CBSE Class 12 Accountancy Analysis of Financial Statements Advanced Questions

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

Answer: a

Question: Main limitation of analysis of financial statements is
a) Affected by window dressing
b) Difficulty in forecasting
c) Do not reflect changes in price level
d) All of the Above

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: 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: Interest on Loans is
a) Direct Expenses
b) Indirect Expenses
c) Operating Expenses
d) None of the Above

Answer: b

Question: Comparative statement are also known as
a) Horizontal analysis
b) Dynamic analysis
c) Vertical analysis
d) External analysis

Answer: a

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: Which objective is not fulfilled by comparative financial statement:
a) Indicate the extent of change in assets and liabilities
b) Indicate the extent of change in items of Statement of Pofit & Loss
c) Show effect of operative activities on assets and liabilities
d) Show the direction of change in assets and liabilities

Answer: b

Question: Importance of Comparative Statement is
a) Make the data simple and more understandable
b) All of the options
c) Indicate the trend with respect to the previous year
d) compare the firm performance with the performance of other firm in the same business

Answer: b

Question: Rent received, Profit on sale of fixed assets, Compensation for acquisition of land are example of
a) Non-operating Incomes
b) Operating Incomes
c) Operating expenses
d) None of the options

Answer: a

Question: Bring out the importance of Financial Analysis
a) Helps in evaluating the profit earning capacity and financial feasibility of a business
b) All of the options
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: b

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: Common size analysis is also known as ______ Analysis
a) Vartical
b) Varitcal
c) Vertical
d) None of the options

Answer: c

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

Answer: d

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

Answer: a

Question: Operating Expenses is include
a) Office and Administrative expenses
b) All of the options
c) Selling and Distribution expenses
d) Provision for doubtful debts

Answer: b

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: 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: An equation in which total assets are multiplied to profit margin is classified as
a) Turnover equation
b) Du DuPont equation
c) Preference equation
d) None of the options

Answer: b

Question: Comparative Financial Statements show:
a) Financial position of a concern
b) Earning capacity of a concern
c) Both of them
d) None of these

Answer: c

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

Answer: b

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: In the Statement of Profit & Loss of a Common Size Statement:
a) Figure of net revenue from operations is assumed to be equal to 100
b) Figure of gross profit is assumed to be equal to 100
c) Figure of net profit is assumed to be equal to 100
d) Figure of assets is assumed to be equal to 100

Answer: a

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

Answer: a

Question: In which analysis Financial Statement for a single year analysed
a) Dynamic Analyses
b) Vertical Analysis
c) Vertical Analysis and Dynamic Analyses
d) None of the options

Answer: b

Question: Financial Statement Analysis Objectives/Need is
a) All of the options
b) Measure the profitability of the business
c) Measure the financial strength of the business
d) Make comparative study within the firm and with other forms

Answer: a

Question: For a healthy business the current ratio lies between
a) 0 to 1.5
b) 1.5 to 3
c) 3 to 4.5
d) 4.5 to 6

Answer: b

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

Answer: a

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: 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: each item is expressed as a percentage of some common base in
a) Fund Flow Statement
b) Common size statement
c) Cash Flow Statement
d) Cash Flow Statement

Answer: b

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

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: In a common-size Balance Sheet, total equity and liabilities are assumed to be equal to :
a) 1,000
b) 100
c) 10
d) 1

Answer: b

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

Answer: a

Question: An Annual Report is issued by a company to its:
a) Management
b) Directors
c) Auditors
d) Management

Answer: a

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

Answer: b

Question: The analysis of financial statement by a shareholder is an example of:
a) External Analysis
b) Internal Analysis
c) Vertical Analysis
d) Horizontal Analysis

Answer: a

Question: Which of the following is device of comparative statements?
a) Comparison expressed in terms of absolute data
b) Comparison expressed in terms of percentages
c) Comparison expressed in terms of ratios
d) All of the Above

Answer: d