This quiz works best with JavaScript enabled. Home > Cbse > Class 12 > Commerce > Accountancy > Class 12 Accountancy Chapter 8 Analysis Of Financial Statements – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 5 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. ..... Analysis shows trend in performance. A) Horizontal. B) Technical. C) Vertical. D) Trend. Show Answer Correct Answer: D) Trend. 2. What does the P/E ratio compare? A) A stock's price to its growth potential. B) A stock's price to its dividends. C) A stock's price to its projected future earnings. D) A stock's price to its company earnings. Show Answer Correct Answer: D) A stock's price to its company earnings. 3. What does the return on assets (ROA) ratio measure? A) Market share of a company. B) Profitability of a company. C) Number of employees in a company. D) Total revenue of a company. Show Answer Correct Answer: B) Profitability of a company. 4. Where do you find the beginning balance for Retained Earnings? A) Balance sheet. B) Worksheet. C) Statement of retained earnings. D) Income statement. Show Answer Correct Answer: B) Worksheet. 5. Which analysis states a figure as a percentage of a base amount on the same statement? A) Common-size benchmarking. B) Trend indexing. C) Vertical analysis. D) Horizontal analysis. Show Answer Correct Answer: C) Vertical analysis. 6. What is total shareholders' equity according to the balance sheet? A) $ 3, 274.0M. B) $ 13177.9M. C) $ 2, 851.9M. D) $ 2372.1M. Show Answer Correct Answer: A) $ 3, 274.0M. 7. What is the purpose of a balance sheet in financial statements? A) To analyze market trends. B) To predict future financial performance. C) To calculate employee salaries. D) To provide a snapshot of a company's financial position at a specific point in time. Show Answer Correct Answer: D) To provide a snapshot of a company's financial position at a specific point in time. 8. Fixed Assets Coverage Ratio (FACR) indicates ..... A) Total fixed assets that are created in the business. B) Number of times the value of net fixed assets covers term liabilities. C) Number of times the gross block covers term liabilities. D) Total fixed assets in relation to current assets. Show Answer Correct Answer: B) Number of times the value of net fixed assets covers term liabilities. 9. What is the value of quick ratio A) 75.41%. B) 76.59%. C) 81.27%. D) 68.95%. Show Answer Correct Answer: B) 76.59%. 10. What does the price-earnings (P/E) ratio indicate about a company's stock? A) It indicates the company's number of employees. B) It indicates the company's market share. C) It indicates the company's total revenue. D) It indicates the price of a company's stock relative to its earnings per share. Show Answer Correct Answer: D) It indicates the price of a company's stock relative to its earnings per share. 11. A balance sheet reports: A) A company's cash position and assets. B) A company's profit, loss and expenses. C) A company's assets on one side, and liabilities, and shareholder equity on the other. D) None of the answers are correct. Show Answer Correct Answer: C) A company's assets on one side, and liabilities, and shareholder equity on the other. 12. As an investor, you would typically want ROE (return on equity) to be ..... A) Lower than competitors. B) Zero. C) Higher than competitors. D) Greater than beta. Show Answer Correct Answer: C) Higher than competitors. 13. Who uses financial statements to assess creditworthiness and the strength of a company's operations? A) Government agencies. B) Accountants. C) Lenders. D) All of the above. Show Answer Correct Answer: C) Lenders. 14. In common size income statement thev basis is ..... A) Sales. B) G.P. C) N.P. D) Total Cost. Show Answer Correct Answer: A) Sales. 15. During the current financial year, an advertising campaign was launched for R15 000. The sales were R400 000 in 2021 and R490 000 in 2022. Was the campaign successful? (3 marks) A) Yes, because sales increased. B) No, because sales didn't increase alot. C) Yes, it was successful, because sales increased by R90 000 (22, 5%) and the advertising campaign only cost R15 000. D) No, it was not successful, because the sales only increased by 22, 5%. Show Answer Correct Answer: C) Yes, it was successful, because sales increased by R90 000 (22, 5%) and the advertising campaign only cost R15 000. 16. Which of the following best represents the formula for calculating Gross Profit? A) Revenue-Purchases. B) Revenue-Cost of Goods Sold (COGS). C) Revenue-Net Profit. D) Revenue-Expenses. Show Answer Correct Answer: B) Revenue-Cost of Goods Sold (COGS). 17. What is the value of debt ratio A) 27.17%. B) 26.46%. C) 25.19%. D) 28.61%. Show Answer Correct Answer: B) 26.46%. 18. What is working equity? A) Money owed to a business by debtors. B) Money that is tied up in investments or property. C) Money that a business can access immediately. D) None of the above. Show Answer Correct Answer: C) Money that a business can access immediately. 19. The two major sections on an income statement are ..... A) Revenue and expenses. B) Assets and liabilities. C) Assets and expenses. D) Cash flow and revenue. Show Answer Correct Answer: A) Revenue and expenses. 20. To determine whether the business will be able to meet their long-term obligations, we can use the: A) Liquidity ratio. B) Solvency ratio. C) Return on owner's equity. D) Profitability ratio. Show Answer Correct Answer: B) Solvency ratio. 