Scribd
Upload
170 views

MCQ On Financial Statement Analysis

This document contains 25 multiple choice questions related to financial ratio analysis. The questions cover a range of topics including current ratio, debt-to-equity ratio, inventory turnover, receivables collection period, profitability ratios, and using ratios to analyze liquidity, solvency, and financial risk.

Uploaded by

Nihar Shah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
170 views

MCQ On Financial Statement Analysis

This document contains 25 multiple choice questions related to financial ratio analysis. The questions cover a range of topics including current ratio, debt-to-equity ratio, inventory turnover, receivables collection period, profitability ratios, and using ratios to analyze liquidity, solvency, and financial risk.

Uploaded by

Nihar Shah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

MCQ

1. A company’s current ratio is 1.9:1. If some of the accounts payable are paid off from
the cash account, then the:
A. Numerator would decrease by a greater percentage than the denominator, resulting
in a lower current ratio
B. Denominator would decrease by a greater percentage than the numerator, resulting
in a higher current ratio
C. Numerator and denominator would decrease proportionally, leaving the current
ratio unchanged
D. Numerator and denominator would not change, hence the current ratio will remain
unchanged

ANSWER:

2. A firm has a debt/equity ratio of 2:3. What is the after-tax weighted average cost of
capital if the after tax cost of debt is 12% and the cost of equity is 15%?
A. 12.0%
B. 13.8%
C. 15.0%
D. 13.2%

ANSWER:

3. ABC Co’s purchases during the year were Rs.1,00,000. The balance sheet shows an
average accounts payable balance of Rs.12,000. Consider 365 days in a year. ABC
Co’s payables payment period is closest to :
A. 37 days
B. 44 days
C. 52 days
D. 40 days

ANSWER:

4. Beginning balance of Accounts Receivable was Rs.45,000, and the ending balance was
Rs.48,000. Sales were Rs.430,000. What was the net cash inflow from customer
receipts?
A. Rs.427,000
B. Rs.433,000
C. Rs.475,000
D. Rs.382,000

ANSWER:

5. Which is the best ratio indicator for the solvency of a company


A. Cash flow to debt
B. Return of average assets
C. Current ratio
D. Debt to equity ratio

ANSWER:

6. Current ratio of a company is 1, its net working capital will be


A. Positive
B. Negative
C. Nil
D. None of the given options

ANSWER:

7. Current ratio is 4:1. Net Working Capital is Rs.30,000. Find the amount of current
Assets.
A. Rs.10,000
B. Rs.40,000
C. Rs.24,000
D. Rs.30,000

ANSWER:

8. Quick assets do not include


A. GOI bond
B. Book debts (debtors)
C. Advance for supply of raw materials
D. Inventories

ANSWER:

9. A decrease in the firm's receivable turnover ratio means that __________.


A. it is collecting credit sales more quickly than before
B. it is collecting credit sales more slowly than before
C. sales have gone down
D. inventories have gone up

ANSWER:

10. XYZ Co’s receivable (debtors) turnover is 10 times, the inventory (stock) turnover is 5
times and the payables (creditors) turnover is 9 times. XYZ Co’s cash conversion cycle
is closet to:
A. 69 days
B. 104 days
C. 150 days
D. 80 days

ANSWER:

11. ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5,00,000. What
are the Current Assets?
A. Rs. 5,00,000,
B. Rs. 10,00,000,
C. Rs. 15,00,000,
D. Rs. 25,00,000

ANSWER:

12. There is deterioration in the management of working capital of XYZ Ltd. What does it
refer to?
A. That the Capital Employed has reduced,
B. That the Profitability has gone up,
C. That debtors collection period has increased,
D. That Sales has decreased.

ANSWER:

13. Which of the following does not help to increase Current Ratio?
A. Issue of Debentures to buy Stock,
B. Issue of Debentures to pay Creditors,
C. Sale of Investment to pay Creditors,
D. Avail Bank Overdraft to buy Machine.

ANSWER:

14. A firm has Capital of Rs. 10,00,000; Sales of Rs. 5,00,000; Gross Profit of Rs.
2,00,000 and Expenses of Rs. 1,00,000. What is the Net Profit Ratio?
A. 20%,
B. 50%,
C. 10%,
D. 40%

ANSWER:

15. XYZ Ltd. has earned 8% Return on Total Assests of Rs. 50,00,000 and has a Net Profit
Ratio of 5%. Find out the Sales of the firm.
A. Rs. 4,00,000,
B. Rs. 2,50,000
C. Rs. 80,00,000
D. Rs. 83,33,333

ANSWER:

16. Suppliers and Creditors of a firm are interested in


A. Profitability Position
B. Liquidity Position
C. Market Share Position
D. Debt Position

ANSWER:

17. Which of the following is a measure of Debt Service capacity of a firm?


A. Current Ratio
B. Acid Test Ratio
C. Interest Coverage Ratio
D. Debtors Turnover

ANSWER:

18. Gross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. The
reason for such behavior could be:
A. Increase in Costs of Goods Sold
B. If Increase in Expense
C. Increase in Dividend
D. Decrease in Sales

ANSWER:

19. Which of the following statements is correct?


A. A Higher Receivable Turnover is not desirable
B. Interest Coverage Ratio depends upon Tax Rate
C. Increase in Net Profit Ratio means increase in Sales
D. Lower Debt-Equity Ratio means lower Financial Risk

ANSWER:

20. Debt to Total Assets of a firm is .2. The Debt to Equity would be:
A. 0.80
B. 0.25
C. 1.00
D. 0.75

ANSWER:

21. Which of the following helps analysing return to equity Shareholders?


A. Return on Assets
B. Earnings Per Share
C. Net Profit Ratio,
D. Return on Investment.

ANSWER:

22. Return on Assets and Return on Investment Ratios belong to:


A. Liquidity Ratios
B. Profitability Ratios
C. Solvency Ratios
D. Turnover

ANSWER:

23. XYZ Ltd. has a Debt Equity Ratio of 1.5 as compared to 1.3 Industry average. It
means that the firm has:
A. Higher Liquidity
B. Higher Financial Risk
C. Higher Profitability
D. Higher Capital Employed

ANSWER:

24. Ratio Analysis can be used to study liquidity, turnover, profitability, etc. of a firm.
What does Debt-Equity Ratio help to study?
A. Solvency
B. Liquidity
C. Profitability
D. Turnover

ANSWER:

25. In Inventory Turnover calculation, what is taken in the numerator?


A. Sales
B. Cost of Goods Sold
C. Opening Stock
D. Closing Stock

ANSWER:

You might also like