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MCQs on Analysis of Financial Statements

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MCQs on Analysis of Financial Statements

All these questions have been taken from previous year CBSE examination question papers.

Question 1:

The Quick Ratio of a company is 1 : 2. Which of the following transactions will result in an increase in this ratio?

  1. Cash received from debtors
  2. *Sold goods on credit
  3. Purchased goods on credit
  4. Purchased goods on cash

Question 2:

Identify which of the following would result in inflow of cash from operating activities:

  1. Payment to creditors
  2. Interest received by a non-finance company
  3. Dividend received by a non-finance company
  4. *Amount received from debtors

Question 3:

Analysis of Financial Statements is useful and significant to different users. Which of the following users is particularly interested in firm's ability to meet their claims over a very short period of time?

  1. Labour Unions
  2. *Trade Payables
  3. Top Management
  4. Finance Manager

Question 4:

_____ ratios are calculated to determine the ability of the business to service its debt in the long run.

  1. Liquidity
  2. Turnover
  3. *Solvency
  4. Profitability

Question 5:

Acquisition of machinery by issue of equity shares will result in:

  1. Cash inflow from financing activities
  2. Cash outflow from financing activities
  3. Cash outflow from investing activities
  4. *No flow of cash

MCQs on Analysis of Financial Statements

Question 6:

The transaction "Capital gains tax paid on sale of fixed assets" is classified under which of the following:

  1. Operating Activities
  2. *Investing Activities
  3. Financing Activities
  4. Cash and Cash Equivalents

Question 7:

Which of the following is not an objective of Analysis of Financial Statements?

  1. To assess the current profitability and operational efficiency of the firm.
  2. To ascertain the relative importance of different components of the financial position of the firm.
  3. *To consider the impact of price level changes.
  4. To identify the reasons for change in the profitability/financial position of the firm.

Question 8:

_______ is also known as Acid-Test Ratio.

  1. Current Ratio
  2. *Quick Ratio
  3. Gross profit Ratio
  4. Operating Ratio

Question 9:

Current Ratio of Super Ltd. is 2 : 1. Which of the following transactions will result in decrease in this ratio?

  1. Payment of ₹40,000 to creditors
  2. Sale of furniture (book value ₹38,000) for ₹16,000 only
  3. *Repayment of long-term loan of ₹7,00,000
  4. Cash collected from debtors ₹1,18,000

Question 10:

Statement I: Issue of Debentures will result in inflow of cash.

Statement II: Issue of Debentures to the vendors for purchase of machinery will result in outflow of cash.

Choose the correct option from the following:

  1. Both statements are correct.
  2. Both statements are incorrect.
  3. *Statement I is correct, and Statement II is incorrect.
  4. Statement I is incorrect, and Statement II is correct.

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