Refer to MCQs for Accountancy Class 12 with Answers Chapter 4 Analysis of Financial Statement designed as per the latest syllabus issued by CBSE. All Multiple choice questions have been provided with solutions and have been prepared based on the expected pattern in upcoming board exams

Question. The most commonly used tools for financial analysis are:
a. Comparative Statements
b. Common Size Statements
c. Accounting Ratios
d. All of the above

Question: Which of the following statements are true
a) All of the options
b) External analysis depends entirely on issued financial statements
c) Interpretation and analysis both are different
d) Financial analysis covers interpretation

Question: Importance of Comparative Statement is
a) Indicate the trend with respect to the previous year
b) Make the data simple and more understandable
c) All of the options
d) compare the firm performance with the performance of other firm in the same business

Question. Which one of the following is not a method/tool of analysis of financial statements?
a. Accounting Ratios
b. Break Even Point
c. Statements of Receipts and Payments
d. Fund Flow Statement

Question. Feature of financial analysis is to present the data contained in financial statements in
a. Easy form
b. Convenient and rational groups
c. Comparable form
d. All of the above

Question. The financial statements of a business enterprise include :
(a) Balance sheet
(b) Statement of Profit and loss account
(c) Cash flow statement
(d) All the above 

Question. Which of the following is the objective of comparative statements?
a. To make the data simpler and understandable
b. To indicate the trend
c.To help in forecasting
d. All of the above

Question: When financial statements of several years are analysed, it is termed as
a) None of the options
b) Horizontal analysis
c) Current ratios
d) Vertical analysis

Question: Heterogeneous cash flows can be made comparable by
a) Discounting technique and Compounding technique
b) Discounting technique
c) Compounding technique
d) None of the options

Question. Comparative Balance Sheet :
a. Provides a summarized view of the operations of the firm
b. Presents the financial position of the firm
c. Presents the change in various items of balance sheet
d. None of the above

Question. Which analysis is considered as dynamic?
a. Horizontal Analysis
b. vertical Analysis
c. internal Analysis
d. external Analysis

Question. Comparative Statement of Profit and Loss provides information about:
a. Rate of increase or decrease in revenue from operations
b. Rate of increase or decrease in cost of revenue from operations
c. Rate of increase or decrease in net profit
d. All of the above

Question. The most commonly used tools for financial analysis are :
(a) Horizontal analysis
(b) Vertical analysis
(c) Ratio analysis
(d) All the above

Question: The Real object of Analysis of Financial Statement is
a) To know about historical cost concept
b) To assess the total expenses of the firm
c) To measure the financial strength of the business
d) To assess the total liabilities of the firm

Question. Which analysis depicts the relationship between two figures:
a. Ratio Analysis
b. Trend Analysis
c. Cumulative figures and averages
d. Dividend Analysis

Question: Ratio Analysis is helpful for
a) Financial analysis
b) Financial planning
c) Forecasting
d) All of the options

Question. Which analysis is considered as Static?
a. Horizontal Analysis
b. vertical Analysis
c. internal Analysis
d. external Analysis

Question. Fixed Assets of a company increased from Rs.3,00,000 to Rs.4,00,000. What is the percentage of change?
a. 25%
b. 3%
c. 20%
d. 40%

Question. An Annual Report is issued by a company to its :
(a) Directors
(b) Auditors
(c) Shareholders
(d) Management 

Question: Operating Expenses is include
a) All of the options
b) Office and Administrative expenses
c) Selling and Distribution expenses
d) Provision for doubtful debts

Question. A company’s current liabilities decreased from Rs.4,00,000 to Rs.3,00,000. What is the percentage of change?
a. 25%
b. 3%
c. 20%
d. 40%

Question: Rent received, Profit on sale of fixed assets, Compensation for acquisition of land are example of
a) Non-operating Incomes
b) Operating Incomes
c) Operating expenses
d) None of the options

Question. Main Objective of Analysis of Financial Statement is
a. To know the financial strength
b. To make a comparative study with other firms
c. To know ther efficiency of management
d. All the above

Question. A company’s working capital is Rs.10 Lakh (Negative balance) in the year 2018.It became Rs.15 Lakh(positive balance) in the year 2019. What is the percentage of change?
a. 150%
b. 100%
c. 250%
d. 50%

Question. Balance Sheet provides information about financial position of the enterprise :
(a) At a point in time
(b) Over a period of time
(c) For a period of time
(d) None of the above

Question. Main limitation of analysis of financial statements is
(A) Affected by window dressing
(B) Difficulty in forecasting
(C) Do not reflect changes in price level
(D) All of the Above

Question. Revenue from Operations Rs.4,00,000; Cost of Revenue from Operations 60% of Revenue from Operations; Operating expenses Rs.30,000 and rate of income tax is 40%. What will be the amount of profit after tax?
a. 64,000
b. 78,000
c. 52,000
d. 96,000

