Financial Statement Analysis Multiple Choice Questions#4

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

  1. 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

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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%

  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

  8. 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

  9. 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

  10. 10)

    Operating cycle belongs to which group of ratios?

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