This quiz works best with JavaScript enabled. Home > Cbse > Class 12 > Commerce > Accountancy > Class 12 Accountancy Chapter 8 Analysis Of Financial Statements – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 3 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. In Trend Analysis earliest year is considered as ..... year. A) Last. B) Base. C) Current. D) First. Show Answer Correct Answer: B) Base. 2. What is the value of total assets A) $ 4.985.7M. B) $ 3, 951.2M. C) $ 4, 284.6M. D) $ 4, 451.9M. Show Answer Correct Answer: D) $ 4, 451.9M. 3. A balance sheet includes A) Assets. B) Liabilities. C) Owner's equity. D) All of the above. Show Answer Correct Answer: D) All of the above. 4. Which of the following will not be treated as part of Current Assets in case of Working capital assessment? A) Advances to supplier of capital goods. B) Credit Balance in Cash Credit Account. C) Advances to supplier of Raw Material. D) Stock in process. Show Answer Correct Answer: A) Advances to supplier of capital goods. 5. The difference between what it costs to make and sell a product and what a customer pays for it. A) Profit. B) Expenses. C) Revenue. D) Bookeeper. Show Answer Correct Answer: A) Profit. 6. What is the difference between a classified and unclassified balance sheet? A) The font size used in the balance sheet. B) The language in which the balance sheet is written. C) The difference between a classified and unclassified balance sheet lies in the level of detail provided regarding the classification of assets, liabilities, and equity. D) The color scheme of the balance sheet. Show Answer Correct Answer: C) The difference between a classified and unclassified balance sheet lies in the level of detail provided regarding the classification of assets, liabilities, and equity. 7. Which of the following is NOT a problem from carrying a lot of inventory? A) Inventory can increase sales opportunities. B) Inventory can be lost (also known as "shrinkage"). C) Inventory can be come obsolete, resulting in loss of value. D) Inventory needs to be stored, which can be expensive. Show Answer Correct Answer: A) Inventory can increase sales opportunities. 8. Which of the following is true for every adjusting entry? A) They affect only income statement accounts. B) They affect balance sheet account and an income statement account. C) They affect only balance sheet accounts. D) They affect only accounts with normal debit balance. Show Answer Correct Answer: B) They affect balance sheet account and an income statement account. 9. What is the value of current ratio A) 76.59%. B) 75.41%. C) 73.12%. D) 68.51%. Show Answer Correct Answer: A) 76.59%. 10. How is the P/E ratio calculated? A) By dividing a stock's price by its growth potential per share. B) By dividing a stock's price by its dividends per share. C) By dividing a stock's price by its earnings per share. D) By dividing a stock's price by its projected future earnings per share. Show Answer Correct Answer: C) By dividing a stock's price by its earnings per share. 11. What are the main components of a balance sheet? A) Investments and returns. B) Cash inflow and outflow. C) Revenue and expenses. D) Assets and liabilities. Show Answer Correct Answer: D) Assets and liabilities. 12. "Revenue" is defined as: A) The amount of equity a company has on hand at the end of the year. B) The amount of money a company has after deducting expenses. C) The amount of money a company takes in over a set amount of time. D) The amount of profit shareholders get to keep. Show Answer Correct Answer: C) The amount of money a company takes in over a set amount of time. 13. Which of the following would appear on the report form of a Balance Sheet for a sole proprietorship? A) Sales Revenue. B) Cash from Financing Activities. C) Owner's Capital. D) Cost of Goods SoldTagsDOK Level 1:Recall. Show Answer Correct Answer: C) Owner's Capital. 14. ISA 330 The auditor's assessment of the risks of material misstatement at the assertion level includes an expectation that the controls are operating effectively.When the auditor fine the client's Internal Control is can be to rely on the operating effectiveness of controls in determining as below except? A) Nature. B) Extent Substantive Procedures. C) Cost. D) Timing. Show Answer Correct Answer: C) Cost. 15. Define the term 'financial statement analysis'. A) Financial analysis of non-profit organizations. B) Analyzing marketing strategies of a company. C) Reviewing employee performance reports. D) Financial statement analysis is the process of reviewing and evaluating a company's financial statements to make better economic decisions. Show Answer Correct Answer: D) Financial statement analysis is the process of reviewing and evaluating a company's financial statements to make better economic decisions. 