Financial Statement Analysis Multiple Choice Questions#2



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


  1. 1)

    Nishat Corporation had net income of Rs. 100,000, paid income taxes of Rs. 30,000, and had interest expense of Rs. 8,000. What was Nishat's times interest earned ratio?


    • A) 12.5
    • B) 16.25
    • C) 17.25
    • D) 17.85

  2. 2)

    Operating cycle belongs to which group of ratios?


    • A) Leverage ratios
    • B) Liquidity ratios
    • C) Profitability ratios
    • D) Activity ratios

  3. 3)

    Assume that a company has current assets of Rs. 60,000, current liabilities of Rs. 35,000 and prepaid expenses of Rs. 5,000. Calculate the quick ratio of the company?


    • A) 1.57
    • B) 1.71
    • C) 1.86
    • D) 0.58

  4. 4)

    Which of the following is NOT normally required for revenue to be recognized according to the revenue principle for accrual basis accounting?


    • A) The price is fixed or determinable
    • B) Services have been performed
    • C) Cash that has already been collected
    • D) Evidence of an arrangement for customer payment exists

  5. 5)

    Which of the following is a type of preferred stock that entitles the holder to a fixed dividend and, in addition, to the right to get any surplus profits after payment of agreed levels of dividends to holders of common stock?


    • A) In arrears preferred shares
    • B) Call able preferred shares
    • C) Cumulative preferred shares
    • D) Participating preferred shares

  6. 6)

    To financial analysts, "working capital" means the same thing as which of the following?


    • A) Total assets
    • B) Fixed assets
    • C) Current assets
    • D) Current assets minus current liabilities

  7. 7)

    What are the effects of an adjusting entry on the financial statements?


    • A) Match revenues and expenditures
    • B) Increase net income
    • C) Increase the accuracy of balance sheet and income statement
    • D) Match revenues and assets

  8. 8)

    ABC Company has a cost of goods sold of Rs. 500,000. During the year the inventory increased by Rs. 10,000 and accounts payable increased by Rs.C15, 000. The interest expense was Rs. 15,000 for the year and dividends of Rs.C11, 000 were paid during the year. What would be the cash payments for the purchase of the merchandise?


    • A) Rs. 505,000
    • B) Rs. 516,000
    • C) Rs. 490,000
    • D) Rs. 495,000

  9. 9)

    Which of the following valuation methods can distort the comparison between companies?


    • A) Inventory valuation methods
    • B) Assets valuation methods
    • C) Sales valuation methods
    • D) Expenses valuation methods

  10. 10)

    When dividends are paid to the shareholders they must be approved by which of the following authority?


    • A) Board of directors
    • B) Management
    • C) Common Stockholders
    • D) Preferred Stockholders