Quizr: Financial Statement Analysis Quiz#4, MCQs

Financial Statement Analysis Quiz#4, MCQs

NOTE: Attempt all Questions to see the Result at the bottom of this page.

The Timer has started 10:00

1)

Which one of the following is NOT a limitation of financial statements?
- A) They always present past
- B) They always present the monetary terms
- C) They help in assessment of future profitability
- D) They give no information about management and employee relations
Right Answer is the option "C"

2)

Which of the following business owner is personally liable for its debts?
- A) Sole proprietorship
- B) Corporations
- C) General partnership
- D) Limited liability company
Right Answer is the option "A" Sole proprietorship A business entity owned by a single individual, which is unincorporated. The owner of a sole proprietorship is personally liable for any debts or obligations of the business.

3)

Which of the following characteristics is NOT generally regarded as right of common shareholders?
- A) Preemptive right
- B) Voting rights
- C) Preference in liquidation
- D) Transferability of shares
Right Answer is the option "C" Common shareholders are entitled only to the residual interest in a liquidation; creditors and preferred shareholders have the preference. In the absence of modification, common shares hold a preemptive right, have voting privileges, and are readily transferable.

4)

In the vertical analysis of income statement, all the accounts are expressed as a percentage of which of the following?
- A) Net sales
- B) Gross sales
- C) Net income
- D) Total expenses
Right Answer is the option "A"

5)

The changes in the financial statement items from a base year to following years are often expressed as which of the following?
- A) Trend percentages
- B) Component percentages
- C) Common percentages
- D) Both trend and component percentages
Right Answer is the option "A"

6)

Krisle and Kringle's debt-to-total assets ratio is 4%. What is its debt-to-equity ratio?
- A) 2%
- B) 7%
- C) 6%
- D) 3%
Right Answer is the option "C" Since the debt-to-total assets ratio is.4, then equity-to-total assets ratio is .6. The ratio of debt to equity is then .4/.6 or .667 (66.7%).

7)

Which of the following could account for a company's gross profit ratio increasing from one period to the next?
- A) An increase in the cost of sales which has not been accompanied by an increase in the selling price of goods sold
- B) An increase in the selling price of goods sold which has not been accompanied by an increase in the cost of sales
- C) A change in the mix of goods sold so that lower profit margin goods take a greater proportion of total sales
- D) A change in stock valuation method at the year end which leads to a decrease in the closing stock figure
Right Answer is the option "B"

8)

A company has a cost of goods sold of Rs. 530,000; the beginning inventory is Rs. 120,000, and ending inventory is Rs. 180,000. Calculate the number of days to sell the inventory. (Round the figures to the nearest whole)
- A) 83 days
- B) 125 days
- C) 104 days
- D) 100 days
Right Answer is the option "C" Average inventory = opening inv +ending inv / 2
= 120000+180000/ 2
= 150000
Inventory turnover = CGS / average inventory
= 530,000 / 150000
= 3.53
Number of day to sell the inventory = 365 / 3.53
= 103.39

9)

Which one of the following statement indicates the Inventory turnover ratio?
- A) How quickly company prepared its inventory
- B) How quickly company converts its inventory into cash
- C) How quickly company purchases its inventory
- D) How quickly company sells its inventory
Right Answer is the option "D"

10)

Operating cycle belongs to which group of ratios?
- A) Leverage ratios
- B) Liquidity ratios
- C) Profitability ratios
- D) Activity ratios
Right Answer is the option "D"