CBSE Class 12 Accountancy Financial Analysis And Tools For Financial Analysis Worksheet

FINANCIAL ANALYSIS & TOOLS FOR FINANCIAL ANALYSIS

MCQ Questions for NCERT Class 12 Accountancy Financial Analysis And Tools For Financial Analysis

Question. Which of the following cannot be identified with the help of comparative Statement of profit and loss?
(a) Rate of increase or decrease in expenses
(b) Rate of increase or decrease in revenue from operation
(c) Rate of increase or decrease in net profit
(d) Rate of increase or decrease in Trade payables

Answer: D

Question. In common size statement of Profit and Loss which figure is assumed to be equal to 100?
(a) Total Assets
(b) Equities and Liabilities
(c) Revenue from Operation
(d) None of the above

Answer: C

Question. In Common size Balance sheet, which figure is assumed to be equal to 100?
(a) Revenue from operation
(b) Net profit
(c) Total expenses
(d) Equities and liabilities

Answer: D

Question. In Common size Balance sheet, which of following figure is assumed to be equal to 100?
(a) Equities and liabilities
(b) Total Assets
(c) Either (a) or (b)
(d) None of the above

Answer: C

Question. Comparative Financial statements means.
(a) To facilitate comparison for two or more Years
(b) To show Financial Position
(c) To compute profit or loss of two or more years
(d) None of the above

Answer: A

Question. Which of the following statements are true
(a) External analysis depends entirely on issued financial statements
(b) Interpretation and analysis both are different
(c) Financial analysis covers interpretation
(d) All of the options

Answer: D

Question. When financial statements of several years are analysed, it is termed as
(a) Horizontal analysis
(b) Current ratios
(c) Vertical analysis
(d) None of the options

Answer: C

Question. Heterogeneous cash flows can be made comparable by
(a) Discounting technique and Compounding technique
(b) Discounting technique
(c) Compounding technique
(d) None of the options

Answer: A

Question. The Real object of Analysis of Financial Statement is
(a) To assess the total expenses of the firm
(b) To know about historical cost concept
(c) To measure the financial strength of the business
(d) To assess the total liabilities of the firm

Answer: C

Question. Ratio Analysis is helpful for
(a) All of the options
(b) Financial planning
(c) Forecasting
(d) Financial analysis

Answer: A

Question. Comparative Financial Statement is an example of
(a) Vertical Analysis
(b) External analysis
(c) None of the options
(d) Horizontal analysis

Answer: D

Question. High price to earning ratio shows companys
(a) High growth prospect
(b) Low growth prospect
(c) Low dividends paid
(d) All of the options

Answer: A

Question. A formula such as net income available to common stockholders divided by common equity is used to calculate
(a) Return on interest
(b) Return on earning power
(c) None of the options
(d) Return on common equity

Answer: D

Question. Which of the following is a type of Financial Analysis on the basis of material used ?
(a) Internal Analysis
(b) External Analysis
(c) Internal Audit
(d) Both (a) and (b)

Answer: D

Question. Which one of the following is tool of financial analysis?
(a) Comparative Statements
(b) Common-size Statements
(c) Cash Flow Statement
(d) All of these

Answer: D

Question. When bad position of the business is tried to be depicted as good, it is known as ................
(a) Personal Bias
(b) Price Level Changes
(c) Window Dressing
(d) All of the Above

Answer: C

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: A

Question. Which one of the following items is not a method/tool of analysis of financial statements?
(a) Fund Flow Statement
(b) Common Size Statement
(c) Statement of Trade Receivables
(d) Cash Flow Statement

Answer: C

Question. Interpretation of Financial Statements includes:
(a) Criticisms and Analysis
(b) Comparison and Trend Study
(c) Drawing Conclusion
(d) All the above

Answer: D

Question. Which analysis depicts the relationship between two figures :
(a) Ratio Analysis
(b) Trend Analysis
(c) Cumulative figures and averages
(d) Dividend Analysis

