Unit 8: Financial Statement Analysis — Online MCQ Test
ACCOUNTANCY · CLASS 12th · Tamil Nadu State Board
Practice Unit 8: Financial Statement Analysis with a free chapter-wise online MCQ test.
This chapter covers: This unit focuses on assessing a company's financial health and performance over time using analytical tools. Students learn to prepare and interpret Comparative Statements Common-....
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Unit 8: Financial Statement Analysis — Important Questions & Answers
What is the main purpose of financial statement analysis?
- A. To determine the number of employees in a business
- B. To assess the financial health and performance of a business
- C. To calculate only the market value of shares
- D. To prepare tax returns for the government
Answer: B. To assess the financial health and performance of a business
Financial statement analysis is used to study a firm's financial position, performance, and profitability. It helps in judging the financial health of the business.
Financial statement analysis is used to study a firm's financial position, performance, and profitability. It helps in judging the financial health of the business.
Comparative financial statements are used to compare:
- A. Only one year's data with industry averages
- B. Two or more years' figures of the same firm
- C. Only balance sheet figures with cash flow figures
- D. Only sales figures of different firms
Answer: B. Two or more years' figures of the same firm
Comparative statements present figures for two or more periods side by side. This makes it easy to identify changes over time.
Comparative statements present figures for two or more periods side by side. This makes it easy to identify changes over time.
In a comparative income statement, the difference between figures of two years is called:
- A. Trend ratio
- B. Absolute change
- C. Common base
- D. Current ratio
Answer: B. Absolute change
The absolute change is the numerical difference between two period figures. It shows the actual increase or decrease in an item.
The absolute change is the numerical difference between two period figures. It shows the actual increase or decrease in an item.
A rise in current assets in a comparative balance sheet, along with a rise in current liabilities, may indicate:
- A. Improved liquidity in all cases
- B. Possible improvement or possible strain, depending on the proportion
- C. No financial impact at all
- D. Only higher fixed asset turnover
Answer: B. Possible improvement or possible strain, depending on the proportion
An increase in both current assets and current liabilities cannot be judged in isolation. The effect depends on the relative increase and the resulting liquidity position.
An increase in both current assets and current liabilities cannot be judged in isolation. The effect depends on the relative increase and the resulting liquidity position.
The base year figure of a particular item is ₹80,000. Its trend percentages for the next two years are 125 and 150. What is the amount in the second year?
- A. ₹90,000
- B. ₹1,00,000
- C. ₹1,20,000
- D. ₹1,50,000
Answer: C. ₹1,20,000
Trend amount = Base year figure × Trend percentage / 100 = 80,000 × 150 / 100 = ₹1,20,000. The second year corresponds to the 150 trend percentage.
Trend amount = Base year figure × Trend percentage / 100 = 80,000 × 150 / 100 = ₹1,20,000. The second year corresponds to the 150 trend percentage.