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Analysis of Financial Statements Class 12 MCQs Questions with Answers
Multiple Choice Questions (MCQs):
Which of the following is not recognized as tool for the analysis of financial statements?
(a) Cash Flow Statement
(b) Funds Flow Statement
(c) Trend Analysis
(d) Statement showing distribution of dividends
Answer: (d) Statement showing distribution of dividends
Which of the following is the objective of comparative statement?
(a) To making data simple
(b) To make data comparative
(c) To help in forcasting
(d) To detect financial irregularities
Answer: (d) To detect financial irregularities
Which of the following is not a tool of financial statement analysis?
(a) Cash Flow Statement
(b) Statement showing distribution of dividend
(c) Ratio Analysis
(d) Comparative Financial Statements
Answer: (b) Statement showing distribution of dividend
Which of the following objectives is not met by comparative statement of Profit and Loss?
(a) It helps to compare the figures of atlest two years
(b) It helps to assess absolute changes
(c) It helps to know the changes in the financial position
(d) It helps to know the percent changes in the statement of Profit and Loss
Answer: (c) It helps to know the changes in the financial position
Financial analysis can be done with which of the following tool?
(a) Ratio Analysis
(b) Cash Flow Statement
(c) Comparative Statements
(d) All of the above
Answer: (d) All of the above
Analysis of financial statements for two or more years is known as
(a) Horizontal analysis
(b) External analysis
(c) Vertical analysis
(d) Internal analysis
Answer: (a) Horizontal analysis
Which of the following is not an objective of financial statement analysis?
(a) Efficiency of the Management
(b) Price Level Changes
(c) Profitability of the Enterprise
(d) Solvency of the Enterprise
Answer: (b) Price Level Changes
Who of the following has no financial interest in the analysis of financial statements?
Answer: (b) Debtor
Who has the interest in long-term solvency position of the firm?
(b) Bankers providing overdraft facilities
(c) Financial Institutions
(d) Short-term money lenders
Answer: (c) Financial Institutions
Which of the following is not a limitation in the analysis of financial statements?
(a) Ignores Price Level Changes
(b) Window Dressing
(c) Financial performance of the firm
(d) Bias of the Analyst
Answer: (c) Financial performance of the firm
State whether the following statements are true or false:
Comparative financial statements reflect changes in the items in absolute amount only.
Comparative Financial Statements are prepared at the end a financial year.
Shareholders are interested to know short-term financial position of an enterprise.
Compression of financial statements of two or more years of the same firm is known as inter-firm comparison.
Manipulation of accounts is known as window dressing.
Both quantitative and well as qualitative aspects are ignored in the analysis of financial statements.
Financial statements do not reflect price level changes.
Statement showing the pay roll in a company is one of the tool for the analysis of financial statements.
Comparative financial statements represent the date for two or more years.
Comparative Statement of Profit and Loss reflects changes in the financial position of an enterprise.
Fill in the blanks with correct word:
Financial statement analysis is the post-mortem of the business _________.
Comparative financial statements mean a comparative study of _______ of an enterprise for two or more years.
Answer: Financial Statements
_________ analysis is conducted by those who do not have access to the detailed records of an enterprise.
________ refers to the comparison of financial statements within an enterprise.
Answer: Intra-firm comparison
Preparation of financial statements are ________ in nature.
When the financial statements of two or more enterprises are compared, it is known as __________.
Answer: Inter-firm comparison
In ______ statement, components of balance sheets are compared with the total of balance sheet.
Answer: Common size balance sheet
Absolute changes in the comparative financial statements are found by comparing current year figure with _____ year’s figure.
The items of comparative income statement are converted into percentage by taking _______ as base.
Answer: Revenue from Operations
Cash Flow Statement reflects _____ and ______ of cash and cash equivalents during an accounting year.
Answer: Inflows, outflows
One word Questions:
State any one limitation of Financial Statement Analysis. (CBSE Compartment Delhi 2014, 2015)
Answer: Historical Analysis of financial Statement.
State any one objective of analysis of financial statements. (CBSE Compartment Delhi 2014)
Answer: To measure earning capacity of business.
State the type of Financial Statement Analysis in which figures of the same items of various years are compared.
Answer: Horizontal analysis.
Which type of financial statement analysis helps a company to establish the relationship between different items financial statement of a same year?
Answer: Vertical analysis.
“One of the objectives of Financial Statement Analysis is to assess solvency of business”. What does the term ‘solvency’ mean here ?
Answer: Solvency means ability to pay the debts.
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