Answer: A

Question. In which meeting of company directors report is presented ?
(a) Directors Meeting
(b) Annual General Meeting
(c) Manager’s Meeting
(d) All of the above

Answer: B

Question. A Company’s current liabilities decreased from Rs.4,00,000 to Rs.3,00,000. What is the percentage of change?
(a) 25%
(b) 33.3%
(c) 20%
(d) 40%

Answer: A

Question. The most commonly used tools for financial analysis are :
(a) Comparative Statements
(b) Common Size Statements
(c) Accounting Ratios
(d) All of the above

Answer: D

Question. What is shown by Balance Sheet ?
(a) Accuracy of books of accounts
(b) Profit or loss of a specific period
(c) Financial position on a specific date
(d) None of the above

Answer: C

Question. Common size income statements represent the various elements as a
(a) Percentage of the net sales figure
(b) Percentage of the gross profit
(c) Percentage of the net sales figure and Percentage of the gross profit
(d) None of the options

Answer: A

Question. Which of the following cannot be identified with the help of comparative Balance Sheet?
(a) Rate of Increase or decrease in share Capital
(b) Rate of increase or decrease in reserve and surplus
(c) Rate of increase or decrease in revenue from operation
(d) Rate of increase or decrease in Trade receivables

Answer: C

Question. Quick ratio is .75: 1.curent liabilities ₹ 60000.calculate current assets if stock is ₹1000
a) ₹ 46000
b) ₹560000
c) ₹44000

Answer: A

Question. Current ratio is 2:1.sale of goods at a profit will
a) increase ratio
b) decrease ratio
c) no change in ratio

Answer: A

Question. Selling price is 25% above cost. If sales are ₹800000 ,calculate COGS
a) ₹360000
b) ₹450000
c) ₹640000

Answer: C

Question. If debt equity ratio is 2. Issue of bonus shares will
a) Increase ratio
b) decrease ratio
c) no change in ratio

Answer: C

Question. A company has earned 500000 as profit before interest and tax. Its ROI is 20%. Calculate capital employed.
A) ₹3000000
b) ₹2500000
c) ₹4500000

Answer: B

Question. Which is not a tool of financial statement analysis
a) ratio
b) CFS
c) common size statement
d) shares

Answer: D

Question. Shyam Ltd. has an opening debit balance of ₹5,00,000 in Reserves & Surplus as Balance of Statement of Profit & Loss. It earned a profit of ₹8,00,000 for the year ended 31.3.2013. What will be the amount of Surplus for the period if Reserves & surplus shows balance of ₹3,00,000 on 31.3.2013 and ₹5,00,000) on 31.3.2012
a) ₹ 3,00,000
b) ₹ 1,00,000
c) ₹ 2,00,0000
d) ₹ 50,000

Answer: A

Question. How is excise duty dealt with while preparing Comparative Income statement?
a) Deducted from Gross Revenue from Operations
b) Expenses
c) Deducted from Total Revenue from Operations
d) None of the above

Answer: A

Question. Calculate % of Balance Sheet total for the previous year when closing equity capital and opening equity capital previous year is ₹600000 and current year is₹ 900000 and Balance sheet total of the previous year is 30,00,000.
a) 20%
b) 30%
c) 40%
d) 50%

Answer: A

Question. Which item is assumed to be 100 in case of Common size Income statement?
a) Total Revenue
b) Profit Before Tax
c) Revenue from Operations (Net)
d) Profit After Tax

Answer: C

Q 1 What do you mean by “Analysis of financial statements’. How does it differ from int interpretation of financial statements?

Q 2 Explain

(i) Vertical analysis

(ii) Horizontal analysis

Q 3 Why are the following parties interested in analysis of financial statements:

(i) Shareholders

(ii) Employees

(iii) Regulatory authority

(iv) Creditors

(v) management.

Q 4 List the objectives of financial analysis. Explain the advantages & limitations of financial analysis.