16. Tests of controls are performed only on those controls that the auditor has determined are suitably designed A) To rely internal controls without extending substantive test. B) To prevent, or detect and correct, a material misstatement in an assertion. C) To obtain sufficient appropriate audit evidence. D) To respond assess risk. Show Answer Correct Answer: B) To prevent, or detect and correct, a material misstatement in an assertion. 17. Which financial statement would you analyze to assess a company's liquidity? A) Income Statement. B) Balance Sheet. C) Cash Flow Statement. D) Statement of Owner's EquityTagsDOK Level 1:Recall. Show Answer Correct Answer: B) Balance Sheet. 18. The first "calculation" in the Cost of Merchandise Sold section of the income statement is ..... A) Cost of Delivered Merchandise. B) Net Purchases. C) Cost of Merchandise Available. D) Cost of Merchandise Sold. Show Answer Correct Answer: A) Cost of Delivered Merchandise. 19. What does subtracting liabilities from assets determine? A) Total revenue. B) Net worth. C) Operational costs. D) Investment value. Show Answer Correct Answer: B) Net worth. 20. A Cash Flow Statement: A) Reports the profit a company makes in a fiscal year before interest and taxes are taken out. B) Reports the amount of credit lenders are willing to offer as loans in the short term 12 months or less. C) Reports where the cash coming in came from and where the money going out was spent during a specific period of time. D) All of the answers are correct. Show Answer Correct Answer: C) Reports where the cash coming in came from and where the money going out was spent during a specific period of time. 21. Discuss the importance of the statement of cash flows. A) The statement of cash flows is only relevant for tax purposes. B) Companies can operate successfully without preparing a statement of cash flows. C) The statement of cash flows is important for analyzing a company's financial health and liquidity. D) Analyzing the statement of cash flows is unnecessary for investors. Show Answer Correct Answer: C) The statement of cash flows is important for analyzing a company's financial health and liquidity. 22. How do financial statements help investors make decisions? A) Financial statements help investors make decisions by providing marketing insights. B) Financial statements help investors make decisions by analyzing customer satisfaction. C) Financial statements help investors make decisions by providing crucial insights into a company's financial performance and health. D) Financial statements help investors make decisions by predicting future stock prices. Show Answer Correct Answer: C) Financial statements help investors make decisions by providing crucial insights into a company's financial performance and health. 23. Which of the following is not a current liability? A) Bank loan. B) Accounts payable. C) Collected state sales taxes. D) Mortgage. Show Answer Correct Answer: C) Collected state sales taxes. 24. Balance Sheet of company is required to be prepared in the format given in: A) Schedule III Part I. B) Schedule III Part III. C) Schedule II Part II. D) Table A. Show Answer Correct Answer: A) Schedule III Part I. 25. Feature of financial analysis is to present the data contained in financial statements A) Easy form. B) Convenient and rational groups. C) Comparable form. D) All of the Above. Show Answer Correct Answer: D) All of the Above. 26. On balance sheet, accruals, notes payable, and account payable are listed under which category? A) Accumulated Liabilities. B) Non Current Liabilities. C) Accrued Liabilities. D) Current Liabilities. Show Answer Correct Answer: D) Current Liabilities. 27. When performing test counts, the auditor selects of items from management's count records to compare the physical inventory and select of items from the physical inventory to compare management's count records, consistent with the audit objective to ensure the completeness and the accuracy of those records. The appropriate audit technique for this procedure is: A) Vouching. B) Confirmation. C) Verification. D) Tracing. Show Answer Correct Answer: D) Tracing. 