Question: Comparative Financial Statement is an example of
a) None of the options
b) Vertical Analysis
c) External analysis
d) Horizontal analysis

Question: High price to earning ratio shows companys
a) High growth prospect
b) Low growth prospect
c) Low dividends paid
d) All of the options

Question. Main objective of Common Size statement is:
a. To present the changes in various items
b. To provide for a common base for comparison
c. To establish relationship between various items
d. All of the Above

Question. Financila Analysis becomes significant because it
a. Ignores price level changes
b. Measures the efficiency of business
c. Lacks qualitative analysis
d. Is effected by personal bias

Question. Comparative statements are also known as :
(a) Dynamic analysis
(b) Horizontal analysis
(c) Vertical analysis
(d) External analysis 

Question. Main objective of Common Size Balance Sheet is:
a. To establish relationship between revenue from operations and other items of statement of profit and loss
b. To present changes in assets and liabilities
c. To present changes in various items of income and expenses
d. All of the above

Question: A formula such as net income available to common stockholders divided by common equity is used to calculate
a) Return on common equity
b) Return on interest
c) Return on earning power
d) None of the options

Question. Which of the following is a type of Financial Analysis on the basis of material used ?
(a) Internal Analysis
(b) External Analysis
(c) Internal Audit
(d) Both (a) and (b)

Question. Common Size Statements are prepared
a. In the form of ratios
b.In the form of Percentages
c. In both of the above
d. None of the above

Question. Which one of the following is tool of financial analysis?
(a) Comparative Statements
(b) Common-size Statements
(c) Cash Flow Statement
(d) All of these

Question. When bad position of the business is tried to be depicted as good it is known as
a. Personal bias
b. Pricelevel changes
c. Window dressing
d. All the above

Question. When bad position of the business is tried to be depicted as good, it is known as …………….
(A) Personal Bias
(B) Price Level Changes
(C) Window Dressing
(D) All of the Above

Question. Which of the following is untrue:
a. Common size Balance Sheet
b. Common size Statement of Profit and Loss
c. Common size Cash Flow Staement
d. None of the above

Question: Bring out the importance of Financial Analysis
a) All of the options
b) Helps in evaluating the profit earning capacity and financial feasibility of a business
c) Helps in evaluating the profit earning capacity and financial feasibility of a business
d) Helps in evaluating the relative financial status of a firm comparison to other competitive firms

Question: In which analysis Financial Statement for a single year analysed
a) Vertical Analysis
b) Dynamic Analyses
c) Vertical Analysis and Dynamic Analyses
d) None of the options

Question. Main objective of Common Size Statement of Profit and Loss is :
a. To present changes in assets and liabilities
b. To judge the financial soundness
c. To establish relationship between revenue from operations and other items of statement of Profit and Loss.
d. All of the above

Question. Which analysis depicts the relationship between two figures :
(A) Ratio Analysis
(B) Trend Analysis
(C) Cumulative figures and averages
(D) Dividend Analysis

Question. Main limitation of Analysis of Financial Statement is
a Affected by window dressing
b. Difficulty in forecasting
c. Donot reflect changes in price level
d. All the above

Question. In the statement of Profit and Loss of a Common Size Statement:
a. Figure of net revenue from operations is assumed to be equal to 100
b. Figure of gross profit is assumed to be equal to 100
c. Figure of net profit is assumed to be equal to 100
d. Figure of assets is assumed to be equal to 100

Question. In which meeting of company directors report is presented ?
(a) Directors Meeting
(b) Annual General Meeting
(c) Manager’s Meeting
(d) All of the above

Question. A Company’s current liabilities decreased from Rs.4,00,000 to Rs.3,00,000. What is the percentage of change?
(A) 25%
(B) 33.3%
(C) 20%
(D) 40%

Question. In the Balance Sheet of a Common size Statement:
a. Figure of current liabilities is assumed to be 100
b. Figure of fixed assets is assumed to be 100
c. Figure of total assets is assumed to be 100
d. Figure of share capital is assumed to be 100

Question. The most commonly used tools for financial analysis are :
(A) Comparative Statements
(B) Common Size Statements
(C) Accounting Ratios
(D) All of the above

Question What is shown by Balance Sheet ?
(a) Accuracy of books of accounts
(b) Profit or loss of a specific period
(c) Financial position on a specific date
(d) None of the above

Question.Total assets of a firm are Rs.20,00,000 and its fixed assets are Rs.8,00,000. What will be the percentage of fixed assets on total assets?
a. 60%
b. 40%
c. 29%
d. 71%

Question. Financial Analysis becomes useless because it
a. Measures the profitability
b. Measures the solvency
c. Lacks qualitative analysis
d. Makes a comparative study

