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This set of Analysis of Financial Statements Multiple Choice Questions & Answers (MCQs) focuses on Ratio Analysis Set 2
Q1 | Opening stock + purchases + direct expenses – closing stock =
- net profit.
- cost of production
- administrative expenses.
- cost of goods sold
Q2 | Which ratio measures the number of times the receivables are rotated in a year in terms of sales?
- stock turnover ratio.
- debtors turnover ratio.
- creditors velocity ratio.
- working capital turnover ratio.
Q3 | Debtors turnover ratio is also called .
- stock turnover ratio.
- debtors velocity ratio.
- creditors velocity ratio.
- working capital turnover ratio
Q4 | Creditors turnover ratio is also called
- stock turnover ratio.
- debtors velocity ratio.
- accounts payables ratio.
- working capital turnover ratio.
Q5 | The primary purpose of the liquidity ratios is to determine
- how much working capital is tied up in inventory?
- the relative level of short-term debt.
- how well a firm is able to pay off short-term obligations?
- more than one of the above.
Q6 | Which of the following statements about liquidity ratios is true?
- the higher the current ratio, the more likely a firm is able to pay its short-term obligations.
- the lower the quick ratios relative to the current ratio, the safer a firm is in terms of liquidity.
- the ratio of net working capital to total assets always lies between 0 and 1.
- relatively high current ratios are usually a sign of efficient working capital management.
Q7 | The ________ ratios help determines the degree of financial risk and earnings volatility present in afirm.
- profitability
- asset utilization
- liquidity
- none of the above.
Q8 | Which of the following statements are true?
- debt to equity and debt to asset ratios measure capital structure and vary widely among industries.
- debt utilization ratios alone do not measure a firm\s ability to meet its cash obligations.
- dupont analysis considers the impact of debt on the profitability of the firm.
- two of the above are true.
Q9 | Debt-equity ratio is a sub-part of
- short-term solvency ratio
- long-term solvency ratio
- debtors turnover ratio
- none of the above
Q10 | The most precise test of liquidity is
- quick ratio
- current ratio
- absolute liquid ratio
- none of the above
Q11 | Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs 60,000. Determine value of stock.
- rs 54,000
- rs 60,000
- rs 1, 62,000
- none of the above
Q12 | Statement of cash flows includes
- financing activities
- operating activities
- investing activities
- all of the above
Q13 | In cash flows, when a firm invests in fixed assets and short-term financial investments results in
- increased equity
- increased liabilities
- decreased cash
- increased cash
Q14 | A firm that issues stocks and bonds to raise funds results in
- decreases cash
- increases cash
- increases equity
- indian overseas bank
Q15 | The purchase value of assets over its serviceable life is categorised as
- appreciated liabilities
- appreciated assets
- depreciation
- appreciation
Q16 | The basic financial statements include
- statement of cash flows
- income statement
- balance sheet
- all of the above
Q17 | Cash flow example from a financing activity is
- payment of dividends
- receipt of dividend on investment
- cash received from customers
- purchase of fixed asset
Q18 | Cash flow example from an investing activity is
- issue of debenture
- repayment of long-term loan
- purchase of raw materials for cash
- sale of investment by non-financial enterprise
Q19 | Cash flow example from an operating activity is
- purchase of own debenture
- sale of fixed assets
- interest paid on term-deposits by a bank
- issue of equity share capital
Q20 | Which item comes under financial activities in cash flow?
- redemption of preference share
- issue of preference share
- interest paid
- all the above
Q21 | As per Accounting Standard-3, Cash Flow is classified into
- operating activities and investing activities
- investing activities and financing activities
- operating activities and financing activities
- operating activities, financing activities and investing activities
Q22 | Cash Flow Statement is also known as
- statement of changes in financial position on cash basis
- statement accounting for variation in cash
- both a and b
- none of the above.
Q23 | The objectives of Cash Flow Statement are
- analysis of cash position
- short-term cash planning
- evaluation of liquidity
- comparison of operating performance
Q24 | Cash Flow Statement is based upon
- cash basis of accounting
- accrual basis of accounting
- credit basis of accounting
- none of the above
Q25 | Which of the following statements are true?
- cash flow reveals only the inflow of cash
- cash flow reveals only the outflow of cash
- cash flow is a substitute for income statement
- cash flow statement is not a replacement of funds flow statement.