Analysis Of Financial Statements - MCQs with answers

Analysis Of Financial Statements - MCQs with answers


1. The 3 Ps, i.e. the three objectives of analysis and interpretation of financial statements are : Progress, Position and Prospects.

a) True
b) False

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ANSWER: a) True



2. Which of the following statements are false?

A) When all the figures in a balance sheet are stated as percentage of the total, it is termed as horizontal analysis.

B) When financial statements of several years are analyzed, it is termed as vertical analysis.

C) Vertical Analysis is also termed as dynamic analysis.

a) Both A and B
b) Both A and C
c) Both B and C
d) A, B , C

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ANSWER: b) Both A and C



3. State which of them are true?

A) When ratios of previous years are compared with current years, they are called trend ratios.

B) Trend percentages and trend ratios are used in static analysis.

C) Reliability of financial analysis depends upon the reliability of financial data.

a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C

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ANSWER: d) A, B, C



4. Comparison of financial statements highlights the trend of the _________ of the business.

a) Financial position
b) Performance
c) Profitability
d) All of the above

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ANSWER: d) All of the above



5. Analysis of any financial Statement comprises

a) Balance sheet
b) P&L Account
c) Trading account
d) All of the above

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ANSWER: d) All of the above



6. Which of the following statements are true?

A) Common-size balance sheet shows relative value of the various items.

B) In the common size income statement, each product is represented as a percentage of the net sales figure.

C) Common size income statements represent the various elements as a percentage of the gross profit.

a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C

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ANSWER: a) Both A and B



7. Which of the following statements are true?

A) External analysis depends entirely on issued financial statements.
B) Interpretation and analysis both are different.
C) Financial analysis covers interpretation.

a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C

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ANSWER: d) A, B, C



8. Which of the following are techniques, tools or methods of analysis and interpretation of financial statements?

a) Ratio Analysis
b) Average Analysis
c) Trend Analysis
d) All of the above

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ANSWER: d) All of the above



9. Interpretation of accounts is the

a) Art and science of translating the figures
b) To know financial strengths and weaknesses of a business
c) To know the causes for the prevailing performance of business
d) All of the above

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ANSWER: d) All of the above


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