Prof.

Rahul Ghosale

Mo No-9665383478/7744083478

MCQ of Financial Statement Analysis

1. Accounting Ratios are important tools used by
i.
ii.

Managers,
Researchers

iii.
iv.

Investors,
All of the above

iii.
iv.

Big-term Solvency
Profit for Lenders.

2. Net Profit Ratio Signifies:

i.
ii.

Operational Profitability
Liquidity Position

3. Working Capital Turnover measures the relationship of Working Capital with:

i.
ii.

Fixed Assets
Sales

iii.
iv.

Purchases
Stock.

4. In Ratio Analysis, the term Capital Employed refers to:

i.
ii.

Equity Share
Capital Net worth

iii.
iv.

Shareholders' Funds
None of the above.

iii.
iv.

Pref. Dividend PAT

Pref. Dividend Equity Dividend.

iii.
iv.

Capital Budgeting
Analysis of Fixed Assets.

iii.
iv.

Credit Sales
Cost of goods sold.

5. Dividend Payout Ratio is:

i.
ii.

PAT Capital
DPS EPS

6. DU PONT Analysis deals with:

i.
ii.

Analysis of Current Assets

Analysis of Profit

7. In Net Profit Ratio, the denominator is:

i.
ii.

Net Purchases
Net Sales

8. Inventory Turnover measures the relationship of inventory with:

i.
ii.

Average Sales
Cost of Goods Sold

iii.
iv.

Total Purchases
Total Assets.

iii.
iv.

Expected Value Analysis

Engineering Value Analysis.

iii.
iv.

Increasing Capital Utilization

All of the above.

9. The term 'EVA' is used for:

i.
ii.

Extra Value Analysis

Economic Value Added

10. Return on Investment may be improved by:

i.
ii.

Increasing Turnover
Reducing Expenses

11. In Current Ratio, Current Assets are compared with:

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Prof.Rahul Ghosale
i.
ii.

Mo No-9665383478/7744083478

Current Profit
Current Liabilities

iii.
iv.

Fixed Assets
Equity Share Capital.

12. ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5,00,000. What are the
Current Assets?
i.
ii.

Rs. 5,00,000
Rs. 10,00,000

iii.
iv.

Rs. 15,00,000
Rs. 25,00,000

13. There is deterioration in the management of working capital of XYZ Ltd. What does it refer
to?
i.

That the Capital Employed has

ii.

reduced
That the Profitability has gone up

iii.

That debtors collection period has

iv.

increased
That Sales has decreased.

14. Which of the following does not help to increase Current Ratio?
i.
ii.

Issue of Debentures to buy Stock

Issue of Debentures to pay Creditors

iii.
iv.

Sale of Investment to pay Creditors

Avail Bank O/D to buy Machine

iii.
iv.

Issue of Equity Shares

Redemption of Debt.

15. Debt to Total Assets Ratio can be improved by:

i.
ii.

Borrowing More
Issue of Debentures

16. Ratio of Net Income to Number of Equity Shares known as:

i.
ii.

Price Earnings Ratio

Net Profit Ratio

iii.
iv.

Earnings per Share

Dividend per Share.

17. Trend Analysis helps comparing performance of a firm

i.
ii.

With other firms,

Over a period of firm

iii.
iv.

With other industries

None of the above.

iii.

Current

iv.

Liabilities,
Share Capital > Current Assets.

18. A Current Ratio of Less than One means:

i.
ii.

Current Liabilities < Current Assets

Fixed Assets > Current Assets

Assets

<

Current

19. A firm has Capital of Rs. 10,00,000; Sales of Rs. 5,00,000; Gross Profit of Rs. 2,00,000 and
Expenses of Rs. 1,00,000. What is the Net Profit Ratio?
i.
ii.

20%
50%

iii.
iv.

10%
40%.

20. XYZ Ltd. has earned 8% Return on Total Assests of Rs. 50,00,000 and has a Net Profit Ratio
of 5%. Find out the Sales of the firm.
i.