28. Money market securities have which of the following characteristics? A) Low default risk, low liquidity, low return. B) High liquidity, low risk, low return. C) Short maturity, low risk, low liquidity. D) Long maturity, low risk, high return. E) High return, high liquidity, low risk. Show Answer Correct Answer: B) High liquidity, low risk, low return. 29. ..... is reported on the income statement A) Net Worth. B) Net income or net loss. C) A financial statement. D) A profitability ratio. Show Answer Correct Answer: B) Net income or net loss. 30. How can discrepancies in profit and cash flow raise concerns? A) Reflects high employee satisfaction. B) Suggests a decrease in market demand. C) Shows strong financial health. D) Indicates potential financial discrepancies. Show Answer Correct Answer: D) Indicates potential financial discrepancies. 31. Prepaid expenses are shown in- A) Liability side. B) Asset side. C) Assets or Liability side. D) None of these. Show Answer Correct Answer: B) Asset side. 32. Depreciation for current year in the trial balance is shown in A) Debit side of profit and loss account and it is deducted from the particular asset in the balance sheet. B) Asset side of balance sheet as a deduction from the concerned asset. C) Debit side of p and L account. D) Debit side of trading account. Show Answer Correct Answer: A) Debit side of profit and loss account and it is deducted from the particular asset in the balance sheet. 33. What does a high P/E ratio indicate? A) The stock has limited growth potential. B) The stock is expected to grow quickly. C) The stock is overvalued. D) The stock is undervalued. Show Answer Correct Answer: B) The stock is expected to grow quickly. 34. For a transportation firm, which ratio gives a measure of the source of funds with which property is obtained? A) Per mile-per person-per ton. B) Return on equity. C) Long-term debt to operating property. D) Operating revenue to operating property. E) Operating. Show Answer Correct Answer: C) Long-term debt to operating property. 35. What does a positive cash flow from operating activities indicate in a Cash Flow Statement? A) The business is borrowing more money than it is repaying.TagsDOK Level 2:Skill/Concept. B) The business is efficiently generating more cash than it spends on its operations. C) The business has sold a significant portion of its assets. D) The business is investing heavily in long-term assets. Show Answer Correct Answer: B) The business is efficiently generating more cash than it spends on its operations. 36. In a Balance sheet, Total Assets are Rs. 15 lakh and Total Outside Liabilities are Rs.10 lakh. what could be the owner's capital? A) Rs. 5 Lakh. B) Rs. 10 Lakh. C) Rs. 25 Lakh. D) Rs. 7.50 Lakh. Show Answer Correct Answer: A) Rs. 5 Lakh. 37. Investing Activities include sources and uses of cash from the company's: A) Purchasing of property, equipment and other assets. B) Long term investments. C) Sale of outdated equipment to make room for new. D) All answers are correct. Show Answer Correct Answer: D) All answers are correct. 38. The income statement consists of Operating Activities, Financing Activities, and Investment activities. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 39. The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory is called the: A) Operating cycle. B) Accounts payable period. C) Cash cycle. D) Inventory period. E) Accounts receivable period. Show Answer Correct Answer: A) Operating cycle. 40. What is the purpose of the cash flow statement? A) To track non-cash expenses. B) To project future earnings. C) To monitor actual cash transactions. D) To record sales transactions. Show Answer Correct Answer: C) To monitor actual cash transactions. 41. Closing stock if given outside the trial balance is shown in A) Trading account and balance sheet. B) Profit and loss account. C) Profit and loss account and balance sheet. D) Balance sheet. Show Answer Correct Answer: A) Trading account and balance sheet. 42. Depreciation is necessary to calculate: A) Net profit correct. B) Net financial position. C) Tax. D) None of them. Show Answer Correct Answer: A) Net profit correct. 43. Common size statement expresses each monetary item of Financial Statements as a percentage. A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: A) TRUE. 44. TokTik has a Debt to Equity of 50. What does this financial measure tell you about TokTik? A) TokTik has a difference of $ 50 per share between their debt and equity. B) TokTik has $ 50 of debt for every $ 1 of a shareholder's equity. C) TokTik is 50 times more likely to pay off its long-term debt. D) Every $ 50 of a shareholder's equity is worth $ 1 of debt. Show Answer Correct Answer: B) TokTik has $ 50 of debt for every $ 1 of a shareholder's equity. 