21. Which statement best describes organizational performance in this context? A) Chart of accounts by department. B) Result of all activities that generate revenue. C) List of obligations due within one year. D) Set of procedures for journal entries. Show Answer Correct Answer: B) Result of all activities that generate revenue. 22. Indirect expenses are transferred to A) Trading account. B) Profit and loss account. C) Balance sheet. D) None of the above. Show Answer Correct Answer: B) Profit and loss account. 23. What is the purpose of financial statement analysis? A) Replace managerial judgment with ratios. B) Record every daily transaction detail. C) Eliminate the need for audits entirely. D) Review statements to analyze performance. Show Answer Correct Answer: D) Review statements to analyze performance. 24. Which financial statement would you analyze to assess a company's profitability over a specific period? A) Income Statement. B) Balance Sheet. C) Cash Flow Statement. D) Equity Statement. Show Answer Correct Answer: A) Income Statement. 25. Why is it important for investors to analyze financial statements? A) To determine the company's employee satisfaction levels. B) To predict the company's future stock price. C) To understand the financial health, performance, and risks of a company. D) To learn about the company's marketing strategies. Show Answer Correct Answer: C) To understand the financial health, performance, and risks of a company. 26. A Cash Flow Statement includes: A) Operating Activities. B) Investing Activities. C) Financing Activities. D) All answers are correct. Show Answer Correct Answer: D) All answers are correct. 27. In common size vertical balance sheet the basis is ..... A) Capital Employed. B) Total Assets. C) Proprietor's Funds. D) Total Liabilities. Show Answer Correct Answer: A) Capital Employed. 28. Performance over two years can be understood from ..... A) Comparative Income Statement. B) Income Statement. C) Balance Sheet. D) Common Size Statement. Show Answer Correct Answer: A) Comparative Income Statement. 29. The financial statements of a business enterprise include: ..... A) Balance sheet. B) Statement of Profit and loss. C) Cash flow statement. D) All the above. Show Answer Correct Answer: D) All the above. 30. If a company has a profit margin of 15% and a net income of $ 500, 000, what is its total revenue? A) $ 2, 000, 000.00. B) $ 750, 000.00. C) $ 3, 333, 333.33. D) $ 1, 000, 000.00. Show Answer Correct Answer: C) $ 3, 333, 333.33. 31. Which of the following is the effect of having long cash conversion cycle? A) Greater credibility from the perspective of suppliers. B) Better net profit margin for products/services. C) More retained earnings in the long-run. D) More reliance on external finance to support growth. Show Answer Correct Answer: D) More reliance on external finance to support growth. 32. Explain the concept of 'double-entry accounting'. A) Double-entry accounting involves recording only debit transactions. B) Double-entry accounting requires only one entry for each transaction. C) Double-entry accounting does not involve balancing the accounting equation. D) Double-entry accounting involves recording a debit entry and a credit entry for each transaction to maintain the balance of the accounting equation. Show Answer Correct Answer: D) Double-entry accounting involves recording a debit entry and a credit entry for each transaction to maintain the balance of the accounting equation. 33. If manager is entitled to a 55 commission before deducting his commission, he will receive the commission of Rs ..... on a Rs.8, 400 profit A) 400. B) 442. C) 420. D) 440. Show Answer Correct Answer: C) 420. 34. SNAP, Inc. has a PE of 50 and a stock price of $ 35 while TRIP, Inc. has a PE of 15 and a stock price of $ 35. Based on PE only, which company might be considered "undervalued" . A) SNAP, Inc. B) TRIP, Inc. C) All the above. D) None of the above. Show Answer Correct Answer: B) TRIP, Inc. 35. Prepaid expenses if given in trial balance is shown in A) Trading account as deduction from respective expenses. B) Profit and loss account as deduction from respective expenses. C) Balance sheet. D) None of the above. Show Answer Correct Answer: C) Balance sheet. 36. What must be taken away from sales revenue to show the gross profit of a business? A) Expenses. B) Expenses and cost of sales. C) Cost of sales. D) None of the above. Show Answer Correct Answer: C) Cost of sales. 37. When making business investment decision you should: A) Look at the Income statement to see if you are making a profit. B) Consult all financial statements including ratio analysis and benchmarks within the industry. C) Have a tarot reading. D) Check your bank account to see how much money you have. Show Answer Correct Answer: B) Consult all financial statements including ratio analysis and benchmarks within the industry. 38. How is the net income calculated on an income statement? A) Total Revenues / Total Expenses = Net Income. B) Total Revenues + Total Expenses = Net Income. C) Total Revenues-Total Expenses = Net Income. D) Total Revenues x Total Expenses = Net Income. Show Answer Correct Answer: C) Total Revenues-Total Expenses = Net Income. 39. Accrued income is: A) Revenue. B) An Asset. C) A Liability. D) An Expense. Show Answer Correct Answer: B) An Asset. 