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. What is Not Incorrect About Common Size Statements?

a.The numbers are brought to common base

b.This analysis is also known as Horizontal Analysis

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

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

2. 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.Trade Payables

b.Investors

c.Finance Managers

d.Top Management

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

a.Measure the financial Strength of the business

b.Ascertain the assets and Liabilities of firm

c.Ascertain the loss or Profit

d.Recognize the Profitability

4. 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.Evolution

c.Evaluation

d.Analysis

5. Comparative Statements are also known as:

a.Horizontal Analysis

b.Vertical Analysis

c.External Analysis

d.Dynamic Analysis

6. 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.Vertical Analysis

c.Dynamic Analysis

d.External Analysis

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

a.Cash flow analysis

b.Ratio Analysis

c.Trend Analysis

d.Proportion Analysis

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

a.Short Time

b.Short run

c.Long Run

d.None of the above

9. 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

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

a.All the above

b.Ratio analysis

c.Vertical analysis

d.Horizontal analysis

11. The term Financial Analysis includes both ____________.

a.Analysis and Interpretation

b.Analysis and Forecasting

c.Evaluation and Interpretation

d.Interpretation and Study

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

a.Proportion Analysis

b.Horizontal Analysis

c.Vertical Analysis

d.Ratio Analysis

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

a.Inter firm Comparison

b.Financial Analysis

c.Intra firm Comparison

d.Trend analysis

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

a.Time Data

b.Vertical Analysis

c.Periodical Analysis Technique

d.Trend Analysis

15. Limitation of Financial Analysis.

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

b.All of the above

c.Nonmonetary Aspects re Ignored

d.Ignorance of changes in Price level

16. 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.Investors

b.Top Management

c.Trade Payables

d.Others

17. 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.Financial Analysis

b.Vertical Analysis

c.Internal Analysis

d.Trend Analysis

18. The financial statements of a business enterprise include:

a.Profit and loss account

b.All the above

c.Cash flow statement

d.Balance sheet

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

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

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