Rs. 4,00,000

ii.

Rs. 2,50,000

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Prof.Rahul Ghosale
iii.

Mo No-9665383478/7744083478

Rs. 80,00,000

iv.

Rs. 83,33,333.

iii.
iv.

Market Share Position

Debt Position.

21. Suppliers and Creditors of a firm are interested in

i.
ii.

Profitability Position
Liquidity Position

22. Which of the following is a measure of Debt Service capacity of a firm?

i.
ii.

Current Ratio
Acid Test Ratio

iii.
iv.

Interest Coverage Ratio

Debtors Turnover.

23. Gross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. The reason
for such behavior could be:
i.
ii.

Increase in Costs of Goods Sold

If Increase in Expense

iii.
iv.

Increase in Dividend
Decrease in Sales.

iii.

Increase in Net Profit Ratio means

iv.

increase in Sales
Lower Debt-Equity Ratio means

24. Which of the following statements is correct?

i.

A Higher Receivable Turnover is not

ii.

desirable
Interest Coverage Ratio depends
upon Tax Rate,

lower Financial Risk

25. Debt to Total Assets of a firm is .2. The Debt to Equity boo would be:
i.
ii.

0.80
0.25

iii.
iv.

1.00
0.75

26. Which of the following helps analysing return to equity Shareholders?

i.
ii.

Return on Assets
Earnings Per Share

iii.
iv.

Net Profit Ratio

Return on Investment.

27. Return on Assets and Return on Investment Ratios belong to:

i.
ii.

Liquidity Ratios
Profitability Ratios

iii.
iv.

Solvency Ratios
Turnover.

28. XYZ Ltd. has a Debt Equity Ratio of 1.5 as compared to 1.3 Industry average. It means that
the firm has:
i.
ii.

Higher Liquidity
Higher Financial Risk

iii.
iv.

Higher Profitability
Higher Capital Employed.

29. Ratio Analysis can be used to study liquidity, turnover, profitability, etc. of a firm. What does
Debt-Equity Ratio help to study?
i.
ii.

Solvency
Liquidity

iii.
iv.

Profitability
Turnover

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Prof.Rahul Ghosale

Mo No-9665383478/7744083478

30. In Inventory Turnover calculation, what is taken in the numerator?

i.

Sales

iii.

Opening Stock

ii.

Cost of Goods Sold

iv.

Closing Stock.

31.The statement of cash flow is segregated into three categories:

i.

Operating,

ii.

Investing
Operating,

Financing,
Financing,

iii.

Investing,

Operating,

iv.

Accounting
Financing,

Managing,

Managing

Auditing

32.The statement of cash flow explains changes in _____ by listing the activities that increased
and decreased cash.
i.
ii.

Current Asset
Current Liabilities

iii.
iv.

Cash
Fixed Asset

33.The statement of cash flow can be prepared by using either the direct method or ______.
i.
ii.

Indirect Method
Current Method

iii.
iv.

Non current Method

None of the above

34.Under direct method, _________ cash flows are reported by major classes of operating cash
receipts and payments.
i.
ii.

Financing
Operating

iii.
iv.

Investing
None of the above

35.For a healthy growing firm generally __________ cash flows from operating activities are expected.
i.
ii.

Negative
Positive

iii.
iv.

Null
None of the above

Email Id- rahulghosale@yahoo.com/ghosalerahul@gmail.com

Prof.Rahul Ghosale

Mo No-9665383478/7744083478

36.A summary of a firms changes in financial position from one period to another, it is called _____.
i. Sources
iii.
Uses
ii. Resources
iv. Funds
37.The flow of funds statement portrays net rather than ___________ changes between two
comparable balance sheets at different dates.
i.
ii.

Operating
Gross

iii.
iv.

Financial
Investing

iii.
iv.

Both a and b
None of the above

38.Any decrease in asset item represents

i.
ii.

Uses of funds
Sources of funds

39.An increase in account receivables would be a __________.

i.
ii.