40. Expenses prepaid is an example of Current Assets A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: A) TRUE. 41. What is the purpose of a statement of changes in equity? A) To summarize the changes in a company's equity over a specific period. B) To calculate the company's revenue. C) To analyze the company's expenses. D) To determine the company's market share. Show Answer Correct Answer: A) To summarize the changes in a company's equity over a specific period. 42. Sales of PQR Ltd. are Rs. 30, 00, 000 ; COGS is Rs. 18, 00, 000 ; Gross Profit percentage as per Common Size analysis is A) 100%. B) 60%. C) 40%. D) None of the above. Show Answer Correct Answer: C) 40%. 43. Who is a person or organization that has an interest in a business and uses its financial information? A) Bookkeeper. B) Share capital. C) Underwriter. D) Stakeholder. Show Answer Correct Answer: D) Stakeholder. 44. "Accounts Receivable" is the money: A) Owed to you but not yet received. B) Owed by you the company. C) Deducted from net income. D) Owed before taxes. Show Answer Correct Answer: A) Owed to you but not yet received. 45. A cost of goods sold section is included in a A) Merchandising business income statement. B) Service business income statement. C) Cash flow statement. D) Balance sheet. Show Answer Correct Answer: A) Merchandising business income statement. 46. Adjustment given are recorded once in trading or profit and loss account and again in balance sheet. It is so because of A) Matching principle. B) Dual aspect principle. C) Materiality concept. D) Accrual concept. Show Answer Correct Answer: B) Dual aspect principle. 47. A "snapshot" of an organization's financial position at a given time. A) Statement of Financial Position. B) Cost of Goods Sold. C) Statements of Cash Flow. D) Statement of the Comprehensive Income. Show Answer Correct Answer: A) Statement of Financial Position. 48. Explain the significance of a high inventory turnover ratio for a company. A) It means the company is struggling to sell its inventory. B) It has no significance for the company's performance. C) It indicates that the company is not able to manage its inventory efficiently. D) It indicates that the company is efficiently managing its inventory by quickly selling and replacing its stock. Show Answer Correct Answer: D) It indicates that the company is efficiently managing its inventory by quickly selling and replacing its stock. 49. A company has total assets of Rs.100 lacs and a Net worth of Rs.20.00 lacs. can you guess the leverage ratio i.e. TOL/ATNW of the company? A) 4. B) 5. C) 6. D) 2.25. Show Answer Correct Answer: A) 4. 50. Contingent liability is shown as ..... A) A term liability in the Balance Sheet. B) In profit & Loss Account. C) A foot note in Balance sheet. D) A current liability in the Balance Sheet. Show Answer Correct Answer: C) A foot note in Balance sheet. 51. True or FalseAssets in a balance sheet can be:Plant and Equipment, Motor Vehicles, Buildings and Land A) False. B) True. C) All the above. D) None of the above. Show Answer Correct Answer: B) True. 52. Debts that are earlier written off if recovered are transferred to credit side of A) Debtors. B) Trading account. C) Profit and loss account. D) Provision for doubtful account. Show Answer Correct Answer: C) Profit and loss account. 53. Total current assets of yer 2013 are Rs. 30, 000 and year 2014 are Rs. 36, 000 ; It indicates A) Decrease of 120 %. B) Increase of 20 %. C) Decrease of 20 %. D) Increase of 120 %. Show Answer Correct Answer: B) Increase of 20 %. 54. Which analysis compares financial information side-by-side over different periods? A) Break-even analysis. B) Horizontal analysis. C) Scenario analysis. D) Vertical analysis. Show Answer Correct Answer: B) Horizontal analysis. 55. Revenue from operation is not taken as100 in preparing common-size statement of profit and loss. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 56. Goods destroyed by fire costing rupees 50000 and insurance Company admitted 60% leave the adjustment will be entered in A) Trading account. B) Profit and loss account. C) Balance sheet. D) Trading account profit and loss account and balance sheet. Show Answer Correct Answer: D) Trading account profit and loss account and balance sheet. 57. BIGnsmall, Inc. had an EPS of $ 6.66. This means A) The company has earnings expectations of $ 6.66 based on the future forecast. B) The company made $ 6.66 in revenue per share (before expenses). C) The company paid $ 6.66 in dividends to shareholders. D) The company made $ 6.66 in profit per share (after expenses). Show Answer Correct Answer: D) The company made $ 6.66 in profit per share (after expenses). 58. More than 2 years data is required for comparative analysis A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: B) FALSE. 59. Which of the following business likely has the highest cash conversion cycle? A) Central Department Store. B) Hop Inn Hotel. C) Modernform. D) MK Restaurant. Show Answer Correct Answer: C) Modernform. 60. Debit balance to the account of A, who is a customer-In Balance Sheet it will be shown as ..... A) Trades Payable. B) Sundry Debtors. C) Bills Payable. D) Sundry Creditors. Show Answer Correct Answer: B) Sundry Debtors. ← 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 3Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 4Class 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