Question 1

……………..type of analysis is based on the data from year to year rather than on one date, and also termed as dynamic analysis.
A)internal analysis
B)horizontal analysis
C)external analysis
D)none of these

Accepted Answer

Horizontal analysis, also known as trend analysis, is based on data from year to year and is considered a dynamic analysis because it evaluates financial statements over multiple periods to identify trends and growth patterns.

Question 2

………….analysis is useful in comparing performance of several companies in the same group, or division or department of the same company.
A)vertical analysis
B)horizontal analysis
C)external analysis
D)none of these

Accepted Answer

Vertical analysis is useful in comparing performance of several companies in the same group, or division or department of the same company.

Question 3

………………. are prepared so as to provide time perspective to the consideration of various elements of financial position embodied in such statements.
A)comparative statements
B)common size statements
C)both of these
D)none

Accepted Answer

Comparative statements are prepared to provide a time perspective by comparing financial data across different periods, allowing for analysis of trends and changes in financial position.

Question 4

……………….are the statements, in which figures reported are converted into percentages to some common base.
A)comparative statements
B)common size statements
C)both of these
D)none

Accepted Answer

Common size statements are financial statements in which all line items are expressed as a percentage of a common base figure. This allows for easier comparison across periods or companies.

Question 5

The term fixed assets includes
A)stock in trade
B)furniture
C)payments in advance
D)all of these

Accepted Answer

Fixed assets are long-term tangible assets that are used in the operations of a business and are not expected to be consumed or converted into cash in the short term. Furniture is an example of a fixed asset because it is used over a long period in the operations of a business. Stock in trade and payments in advance are not considered fixed assets; stock in trade is considered inventory, and payments in advance are considered prepaid expenses or other current assets.

Question 6

The following is a recorded fact
A)market value of investment
B)debtors
C)replacement cost
D)none

Accepted Answer

Debtors are recorded facts as they represent amounts owed to a business by its customers, which are documented in financial records.

Question 7

The term current assets does not include
A)payment in advance
B)bills receivable
C)long term deferred charges
D)none of these

Accepted Answer

Long-term deferred charges are not considered current assets because they are not expected to be converted into cash or used up within one year or the operating cycle, whichever is longer. Current assets typically include cash and other assets that are expected to be converted into cash, sold, or consumed within a year.

Question 8

In case of a limited company, the term financial statements includes………
A)profit and loss account
B)profit and loss account, profit and loss appropriation account and balance sheet
C)balance sheet
D)none

Accepted Answer

In the context of a limited company, financial statements typically include the profit and loss account, profit and loss appropriation account, and the balance sheet. These documents provide a comprehensive overview of the company's financial performance and position.

Question 9

Assets and liabilities in a Balance sheet may be arranged in the order of …..
A)liquidity
B)permanence
C)both of these
D)none of these

Accepted Answer

Assets and liabilities on a balance sheet can indeed be arranged in the order of liquidity (how quickly they can be converted into cash or paid) and permanence (how long they are expected to remain in the business). This helps in understanding the financial health and stability of a business.

Question 10

Income statement matches the …………… incurred in the accounting year
A)revenue and costs
B)incomes and expenses
C)both of these
D)none of these

Accepted Answer

The income statement matches both the revenue and costs as well as incomes and expenses incurred in the accounting year, reflecting the company's financial performance.

Question 11

…………..are statements of financial position at different periods
A)comparative statements
B)common size statements
C)both of these
D)none

Accepted Answer

Comparative statements are financial statements that provide information about a company's financial position at different periods, allowing for comparison over time.

Question 12

An increase in current asset accompanied by the increase in current liabilities of the same amount will…………………
A)improve short term financial position
B)not improve short term financial position
C)improve long term financial position
D)none of these

Accepted Answer

An increase in current assets accompanied by an increase in current liabilities of the same amount does not improve the short-term financial position because the ratio of current assets to current liabilities remains unchanged, indicating no improvement in liquidity or the ability to meet short-term obligations.

