# Ratio Analysis - 1- MCQs with answers

## Ratio Analysis - 1 - MCQs with answers

1. When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as

a) Accounting ratio
b) Financial ratio
c) Costing ratio
d) None of the above

2. The definition, “The term accounting ratio is used to describe significant relationship which exist between figures shown in a balance sheet, in a profit and loss account, in a budgetary control system or in a any part of the accounting organization” is given by

a) Biramn and Dribin
b) Lord Keynes
c) J. Betty
d) None of the above.

3. The relationship between two financial variables can be expressed in:

a) Pure ratio
b) Percentage
c) Rate or time
d) Either of the above

ANSWER: d) Either of the above

4. Liquidity ratios are expressed in

a) Pure ratio form
b) Percentage
c) Rate or time
d) None of the above

5. Which of the following statements are true about Ratio Analysis?

A) Ratio analysis is useful in financial analysis.
B) Ratio analysis is helpful in communication and coordination
C) Ratio Analysis is not helpful in identifying weak spots of the business.
D) Ratio Analysis is helpful in financial planning and forecasting.

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

ANSWER: a) A, B and D

6. The ratio analysis is helpful to management in taking several decisions, but as a mechanical substitute for judgment and thinking, it is worse than useless.

a) True
b) False

7. Profit for the objective of calculating a ratio may be taken as

a) Profit before tax but after interest
b) Profit before interest and tax
c) Profit after interest and tax
d) All of the above

ANSWER: d) All of the above

8. Which of the following are limitations of ratio analysis?

A) Ratio analysis may result in false results if variations in price levels are not considered.

B) Ratio analysis ignores qualitative factors

C) Ratio Analysis ignores quantitative factors

D) Ratio Analysis is historical analysis.

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