Financial Statement Analysis Multiple Choice Questions#5



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



  1. 1)

    The actions taken by the management to make company appear as strong as possible in its financial statements is termed as which of the following?


    • A) Window dressing
    • B) Understanding
    • C) Comprehensiveness
    • D) Materiality

  2. 2)

    ABC Company selected ‘Abdullah and Ahmad Charted Accountants’ as its auditors / accountancy firm. After audit the auditors stated company’s audit report as: We have examined the accounts of ABC Company up to the year ended 30th June, 2009, and other record based on these accounts and we got all the information required by us. In our opinion the financial statements and the accounts on which they are based have been prepared in conformity with GAAP and present a true and fair position of the affairs of ABC Company.

    What do you think the above case is which type of following audit reports?


    • A) Qualified Audit Opinion
    • B) Un-qualified Audit Opinion
    • C) Adverse Audit Opinion
    • D) Disclaimer Audit Opinion

  3. 3)

    All of the following users are very much concerned with the ratio analysis EXCEPT?


    • A) Credit analyst, including banks who want to know the credibility of company
    • B) Bond rating companies, who analyze ratios to help ascertain a company’s ability to pay its debts
    • C) Customers, who want to know the designs and quality of the products offered
    • D) Managers, to analyze, control, and thus improve their working operations

  4. 4)

    In order to know the percentage of assets financed by creditors, which of the following ratio is calculated?


    • A) Debt Ratio
    • B) Equity Ratio
    • C) Operating credit Ratio
    • D) Quick Ratio

  5. 5)

    Which of the following statement is the LEAST LIKELY to be correct?


    • A) A firm that has a high degree of business risk is less likely to want to incur financial risk
    • B) There exists little or no negotiation with suppliers of capital regarding the financing needs of the firm
    • C) Financial ratios are relevant for making internal comparisons
    • D) It is important to make external comparisons or financial ratios

  6. 6)

    After recording the transactions in journal, posting is made to which of the following?


    • A) Trial Balance
    • B) Financial Statements
    • C) Ledger
    • D) After-closing Trial Balance

  7. 7)

    Prepaid Expense is a(n) _________ account and has a _________ normal balance.


    • A) Revenue, credit
    • B) Liability, credit
    • C) Asset, debit
    • D) Expense, debit

  8. 8)

    One purpose of closing entries is to give zero balances to which of the following accounts?


    • A) Asset and liability accounts
    • B) Liability and capital accounts
    • C) Revenue and expense accounts
    • D) Expense and capital accounts

  9. 9)

    Which of the following would be considered as cash flow from investing activities?


    • A) Proceeds from issuance of long-term debt
    • B) Expenditure for sale of plant and equipment
    • C) Payments to suppliersPayments to suppliers
    • D) Receipts from sale of goods or services

  10. 10)

    The cash flow from investing activities shows the cash effects of which of the following?


    • A) Income statement items
    • B) Long term assets items
    • C) Long term liability & stockholder’s equity
    • D) Long term liability and long term assets