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

a.Trend Analysis

b.Time Data

c.Vertical Analysis

d.Periodical Analysis Technique

2. The financial statements of a business enterprise include:

a.Profit and loss account

b.Balance sheet

c.Cash flow statement

d.All the above

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

a.Ratio Analysis

b.Horizontal Analysis

c.Vertical Analysis

d.Proportion Analysis

4. 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

5. 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.Internal Analysis

b.Vertical Analysis

c.Trend Analysis

d.Financial Analysis

6. ___________ 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.Trend Analysis

c.Ratio Analysis

d.Proportion Analysis

7. 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.Analysis

b.Evaluation

c.Evolution

d.Study

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

a.Shareholders

b.Lenders

c.Investors

d.Trade Payables

9. 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.Others

c.Investors

d.Top Management

10. Limitation of Financial Analysis.

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

b.Nonmonetary Aspects re Ignored

c.Ignorance of changes in Price level

d.All of the above

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

a.Ascertain the assets and Liabilities of firm

b.Ascertain the loss or Profit

c.Measure the financial Strength of the business

d.Recognize the Profitability

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

a.Intra firm Comparison

b.Financial Analysis

c.Trend analysis

d.Inter firm Comparison

13. What is Not Incorrect About Common Size Statements?

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

b.This analysis is also known as Horizontal Analysis

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

d.The numbers are brought to common base

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

a.Long Run

b.None of the above

c.Short Time

d.Short run

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

a.Ratio analysis

b.Vertical analysis

c.All the above

d.Horizontal analysis

16. 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.Finance Managers

b.Top Management

c.Investors

d.Trade Payables

17. 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.Vertical Analysis

b.Dynamic Analysis

c.External Analysis

d.Horizontal Analysis

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

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

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

c.All of the above

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

19. Comparative Statements are also known as:

a.Horizontal Analysis

b.External Analysis