Question: Common size income statements represent the various elements as a
a) Percentage of the net sales figure
b) Percentage of the gross profit
c) Percentage of the net sales figure and Percentage of the gross profit
d) None of the options

Question. If total assets of a firm are Rs.8,20,000 and its fixed assets are Rs5,90,400, what will be the percentage of current assets on total assets?
a. 42%
b. 58%
c. 28%
d. 72%

Question. Which of the following is device of comparative statements?
(A) Comparison expressed in terms of absolute data
(B) Comparison expressed in terms of percentages
(C) Comparison expressed in terms of ratios
(D) All of the Above

Question: Financial Statement Analysis Objectives/Need is
a) All of the options
b) Measure the profitability of the business
c) Measure the financial strength of the business
d) Make comparative study within the firm and with other forms

Question. Financial analysis become useless because it:
(A) Measures the profitability
(B) Measures the Solvency
(C) Lacks Qualitative Analysis
(D) Makes a comparative study

Question. If net revenue from operations of a firm are Rs.1,20,000; cost of revenue from operations is Rs.66,000 and operating expenses are Rs.21,600, what will be the percentage of operating income on net revenue from operations ?
a. 55%
b. 45%
c. 73%
d. 27%

Question. In the Statement of Profit & Loss of a Common Size Statement:
(A) Figure of net revenue from operations is assumed to be equal to 100
(B) Figure of gross profit is assumed to be equal to 100
(C) Figure of net profit is assumed to be equal to 100
(D) Figure of assets is assumed to be equal to 100

Question. Interest on Loans is
(A) Direct Expenses
(B) Indirect Expenses
(C) Operating Expenses
(D) None of the Above

Question: An equation in which total assets are multiplied to profit margin is classified as
a) Du DuPont equation
b) Turnover equation
c) Preference equation
d) None of the options

Question: An Annual Report is issued by a company to its:
a) Management
b) Directors
c) Auditors
d) Management

Question In a common-size Balance Sheet, total equity and liabilities are assumed to be equal to :
(a) 1,000
(b) 100
(c) 10
(d) 1

Question: each item is expressed as a percentage of some common base in
a) Common size statement
b) Fund Flow Statement
c) Cash Flow Statement
d) Cash Flow Statement

Question: Comparative Financial Statements show:
(a) Financial position of a concern
(b) Earning capacity of a concern
(c) Both of them
(d) None of these

Question: Comparative statement are also known as
a) Horizontal analysis
b) Dynamic analysis
c) Vertical analysis
d) External analysis

Question: Importance of Comparative Statements
a) All of the options
b) Make Presentation Simpler
c) Help in Drawing Conclusion
d) Help in Detection of Problems

Question: For a healthy business the current ratio lies between
a) 1.5 to 3
b) 0 to 1.5
c) 3 to 4.5
d) 4.5 to 6

Question. What will be the trend percentage, if the Inventory of a firm is Rs.2,00,000; Rs.2,40,000; Rs.3,00,000 and Rs.4,00,000 respectively?
(A) 1, 1.2, 1.5,2
(B) 10, 12, 15,20
(C) 100, 120, 150, 200
(D) None of the Above

Question: The analysis of financial statement by a shareholder is an example of:
(a) External Analysis
(b) Internal Analysis
(c) Vertical Analysis
(d) Horizontal Analysis

Question. Feature of financial analysis is to present the data contained in financial statements in
(A) Easy form
(B) Convenient and rational groups
(C) Comparable form
(D) All of the Above

Question. Which of the following is not a limitation of Financial Statement Analysis?
(a) Ignores the Qualitative Elemen
(b) Not free from personal bias
(c) Intra-firm Comparison
(d) Ignores the price level changes

Question. Which of the following is untrue :
(A) Common size Balance Sheet
(B) Common size Statement of Profit & Loss
(C) Common size cash Flow Statement
(D) None of the Above

Question. Which one of the following items is not a method/tool of analysis of financial statements?
(A) Fund Flow Statement
(B) Common Size Statement
(C) Statement of Trade Receivables
(D) Cash Flow Statement

Question: Interpretation of Financial Statements includes:
(a) Criticisms and Analysis
(b) Comparison and Trend Study
(c) Drawing Conclusion
(d) All the above

Question. Which objective is not fulfilled by comparative financial statement:
(A) Indicate the extent of change in assets and liabilities
(B) Indicate the extent of change in items of Statement of Pofit & Loss
(C) Show effect of operative activities on assets and liabilities
(D) Show the direction of change in assets and liabilities

Question. Analysis Simply means _________ data.

Question. Common size analysis is also known as ___________ analysis. 

Question. Comparative Analysis is also known as ___________ analysis. 

Question. Interpretation means __________ data.