Chapter 8: Analysis of Financial Statements — Online MCQ Test
ACCOUNTANCY · CLASS 12 SECOND PUC · Karnataka State Board
Practice Chapter 8: Analysis of Financial Statements with a free chapter-wise online MCQ test.
This chapter covers: Financial Statement Analysis Comparative Statements Common Size Statements Horizontal Analysis Vertical Analysis Profitability Liquidity Solvency Financial Performance Trend Analys....
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Chapter 8: Analysis of Financial Statements — Important Questions & Answers
Financial statement analysis mainly involves:
- A. Recording daily business transactions
- B. Systematic examination and interpretation of financial statements
- C. Preparing vouchers for cash payments
- D. Maintaining inventory records only
Answer: B. Systematic examination and interpretation of financial statements
Financial statement analysis means examining financial statements to assess profitability, liquidity, solvency and overall performance.
Financial statement analysis means examining financial statements to assess profitability, liquidity, solvency and overall performance.
Comparative financial statements show financial data for:
- A. Only one accounting year
- B. Two or more accounting periods
- C. Only cash transactions
- D. Only non-current assets
Answer: B. Two or more accounting periods
Comparative statements present figures for two or more periods to identify changes and trends over time.
Comparative statements present figures for two or more periods to identify changes and trends over time.
Sales increased from Rs. 5,00,000 to Rs. 6,25,000. What is the absolute increase in sales?
- A. Rs. 1,00,000
- B. Rs. 1,25,000
- C. Rs. 1,50,000
- D. Rs. 25,000
Answer: B. Rs. 1,25,000
Absolute increase = Current year sales - Previous year sales = Rs. 6,25,000 - Rs. 5,00,000 = Rs. 1,25,000.
Absolute increase = Current year sales - Previous year sales = Rs. 6,25,000 - Rs. 5,00,000 = Rs. 1,25,000.
A company's revenue increased from Rs. 8,00,000 to Rs. 10,00,000, while net profit increased from Rs. 80,000 to Rs. 90,000. Which conclusion is most appropriate?
- A. Revenue increased by 12.5% and profit increased by 25%
- B. Net profit ratio improved from 9% to 10%
- C. Revenue and profit increased in the same proportion
- D. Net profit ratio declined from 10% to 9%
Answer: D. Net profit ratio declined from 10% to 9%
Net profit ratio was 80,000 / 8,00,000 × 100 = 10% and became 90,000 / 10,00,000 × 100 = 9%. Thus, profitability as a percentage of sales declined.
Net profit ratio was 80,000 / 8,00,000 × 100 = 10% and became 90,000 / 10,00,000 × 100 = 9%. Thus, profitability as a percentage of sales declined.
Which situation makes trend analysis most unreliable or meaningless?
- A. The base year figure is normal and positive
- B. The base year figure is zero or abnormal
- C. Figures are available for five years
- D. The same accounting policy is followed every year
Answer: B. The base year figure is zero or abnormal
Trend percentages cannot be meaningfully calculated when the base year figure is zero, and an abnormal base year may distort the trend.
Trend percentages cannot be meaningfully calculated when the base year figure is zero, and an abnormal base year may distort the trend.