MCQs on Financial Statements Analysis
Multiple Choice Questions and Answers
A. Choose the Correct Answer:
1. Financial statements of a company
include:
a)
Balance Sheet.
b)
Profit or Loss Account.
c)
Cash Flow Statements.
d) All of
the above.
2. Most commonly used tools for financial analysis are:
a)
Horizontal Analysis.
b)
Vertical Analysis.
c)
Ratio Analysis.
d) All of
the above.
3. Balance Sheet shows:
a) Financial
position of a Company.
b)
Profit or Loss of a Company.
c)
Cash flow of a Company.
d)
None of the above.
4. Annual Report is issued by a
company to its:
a)
Directors.
b)
Auditors.
c) Shareholders.
d)
Management.
5. Balance Sheet provides information
about the financial position of the enterprise
a) At a
point of time.
b)
Over a period of time.
c)
For a period of time.
d)
None of the above.
6. Which section of the Companies Act
requires that Balance Sheet is to be prepared in the prescribed form?
a)
Sec 125
b)
Sec 126
c)
Sec 127
d) Sec
129.
7. Dividend is usually paid on:
a)
Authorised capital
b)
Issued share capital
c)
Paid up share capital
d)
Called up share capital
8. Balance Sheet shows:
a)
Operating efficiency
b) Financial
position
c)
All of the above
d)
None of the above
9. Income statement shows:
a) Operating
efficiency
b)
Financial position
c)
All of the above
d)
None of the above
10. Which of the following is prepared
on a particular date?
a)
Trading account
b)
Profit & loss account
c) Balance
sheet
d)
All of the above
B. State whether the following statements are true or false.
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1.
Financial statements are the end products of
accounting process. True
2.
Financial statements are primarily directed
towards the need of owners. True
3.
Facts & figures presented in financial
statements may be affected by may be personal bias. False
4.
Recorded facts are based on replacement cost. False
5.
Going concerns concept assumes that the enterprise
continues for a long period of time. True
6.
Financial statements provide a summary of
accounts. False
7.
Financial statements are based on recorded
facts. True
8.
Patent is an intangible asset. True
9.
Financial Statements are prepared on
historical cost. True
10.
Balance Sheet is a statement containing all
the ledger balances contained in the ledger. False
11.
The term financial statement analysis includes
only analysis and does not include interpretations. False
12.
The term “Interpretation” means explaining the
meaning & significance of data. True
13.
The term “Analysis” means simplification of
financial data by proper clarification of the data. True
14.
Comparative Statements are the form of
Horizontal Analysis. True
15.
Common size statements are a tool in vertical
analysis. True
16.
In common size statement, every item is
expresses as a percentage of some common base. True
17.
Trend Analysis determines the direction
upwards or downward. True
18.
Financial analysis provides an insight into the
structure of financial statements. True
19.
Financial analysis is used only by the creditors.
False
20.
Financial statements accomplish only external
reporting. False, Both Internal and External reporting
21.
Current ratio is also known as liquid ratio. False, Working Capital Ratio
22.
IFRS-4 is associated with insurance contracts. True
23.
Financial statement analysis is an important means
of assessing past performance and planning future performance. True
24.
The new name of standards issued the IASB is
international financial reporting standards (IFRS).
True
25.
Higher the price earnings ratio, better it is, as it
indicates growth of the company. True
26.
Financial statements disclose only monetary facts. True
27.
The figures shown in financial statements are on
historical cost basis. True
28.
Current Ratio is calculated to compare current
assets and fixed assets. False, Current Assets/Current
Liabilities
29.
A decrease in Stock Turnover Ratio indicates that
business is becoming more efficient. False
30. Corporate
social responsibility reporting is not mandatory for any business in India. 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.
31.
Financial statements reflect the recorded facts. True
32.
The new name of Accounting Standards issued by IASB
is International Financial Reporting Standards (IFRS). True
33.
Current Ratio indicates short-term debt paying
ability of a firm. True
34.
Analysis of financial statements ignores the issue
of price level changes. True
35.
Capital gearing is a term used to express the
relationship between ordinary share capital and fixed interest bearing
securities of a company. True
36. The IRDA
was incorporated as statutory body in April 1999. False,
April 2000
37.
Financial statements are Summarized report of
recorded facts. True
38.
Financial statements include Profit & Loss
statement, Balance Sheet and Cash Flow Statement. True
39.
The prescribed form of the Balance Sheet for
the Companies has been in the Schedule III. True
40.
IFRS-4 is associated with insurance
contracts. True
41. Corporate
social responsibility reporting is not mandatory for any business in
India. False
42. Corporate
financial reporting in fact is an effective communication of accounting
information between the management and the user groups of the financial
statements. True
43.
