Financial Statement Analysis Multiple Choice Questions#6



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



  1. 1)

    In a perpetual inventory system, which of the following is NOT part of the series of journal entries made when merchandise is sold on credit?


    • A) Credit the Cost of Goods Sold account
    • B) Credit the Sales account
    • C) Credit the Merchandise Inventory account
    • D) Debit the Accounts Receivable account

  2. 2)

    Which of the following is NOT an example of accelerated depreciation method?


    • A) Straight-line method
    • B) Sum-of-the-years digit method
    • C) Double-declining balance method
    • D) Modified Accelerated Cost Recovery System

  3. 3)

    As stated in the audit report, or Report of Independent Accountants, the primary responsibility for a company’s financial statements lies with which of the following?


    • A) The owners of the company
    • B) Independent financial analysts
    • C) The auditors
    • D) The company’s management

  4. 4)

    Capital stock is normally listed on which of the following financial statements of a business enterprise?


    • A) Cash flow Statement
    • B) Income Statement
    • C) Statement of Retained Earnings
    • D) Balance Sheet

  5. 5)

    The money that a company gets from potential investors in addition to the stated value of the stock is referred to which of the following?


    • A) Paid in capital
    • B) Additional paid in capital
    • C) Capital stock
    • D) Contributed capital

  6. 6)

    Generally , investors want to buy shares at which of the following prices?


    • A) At face value
    • B) Below face value
    • C) Above face value
    • D) At market value

  7. 7)

    By computing component percentages for several successive balance sheets, which of the following can NOT be found?


    • A) The increasing items
    • B) The decreasing items
    • C) The unchanged items
    • D) The future profitable items

  8. 8)

    Which of the following are the ratios that are used to determine an entity’s short-term debt paying ability?


    • A) Times interest earned, inventory turnover, current ratio, and receivables turnover
    • B) Times interest earned, acid-test ratio, current ratio, and inventory turnover
    • C) Current ratio, acid-test ratio, receivables turnover, and inventory turnover
    • D) Asset turnover, times interest earned, current ratio, and receivables turnover

  9. 9)

    If a company had a current ratio of 0.5, then which of the following statements regarding that company's working capital would be true?


    • A) The company's working capital would be positive
    • B) The company's working capital would be zero
    • C) The company's working capital would be negative
    • D) The company's working capital would be 2:1

  10. 10)

    A company has an inventory turnover ratio of 1.05 times, and cost of goods sold of Rs. 50,000. Calculate the average inventory of the company


    • A) Rs. 47, 500
    • B) Rs. 47, 619
    • C) Rs. 47, 500
    • D) Rs. 47, 650