Financial Statement Analysis Multiple Choice Questions and Answers

Multiple Choice Questions and Answers

1. Financial statements accomplish only external reporting.

Ans: False, Both Internal and External reporting

2. Current ratio is also known as liquid ratio.                                     

Ans: False, Working Capital Ratio

3. IFRS-4 is associated with insurance contracts.

Ans: True

4. Financial statement analysis is an important means of assessing past performance and planning future performance.

Ans: True

5. The new name of standards issued the IASB is international financial reporting standards (IFRS).

Ans: True

6. Higher the price earning ratio, better it is, as it indicates growth of the company.

Ans: True

7. Financial statements disclose only monetary facts.

Ans: True

8. The figures shown in financial statements are on historical cost basis.

Ans: True

9. Current Ratio is calculated to compare current assets and fixed assets.

Ans: False, Current Assets/Current Liabilities

10. A decrease in Stock Turnover Ratio indicates that business is becoming more efficient.

Ans: False,

11. Corporate social responsibility reporting is not mandatory for any business in India.

Ans: False, The following companies are necessary to constitute a CSR committee: Companies with a net worth of Rs. 500 crores or greater, or Companies with a turnover of Rs. 1000 crores or greater, or Companies with a net profit of Rs. 5 crores or greater.

12. Financial statements reflect the recorded facts.

Ans: True

13. The new name of Accounting Standards issued by IASB is International Financial Reporting Standards (IFRS).

Ans: True

14. Current Ratio indicates short-term debt paying ability of a firm.

Ans: True

15. Analysis of financial statements ignores the issue of price level changes.

Ans: True

16. Capital gearing is a term used to express the relationship between ordinary share capital and fixed interest bearing securities of a company.

Ans: True

17. The IRDA was incorporated as statutory body in April 1999.

Ans: False, April 2000

18. Profit or Loss of Life Insurance business is determined by preparing _____. (Revenue Account/Valuation Balance Sheet).

19. A Banking Company incorporate in India shall have to transfer a sum equal to 25%. (25%/30%) of profit to a Statutory Reserve.

20. According to RBI Guidelines a Provision of _____(20%/30%) is required for any advance remains doubtful up to one year.

21. Common Size Statement Analysis is known as _____ (Vertical Analysis/Horizontal Analysis).

22. Compliance of Corporate Governance was made mandatory by SEBI as listing requirement vide _____(Clause 49/Clause 32).

23. Long-term solvency of the business is reflected by _____ (Acid Test/Ratio/Debt-equity Ratio/Stock Turnover Ratio).

24. Accounting Standards Board (ASB) was set up in India in the year _____ (1973/1975/1977)

25. The basic objective of financial statements is to ____ (provide information/meet legal requirement/show performance of management).

26. Disclosure in financial statements of banks and similar financial institutions is associated with (IAS-30/IAS-31/IAS-32)

27. Comparative statement analysis is also known as ____ (vertical analysis/static analysis/horizontal analysis)

28. The ____ of a company has primary responsibility for the corporation’s external financial reporting functions (management/members/board of directors).

29. At present ASB of ICAI formulates the AS based on ____ (GAAP/IFRS/IAS).

30. Ratio of net profit before interest and taxes to sales is ____ ratio (net profit/profit/operative profit)

31. Financial statement analysis helps to measure ________ (Operating efficiency/Management efficiency/Employee’s efficiency)

32. GAAP stands for Generally Accepted Accounting Principles.

33. Reporting to corporate governance reflects __________. (Company Management/Earning status/Socio economic status).

34. The institute of chartered accountants if India (ICAI) has decided to adopt IFRS in India from ____. (2011/2012/2013)

35. According to IFRS, banking companies are to adopt _______ (Fair value accounting/Historical value accounting).

36. Financial system are______.(estimates of fact/ recorded facts/anticipated facts.)

37. Long term solvency ratio is the same as_____(current ratio/acid-test ratio/ debt-equity ratio)

38. The objective of financial reporting for business enterprises are based on_____(GAAP/the need of conservatism/need of the users of the information).

39. The institute of chartered Accountant Of India has decided to converge the Indian reporting of corporate India with effect from 1^st April 2011. (2011/2012/2013).

40. Disclosures in financial statement of banks and similar financial institutions are associated with IAS 30.(IAS 30/IAS 31/IAS 32)

41. Financial statements are the end product of financial accounting process.   True

42. Liquidity ratios indicate the firm’s ability to pay its current liability.                True

43. Financial statements also disclose such facts which are not recorded in accounting books.   True

44. IFRS-4 is associated with insurance contracts.                             True

45. Corporate social responsibility reporting is not mandatory for any business in India.              False

46. Quick assets are current assets less _____ and _____ expenses (stock, prepaid/debtor, outstanding/bank overdraft, prepaid).

47. Current ratio is also known as acid test ratio.                              False

48. Corporate financial reporting in fact is an effective communication of accounting information between the management and the user groups of the financial statements.                                 True

49. The new name for standard issued by the FASB is International Financial Reporting Standards (IFRS).

50. The IRDA was incorporated as a statutory body in April 2000.                              True

51. The basic objective of financial statements is to _____ (provide accounting information/meet legal requirement/show performance of management).

52. According to IFRS, banking companies are to adopt _____ (fair value accounting/historical value accounting).