Chapter Exam

Chapter 8: Analysis of Financial Statements — Online MCQ Test

Q: Comparative financial statements show financial data for:

Answer: B. Two or more accounting periods — Comparative statements present figures for two or more periods to identify changes and trends over time.

Q: Sales increased from Rs. 5,00,000 to Rs. 6,25,000. What is the absolute increase in sales?

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.

Q: 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?

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.

Q: Which situation makes trend analysis most unreliable or meaningless?

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.

ACCOUNTANCY · Grade 12 · CBSE(NCERT)

Practice Chapter 8: Analysis of Financial Statements with a free chapter-wise online MCQ test for CBSE(NCERT) Grade 12 ACCOUNTANCY. This chapter covers: Financial Statement Analysis Comparative Statements Common Size Statements Horizontal Analysis Vertical Analysis Profitability Liquidity Solvency Financial Performance Trend Analys.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 8: Analysis of Financial Statements — Important Questions & Answers (FAQ)

Frequently asked questions from CBSE(NCERT) Grade 12 ACCOUNTANCY — Chapter 8: Analysis of Financial Statements, with answers and explanations. These are sample questions; the exam has its own separate question set.

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.

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.

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.

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.

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.