 1,02,400

c) Rs.92,160

d) Rs.1,53,600

Answer: A

Question: Common Size Statements are prepared

a) In the form of Ratios

b) In the form of Percentages

c) In both of the Above

d) None of the Above

Answer: B

Question: Which of the following is untrue :

a) Common size Balance Sheet

b) Common size Statement of Profit & Loss

c) Common size cash Flow Statement

d) None of the Above

Answer: C

Question: Main objective of Common Size Statment of Profit & Loss is :

a) To present changes in assets and liabilities

b) To judge the financial soundness

c) To establish relationship between revenue from operations and other items of statement of Profit & Loss

d) All of the Above

Answer: C

Question: Which one of the following items is not a method/tool of analysis of financial statements?

a) Trend Analysis

b) Statement of Affairs

c) Cash Flow Statement

d) Comparative Statements

Answer: B

Question: Which one of the following items is not a method/tool of analysis of financial statements?

a) Accounting Ratio

b) Break Even Point

c) Statement of Receipts and Payments

d) Fund Flow Statement

Answer: C