Class 12 Accountancy Chapter 4 (Part 1) - Analysis of financial statements MCQs

Class 12 Accountancy Chapter 4 (Part 1) – Analysis of financial statements MCQ Question Answers for CUET 2024

1. Whose analysis help in studying accounting data so as to determine the continuity of the operating policies, investment value of the business, credit ratings and testing the efficiency of operations?

a.Investors

b.Finance Managers

c.Trade Payables

d.Top Management

2. What is Not Incorrect About Common Size Statements?

a.Percentage calculated can be easily compared with the results of corresponding percentages of the previous year

b.The numbers are brought to common base

c.Common size statements are useful, both, in intra-firm comparisons over different years

d.This analysis is also known as Horizontal Analysis

3. Common Size Statement is of immense use for ______________.

a.Trend analysis

b.Intra firm Comparison

c.Financial Analysis

d.Inter firm Comparison

4. The financial statements of a business enterprise include:

a.All the above

b.Profit and loss account

c.Balance sheet

d.Cash flow statement

5. The most commonly used tools for financial analysis are:

a.All the above

b.Ratio analysis

c.Vertical analysis

d.Horizontal analysis

6. Trend analysis is important because, with its _________ view, it may point to basic changes in the nature of the business

a.None of the above

b.Short run

c.Short Time

d.Long Run

7. Whose analysis will evaluate the ability of the company to meet its short-term obligations & firm’s liquidity position?

a.Investors

b.Lenders

c.Shareholders

d.Trade Payables

8. Using the previous years’ data of a business enterprise, __________can be done to observe the percentage changes over time in the selected data.

a.Vertical Analysis

b.Time Data

c.Trend Analysis

d.Periodical Analysis Technique

9. Comparative Statements are also known as:

a.External Analysis

b.Dynamic Analysis

c.Horizontal Analysis

d.Vertical Analysis

10. ___________ describes the significant relationship which exists between various items of a balance sheet and a statement of profit and loss of a firm.

a.Ratio Analysis

b.Cash flow analysis

c.Trend Analysis

d.Proportion Analysis

11. The term Financial Analysis includes both ____________.

a.Interpretation and Study

b.Evaluation and Interpretation

c.Analysis and Forecasting

d.Analysis and Interpretation

12. The following are the reasons that advocate in favour of Financial Analysis.

a.It helps in evaluating the profit earning capacity and finance feasibility of a business.

b.All of the above

c.It helps in assessing the long-term solvency of the business.

d.Helps to ascertain the relative importance of different components of the financial position of the firm

13. By Analysing Common Size Statements Which Analysis can be Processed?

a.Vertical Analysis

b.Horizontal Analysis

c.Proportion Analysis

d.Ratio Analysis

14. The main and sole Objective of Analysis of financial statements is to

a.Recognize the Profitability

b.Measure the financial Strength of the business

c.Ascertain the loss or Profit

d.Ascertain the assets and Liabilities of firm

15. This is Not a feature of Trend Analysis

a.Assists in Forecasting

b.Consider Only Monetary Aspect

c.Presents a Broader Picture

d.Percentage Terms

16. Limitation of Financial Analysis.

a.Nonmonetary Aspects re Ignored

b.All of the above

c.Misleading without the knowledge of the changes in accounting procedure

d.Ignorance of changes in Price level

17. The process of critical _________ of the financial information contained in the financial statements in order to understand and make decisions regarding the operations of the firm is called ‘Financial Statement Analysis’

a.Study

b.Evaluation

c.Analysis

d.Evolution

18. Who are also interested in the firm’s capital structure to ascertain its influences on firm’s earning, Risk and Also evaluate the efficiency of the management and determine whether a change is needed or not?

a.Trade Payables

b.Investors

c.Top Management

d.Others

19. In Which analysis, each item in the statement is stated as a percentage of the aggregate, or revenue from operations of which that item is a part.

a.Horizontal Analysis

b.External Analysis

c.Vertical Analysis

d.Dynamic Analysis

20. Conclusion base on financial analysis may be non-reliable because financial statement is based on certain concepts and conventions. This Statement Can be Limitation of __________.

a.Vertical Analysis

b.Trend Analysis

c.Internal Analysis

d.Financial Analysis