TOOLS FOR FINANCIAL ANALYSIS

Q 1 List the tools of financial analysis & briefly explain them.

Q 2 What constitutes financial statements? Explain Intra firm & Inter firm comparision

Q 3 State the difference between comparative statement & common size statement.

Q 4 State any two objectives of comparative financial statements.

RATIOS

Q 1 Define ‘Ratios’.

Q 2 What is meant by Cross sectional analysis , Time series analysis , & Benchmarks.

Q 3 What are the different ways in which ratios can be expressed?

Q 4 List the advantages & disadvantages of ratio analysis.

Q 5 List the significance of the following ratios:

Liquidity ratios , Solvency ratios , Profitability ratios & Turnover ratios 

Important Questions for NCERT Class 11 Accountancy Financial Statements

Question :  Choose the Current Assets from the following :
(a) Cash
(b) Stock
(c) Debtors
(d) All of these 

Answer :  D

Question :  Following information is given in Trial Balance
Bad Debt Rs. 3,000
Provision for Bad Debts Rs. 3,500
Debtors Rs.40,000
Additional information :
It is desired to make a provision for doubtful debts @ of 10% on debtors. The amount debited to P&L A/c is
(a) Rs.4,000
(b) Rs.5,000
(c) Rs.6,500
(d) Rs.3,500 

Answer :  D

Question :  Net Profit before the following adjustments Rs. 1,80,000
Outstanding salary Rs. 10,000
Prepaid Insurance Rs. 13,000
Calculate profit after adjustments
(a) Rs. 1,83,000
(b) Rs.1,77,000
(c) Rs.2,03,000
(d) Rs. 1,87,000 

Answer :  A

Question : Schedule of balances prepared from ledger accounts is known as :
(a) Balance Sheet
(b) Trial Balance
(c) Statement of Accounts
(d) Statement of Affairs 

Answer :  B

Question :  Closing Stock appearing in the Trial Balance is shown :
(a) On the Dr. side of Trading A/c
(b) On the Cr. side of Trading A/c
(c) On the Assets side of Balance Sheet
(d) On the Cr. side of Trading A/c and on the Assets side of Balance Sheet 

Answer :  C

Question :   Adjustments given are recorded once in Trading and Profit and Loss Account and again in Balance Sheet. It is so because of
(a) Matching Principle.
(b) Dual Aspect Principle.
(c) Accrual Concept.
(d) Materiality Principle. 

Answer :  B

Question :   Indirect Expenses are transferred to
(a) Trading Account.
(b) Profit and Loss Account.
(c) Balance Sheet.
(d) Trading Account and Balance Sheet. 

Answer :  B

Question :  Computers purchased for re-sale is:
(a) Capital expenditure.
(b) Revenue Expenditure.
(c) Deferred Revenue Expenditure.
(d) None of these. 

Answer :  B

Question :    Wages and Salaries Account is shown in
(a) Trading Account,
(6) Profit and Loss Account.
(c) Balance Sheet.
(d) Trading Account and Balance Sheet. 

Answer :  A

Question :  . If sales are Rs.2,000 and the rate of gross profit on cost of goods sold is 25%, then the cost of goods sold will be :
(a) Rs. 1,600
(b) Rs. 1,500
(c) Rs. 1,700
(d) Rs. 1,800 

Answer :  A

Question :   Which of the following is not shown in Balance Sheet?
(a) Opening Stock
(b) Closing Stock
(c) Patents
(d) Debtors 

Answer :  A

Question :  What is the effect of overvaluing Closing Stock on the Current Year’s Profit?
(a) Decreases the gross profit and net profit.
(b) Increases the gross profit but decreases the net profit.
(c) Decreases the gross profit and increases net profit.
(d) Increases the gross profit and net profit 

Answer :  D

Question : Calculate the gross profit if rate of gross profit is 25% on sales and cost of goods sold are Rs. 1,80,000
(a) Rs.60,000
(b) Rs.36,000
(c) Rs.45,000
(d) Rs.30,000 

Answer :  A

Question :  Provision for Doubtful Debts is made on the debts that are
(а) Doubtful of recovery.
(b) Not doubtful of recovery.
(c) Total Debtors.
(d) Total Debtors less Provision for Doubtful Debts. 

