Analysis & interpretation of financial statement Set 1

Bachelor of Business Administration (BBA),

Bachelor of Banking and Insurance (BBI),

Bachelor of Commerce (B Com)

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This set of Management Accounting Multiple Choice Questions & Answers (MCQs) focuses on Analysis & interpretation of financial statement Set 1

Q1 | The dividend is related to the market value of shares in .
  • interest cover ratio.
  • fixed dividend cover ratio.
  • debt service coverage ratio.
  • dividend yield ratio.
Answer: dividend yield ratio.
Q2 | Turnover ratio is also known as .
  • activity ratios.
  • solvency ratios.
  • liquidity ratios.
  • profitability ratios.
Answer: activity ratios.
Q3 | Inventory or stock turnover ratio is also called .
  • stock velocity ratio.
  • debtors velocity ratio.
  • creditors velocity ratio.
  • working capital turnover ratio.
Answer: stock velocity ratio.
Q4 | Which ratio is calculated to ascertain the efficiency of inventory managementin terms of capital investment?
  • stock velocity ratio.
  • debtors velocity ratio.
  • creditors velocity ratio.
  • working capital turnover ratio.
Answer: stock velocity ratio.
Q5 | The ratio which measures the relationship between the cost of goods sold andthe amount of average inventory is
  • stock turnover ratio.
  • debtors velocity ratio.
  • creditors velocity ratio.
  • working capital turnover ratio.
Answer: stock turnover ratio.
Q6 | Sales – Gross Profit = .
  • net profit.
  • administrative expenses.
  • cost of production.
  • cost of goods sold.
Answer: cost of goods sold.
Q7 | Opening stock + purchases + direct expenses – closing stock =
  • net profit.
  • cost of production
  • administrative expenses.
  • cost of goods sold
Answer: cost of goods sold
Q8 | Debtors turnover ratio is also called .
  • stock turnover ratio.
  • debtors velocity ratio.
  • creditors velocity ratio.
  • working capital turnover ratio
Answer: debtors velocity ratio.
Q9 | Creditors turnover ratio is also called .
  • stock turnover ratio.
  • debtors velocity ratio.
  • accounts payables ratio.
  • working capital turnover ratio.
Answer: accounts payables ratio.
Q10 | Which of the following shows details and results of the company's profitrelated activities for a period of time?
  • balance sheet
  • income statement
  • statement of cash flows
  • statement of financial position
Answer: income statement
Q11 | Which of the following financial statements is also known as a statement offinancial position?
  • balance sheet
  • statement of cash flows
  • income statement
  • none of the above
Answer: balance sheet
Q12 | 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?
  • 20%,
  • 50%,
  • 10%,
  • 40%
Answer: 20%,
Q13 | Which technique used for figures of two or more periods are placed side byside to facilitate easy and meaningful comparisons?
  • comparative statement
  • common?size statement
  • trend analysis
  • none
Answer: comparative statement
Q14 | Which of the following are techniques, tools or methods of analysis andinterpretation of financial statements?
  • ratio analysis
  • average analysis
  • trend analysis
  • all of the above
Answer: all of the above
Q15 | Which of the following is NOT a key ratio in the prediction of bankruptcy asdeveloped by Edward Altman?
  • debt to equity
  • current ratio
  • retained earnings as a percent of total assets
  • total assets
Answer: debt to equity
Q16 | _______________ ratios measure the ability of a firm to earn an adequatereturn on sales, total assets and invested capital.
  • asset utilization
  • liquidity
  • profitability
  • debt utilization
Answer: profitability
Q17 | The ________ ratios help determines the degree of financial risk and earningsvolatility present in a firm.
  • profitability
  • asset utilization
  • liquidity
  • none of the above.
Answer: liquidity
Q18 | __________ analysis is the process of studying a series of ratios for a companyand/or industry over time.
  • dupont
  • trend
  • common size
  • all of the above
Answer: common size
Q19 | The ideal level of current ratio is
  • 4:02
  • 2:01
  • both a and b
  • none of the above
Answer: 2:01
Q20 | The most precise test of liquidity is
  • quick ratio
  • current ratio
  • absolute liquid ratio
  • none of the above
Answer: absolute liquid ratio
Q21 | Debt-equity ratio is a sub-part of
  • short-term solvency ratio
  • long-term solvency ratio
  • debtors turnover ratio
  • none of the above
Answer: short-term solvency ratio
Q22 | 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
Answer: rs 1, 62,000
Q23 | Funds flow statements are prepared so as to
  • to identify the changes in working capital
  • to identify reasons behind change in working capital
  • to know the item-wise outflow of funds during given period
  • all of the above
Answer: all of the above
Q24 | Net Profit ratio is calculated by
  • (gross profit/gross sales) *100
  • (gross profit/net sales) *100
  • (net profit/net sales) *100
  • none of the above
Answer: (net profit/net sales) *100
Q25 | If sales is Rs 5, 00,000 and net profit is Rs 1, 20,000 Net Profit ratio is
  • 24%
  • 41%
  • 60%
  • none of the above
Answer: 24%
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