Question 13

Which among the following is an example for horizontal analysis ?
A)comparative balance sheet
B)comparative income statement
C)common size statements
D)a & b

Accepted Answer

Horizontal analysis involves comparing financial data across multiple periods, which is done in both comparative balance sheets and comparative income statements.

Question 14

If the Gross sales of a concern is Rs.200000 and sales return is 20000, Gross profit is 150000.cost of goods sold is……………………..
A)150000
B)30000
C)50000
D)none of these

Accepted Answer

The answer of If the Gross sales of a concern...

Question 15

Given opening stock is Rs.20000, Direct expenses 10000, Closing stock 5000.Cost of goods sold is ……………………
A)25000
B)35000
C)15000
D)20000

Accepted Answer

Cost of Goods Sold (COGS) is calculated as Opening Stock + Direct Expenses - Closing Stock. Therefore, COGS = 20000 + 10000 - 5000 = 25000.

Question 16

Ratio of Net sales to Net working capital is a ………………………..
A)working capital turnover ratio
B)profitability ratio
C)liquidity ratio
D)none of these

Accepted Answer

The ratio of Net Sales to Net Working Capital is known as the Working Capital Turnover Ratio. This ratio indicates how efficiently a company is using its working capital to generate sales.

Question 17

Observing changes in financial analysis across the years is ……………
A)vertical analysis
B)horizontal analysis
C)inter firm comparison
D)none of these

Accepted Answer

Horizontal analysis is the process of observing changes in financial analysis across the years.

Question 18

Ratio of net profit before interest and tax to sales is ……………….
A)operating profit ratio
B)operating ratio
C)capital gearing
D)solvency ratio

Accepted Answer

The operating profit ratio is calculated by dividing the net profit before interest and tax by sales. This ratio indicates how much of the sales revenue is remaining after all the operating expenses have been paid off.

Question 19

The statistical yardstick that provides a measure of relationship between two accounting figures is ……………………
A)current ratio
B)the accounting ratio
C)input output ratio
D)none of these

Accepted Answer

The accounting ratio is the correct answer because it is a statistical measure that expresses the relationship between two accounting figures, used to assess the financial health, performance, and conditions of a company.

Question 20

……………….is a statement which lists all the sources of funds and applications of funds taken place in a business during a particular period
A)fund flow statement
B)cash flow statement
C)any of these
D)none of these

Accepted Answer

A fund flow statement is a financial statement that outlines the sources and uses of funds in a business over a specific period. It highlights how funds have been raised and where they have been applied, providing insights into the financial health and operational activities of the business.

Quiz 2: Financial Analysis and Statements

……………..type of analysis is based on the data from year to year rather than on one date, and also termed as dynamic analysis.

………….analysis is useful in comparing performance of several companies in the same group, or division or department of the same company.

………………. are prepared so as to provide time perspective to the consideration of various elements of financial position embodied in such statements.

……………….are the statements, in which figures reported are converted into percentages to some common base.

The term fixed assets includes

The following is a recorded fact

The term current assets does not include

In case of a limited company, the term financial statements includes………

Assets and liabilities in a Balance sheet may be arranged in the order of …..

Income statement matches the …………… incurred in the accounting year

…………..are statements of financial position at different periods

An increase in current asset accompanied by the increase in current liabilities of the same amount will…………………

Which among the following is an example for horizontal analysis ?

If the Gross sales of a concern is Rs.200000 and sales return is 20000, Gross profit is 150000.cost of goods sold is……………………..

Given opening stock is Rs.20000, Direct expenses 10000, Closing stock 5000.Cost of goods sold is ……………………

Ratio of Net sales to Net working capital is a ………………………..

Observing changes in financial analysis across the years is ……………

Ratio of net profit before interest and tax to sales is ……………….

The statistical yardstick that provides a measure of relationship between two accounting figures is ……………………

……………….is a statement which lists all the sources of funds and applications of funds taken place in a business during a particular period