Answer :  A

Question :  Balance Sheet is a
(a) a list of all the accounts in the books of a business.
(b) an account showing trading activities of a business.
(c) an account showing the financial position of a business as on a certain date.
(d) a list of assets, liabilities and capital of a business at a certain date. 

Answer :  D

Question. Which of the following cannot be identified with the help of comparative Statement of profit and loss?

(a) Rate of increase or decrease in expenses
(b) Rate of increase or decrease in revenue from operation
(c) Rate of increase or decrease in net profit
(d) Rate of increase or decrease in Trade payables

Answer: D

Question. In common size statement of Profit and Loss which figure is assumed to be equal to 100?
(a) Total Assets
(b) Equities and Liabilities
(c) Revenue from Operation
(d) None of the above

Answer: C

Question. In Common size Balance sheet, which figure is assumed to be equal to 100?
(a) Revenue from operation
(b) Net profit
(c) Total expenses
(d) Equities and liabilities

Answer: D

Question. In Common size Balance sheet, which of following figure is assumed to be equal to 100?
(a) Equities and liabilities
(b) Total Assets
(c) Either (a) or (b)
(d) None of the above

Answer: C

Question. Comparative Financial statements means.
(a) To facilitate comparison for two or more Years
(b) To show Financial Position
(c) To compute profit or loss of two or more years
(d) None of the above

Answer: A

Question. Which of the following cannot be identified with the help of comparative Balance Sheet?
(a) Rate of Increase or decrease in share Capital
(b) Rate of increase or decrease in reserve and surplus
(c) Rate of increase or decrease in revenue from operation
(d) Rate of increase or decrease in Trade receivables

Answer: C

Question. Vertical Analysis is
(a) The comparison of P&L A/c with the Balance Sheet.
(b) The comparison of one company’s results with another company.
(c) The calculation of relative components of a particular accounting year.
(d) The comparison of the current year’s figures with the previous year’s figures.

Answer: C

Question. Which analysis is known as Trend Analysis?
(a) Inter firm analysis
(b) Intra firm analysis
(c) Cross Section analysis
(d) None of the above

Answer: B

Question. Which of the following is not a limitation of Financial statement Analysis?
(a) Historical analysis
(b) Variation in accounting practices
(c) Qualitative aspect ignored
(d) Understandable

Answer: D

Question. Which one of the following is the process of Financial statement Analysis?
(a) Rearrangement of Financial statement, Comparison, Analysis, Interpretation
(b) Rearrangement of Financial statement, Interpretation , Analysis, Comparison
(c) Rearrangement of Financial statements, Analysis, Comparison, Interpretation
(d) Comparison, Rearrangement of Financial statements, Analysis, Interpretation

Answer: A

Question. External Analysis is a _______________of Financial statement Analysis.
(a) technique
(b) uses
(c) type
(d) objective

Answer: C

Current Assets:
Cash                                                           500           600
Accounts Receivables                              2,000       3,000
Inventory                                                  1,500       2,500
Total Current Assets                              4,000       6,100

Fixed Assets:
Buildings                                                    3,000       4,000
Furnitures & office equipments                 1,000       1,500
Total Fixed Assets                                     4,000       5,500
Total Assets                                             8,000      11,600

Liabilities:
Current Liabilities:
Accounts Payable                                         1,000        1,200
Notes Payable                                                 500            500
Interest Payable                                              100            120
Total Current Liabilities                             1,600         1,820

Shareholder's Equity:
Common Stock                                               5,000         7,500
Retained earnings                                          1,400         2,280
Total Stockholder's equity                               6,400         9,780
Total Liabilities & Stockholder's equity      8,000       11,600