45. Which analysis is considered as dynamic: A) Vertical Analysis. B) External Analysis. C) Internal Analysis. D) Horizontal Analysis. Show Answer Correct Answer: D) Horizontal Analysis. 46. What does a low share price indicate about a stock? A) The stock is expected to grow quickly. B) The stock is undervalued. C) The stock has limited growth potential. D) The stock is overvalued. Show Answer Correct Answer: C) The stock has limited growth potential. 47. If a business has sales revenue of $ 100, 000, cost of goods sold of $ 60, 000, and office expenses of $ 20, 000, what is the net profit? A) $ 60, 000. B) $ 80, 000. C) $ 40, 000. D) $ 20, 000. Show Answer Correct Answer: D) $ 20, 000. 48. ..... are the methods of preparation of comparative statement A) Internal/External %. B) Direct / Indirect %. C) Increase / Decrease %. D) None of the above. Show Answer Correct Answer: C) Increase / Decrease %. 49. What is the primary purpose of analyzing a company's financial statements? A) To design marketing strategies. B) To decide on hiring practices. C) To determine investment viability. D) To prepare for tax season. Show Answer Correct Answer: C) To determine investment viability. 50. Trading and profit and loss account is prepared A) For particular period. B) On particular date. C) For whole year. D) None of these. Show Answer Correct Answer: A) For particular period. 51. Which of the following is not a long-term asset? A) Machinery. B) Building. C) Equipment. D) Accounts receivable. Show Answer Correct Answer: D) Accounts receivable. 52. In an income statement, subtracting the cost of goods sold from the net sales provides the A) Revenue. B) Gross profit. C) Net income. D) Net operating income. Show Answer Correct Answer: B) Gross profit. 53. These are used by investors, market analysts, and creditors to evaluate a company's financial health and earnings. A) Financial Statements. B) Balance Sheet. C) Statement of Financial Position. D) Cash flows. Show Answer Correct Answer: A) Financial Statements. 54. If a business had $ 50, 000 in revenue and $ 30, 000 in cost of goods sold, what would the gross profit be? A) $ 20, 000. B) $ 80, 000. C) $ 50, 000. D) $ 30, 000. Show Answer Correct Answer: A) $ 20, 000. 55. What does the balance sheet primarily show about a company? A) Employee performance metrics. B) Yearly profit margins. C) Future financial projections. D) Financial status at a specific time. Show Answer Correct Answer: D) Financial status at a specific time. 56. What does the debt-to-equity ratio measure in financial ratios analysis? A) The proportion of company assets financed by debts and equity. B) The proportion of company assets financed through equity. C) The proportion of company assets financed through debt. D) The proportion of company's debt to its equity.TagsDOK Level 2:Skill/Concept. Show Answer Correct Answer: D) The proportion of company's debt to its equity.TagsDOK Level 2:Skill/Concept. 57. "Prepaid Expenses" are: A) Expenses the cost is pre-determined. B) Expenses that are paid in advance of receiving the goods or services. C) Expenses paid by the prior owner of the company. D) Expenses you pay later in the year. Show Answer Correct Answer: B) Expenses that are paid in advance of receiving the goods or services. 58. Revenues minus expenses equals: A) Owner Equity. B) Net Income. C) Assets. D) Liabilities. Show Answer Correct Answer: B) Net Income. 59. Operating Expenses include: A) Rent on office space. B) Office Supplies. C) Salaries and Wages. D) All answers are correct. Show Answer Correct Answer: D) All answers are correct. 60. What is operating profits according to the income statement? A) $ 357.6M. B) $ 427.5M. C) $ 605.0M. D) $ 200.0M. Show Answer Correct Answer: A) $ 357.6M. ← PreviousNext →Related QuizzesCommerce QuizzesClass 12 QuizzesClass 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 1Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 2Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 4Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 5Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 6Class 12 Accountancy Chapter 1 Accounting For Partnership Firms Fundamentals QuizClass 12 Accountancy Chapter 2 Accounting For Partnership Firms Admission Of A Partner QuizClass 12 Accountancy Chapter 3 Accounting For Partnership Firms Retirement Death Of A Partner Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books