Use of funds
Reuse of funds

iii.
iv.

Sources of funds
Both a and c

40._______ is a bookkeeping entry that allocates the cost of assets against income but does not
involve any movement of capital.
i.
ii.

Depletion
Amortization

iii.
iv.

Depreciation
None of the above

41.Deferred taxes an item that often appear in the long term portion of a firms
balance sheet.
i.
ii.

Assets
owners equity

iii.
iv.

liability
current assets

42.Deferred taxes most commonly arises when a firm determines .. Expenses in

its published financial statement on a different basis then in its tax return.
a) Direct expense
b) depreciation

c) indirect expense
d) tax expense

e)

Email Id- rahulghosale@yahoo.com/ghosalerahul@gmail.com

Prof.Rahul Ghosale

Mo No-9665383478/7744083478

43.Most likely a company chooses depreciation method for its published income
statement.
i.
ii.

MACRS
simple method

iii.

straight line method

iv.

double decline method

44.For tax purpose company uses the depreciation method.

i.
ii.

MACRS
simple method

iii.
iv.

straight line method

double decline

45.By analyzing ________ ratio, we know the reason of growing inventory and receivables.
i.
ii.

Activity
Profitability

iii.
iv.

Market
Liquidity

46.An analysis of percentage of financial statements where all the balance sheet items are
divided by total assets and all income statement items are divided by net sales and revenue, is
called
i.
ii.

Trend analysis
Common size analysis

iii.
iv.

Vertical analysis
Index analysis

47.An analysis of percentage of financial statements where all the balance sheet or income
statement figures for a base year equals 100.
i.
ii.

Trend analysis
Common size analysis

iii.
iv.

Vertical analysis
Index analysis

48.Which of the following would be considered a use of funds?

i.

a decrease in accounts

ii.

receivable.
a decrease in cash.

iii.

an increase in account

iv.

payable.
an increase in cash.

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Prof.Rahul Ghosale

Mo No-9665383478/7744083478

49.Which of the following is NOT a cash outflow for the firm?

i.
ii.

depreciation.
dividends.

iii.
iv.

interest payments.
taxes.

50.An examination of the sources and uses of funds statement is part of:
i.

forecasting

ii.

technique.
A funds flow analysis.

iii.
iv.

A ratio analysis.
Calculations for the
balance sheet.

51.Uses of funds include a (an):

i.
ii.

decrease in cash.
increase in any liability.

iii.
iv.

increase in fixed assets.

tax refund.

52.According to the Financial Accounting Standards Board (FASB), which of the following is a
cash flow from a "financing" activity?
i.

cash outflow to the government for

ii.

taxes.
cash outflow to shareholders as

iii.
iv.

cash outflow to lenders as interest.

cash outflow to purchase bonds
issued by another company.

dividends.

53._________ provides a financial summary of the firms operating results during a specified
period.
i.
ii.

Balance sheet
Income statement

iii.
iv.

Cash flow statement

Statement of retained earning

54.Firms financial position at a given point in time is stated in ________.

i.
ii.

Balance sheet
Income statement

iii.
iv.

Capital budgeting
None of the above

Email Id- rahulghosale@yahoo.com/ghosalerahul@gmail.com

Prof.Rahul Ghosale

Mo No-9665383478/7744083478

55.The times interest earned ratio, sometimes also called the________________.

i.
ii.

Total Asset Turnover

Average Payment Period

iii.
iv.

Fixed-Payment Coverage Ratio

Interest coverage ratio

56.A popular tool for evaluating profitability in relation to sales is the _________________.
i.
ii.

Liquidity Ratios
Common-size

income

iii.
iv.

Quick Ratio
Cash Ratio

statement
57.Which of the following three is not frequently cited ratio of profitability that can be read
directly from the common-size income statement?
i.
ii.

Gross profit margin,

Operating profit margin,

iii.
iv.

Net profit margin

Return on Total Assets

Email Id- rahulghosale@yahoo.com/ghosalerahul@gmail.com