The new name for standard issued by the FASB is
International Financial Reporting Standards (IFRS).
44. The IRDA
was incorporated as a statutory body in April
2000. True
45. Financial
statements are the end product of financial accounting
process. True
46. Liquidity
ratios indicate the firm’s ability to pay its current
liability. True
47. Financial
statements also disclose such facts which are not recorded in accounting
books. True
48. Current
ratio is also known as acid test
ratio. False
C. Fill up the blanks with appropriate word/words.
1.
Financial
Statements are the basic source of information to interested parties.
2.
Balance
Sheet shows the financial position of an enterprise.
3.
Financial Statements are prepared on the basis
of Historical value.
4.
A company is required to publish its Financial Statements every year.
5.
Profit & Loss Statement shows the Operating Efficiency of the
enterprise.
6.
Balance sheet shows financial Position of an enterprise.
7.
Financial Statements are basis of information to interested parties.
8.
Proposed Dividend is shown in the Balance
Sheet of a Company under Current
liabilities & sub heading Short
term provisions.
9.
Preparation of Profit & Loss Statement is
based on Accrual basis.
10.
Shareholders of a company are called Owners.
11.
Financial Facts are recorded at Cost Price.
12.
Current liabilities are payable within 12 months.
13.
Number of main headings in Equity &
Liabilities side of a Company Balance Sheet is four (4).
14.
The number of main headings in the asset side
of the balance sheet is two (2).
15.
Preliminary Expenses are shown in the Balance
Sheet under Other non-current assets.
16.
Common Size Statement Analysis is known as _____ (Vertical Analysis/Horizontal
Analysis).
17.
Long-term solvency of the business is reflected by
_____ (Acid Test/Ratio/Debt-equity Ratio/Stock Turnover Ratio).
18.
Accounting Standards Board (ASB) was set up in India
in the year _____ (1973/1975/1977)
19.
The basic objective of financial statements is to
____ (provide information/meet legal
requirement/show performance of management).
20.
Comparative statement analysis is also known as ____
(vertical analysis/static analysis/horizontal analysis)
21.
The ____ of a company has primary responsibility for
the corporation’s external financial reporting functions (management/members/board
of directors).
22.
At present ASB of ICAI formulates the AS based on
____ (GAAP/IFRS/IAS).
23.
Ratio of net profit before interest and taxes to
sales is ____ ratio (net profit/profit/operative profit)
24.
Financial statement analysis helps to measure
________ (Operating efficiency/Management efficiency/Employee’s
efficiency)
25.
GAAP stands for Generally Accepted Accounting
Principles.
26.
Financial system are______.(estimates of fact/ recorded
facts/anticipated facts.)
27.
Long term solvency ratio is the same as_____(current
ratio/acid-test ratio/ debt-equity ratio)
28.
The objective of financial reporting for business
enterprises are based on_____(GAAP/the need of conservatism/need of the
users of the information).
29.
The institute of chartered Accountant Of India has
decided to converge the Indian reporting of corporate India with effect
from 1st April 2011. (2011/2012/2013).
30.
Quick assets are current assets less _____ and _____
expenses (stock, prepaid/debtor, outstanding/bank
overdraft, prepaid).
31.
The basic objective of financial statements is to
_____ (provide accounting information/meet legal
requirement/show performance of management).
32.
According to IFRS, banking companies are to adopt
_____ (fair
value accounting/historical value accounting).
33.
Profit or Loss of Life Insurance business is
determined by preparing _____. (Revenue Account/Valuation Balance Sheet).
34.
A Banking Company incorporate in India shall have to
transfer a sum equal to 25%. (25%/30%)
of profit to a Statutory Reserve.
35.
According to RBI Guidelines a Provision of _____(20%/30%)
is required for any advance remains doubtful up to one year.
36.
Compliance of Corporate Governance was made
mandatory by SEBI as listing requirement vide _____(Clause 49/Clause
32).
37.
Disclosure in financial statements of banks and
similar financial institutions is associated with (IAS-30/IAS-31/IAS-32)
38. Reporting
to corporate governance reflects __________. (Company Management/Earning
status/Socio
economic status).
39.
The institute of chartered accountants if India
(ICAI) has decided to adopt IFRS in India from ____. (2011/2012/2013)
40.
According to IFRS, banking companies are to adopt
_______ (Fair value accounting/Historical value accounting).
41. Disclosures in financial statement of banks and similar financial institutions are associated with IAS 30.(IAS 30/IAS 31/IAS 32)
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