PC 13/14 MCQ On Chapter 5 (Financial Statement) | SAS PC14 MCQ

PC 13/14 MCQ on Chapter 5 (Financial Statement) | SAS PC14 MCQ

The part of a financial statement are
i. Trial Balance ii. Trading Account
iii. Profit & Loss Account iv. Balance Sheet
a. i, ii and iii b. ii, iii and iv
c. i, iii and iv d. All of the above
Answer
Answer: B
Which of the following is also known as Position Statement?
a. Trial Balance b. Trading & Profit Account
c. Income & Expenditure Account d. Balance Sheet
Answer
Answer: D
The objectives of a financial statement are
i. Ascertaining the results of business operations
ii. Helps in managerial decision making
iii. An index of solvency of the concern
iv. Source of information
v. Ascertaining the financial position
a. i, ii, iii and iv b. i, iii, iv and v
c. ii, iii, iv and v d. All of the above
Answer
Answer: D
Expenditure which aims at increasing the earning capacity of business is
a. capital expenditure b. revenue expenditure
c. contingent expenditure d. all of the above
Answer
Answer: A
Pick the correct one
a. Capital expenditure is placed as an income in Profit & Loss A/c whereas revenue expenditure as a charge
b. Capital expenditure is placed as an assets in balance sheet whereas revenue expenditure as a liability
c. Capital expenditure is placed as an assets in balance sheet whereas revenue expenditure as a charge in Profit & Loss A/c
d. None of the given
Answer
Answer: C
The expenditure provides the benefits spread over a number of years is/are
a. Capital expenditure b. Revenue expenditure
c. Contingent expenditure d. All of the above
Answer
Answer: A
The heavy expenditure incurred on advertising is likely to benefit the business firm for more than one accounting period will be accounted for under
a. Capital expenditure b. Revenue expenditure
c. Deferred capital expenditure d. Deferred revenue expenditure
Answer
Answer: D
Pick the correct one
a. Revenue receipts are shown in Trading & Profit and Loss A/c whereas Capital receipts are shown in Balance Sheet
b. Revenue receipts are shown in Balance Sheet whereas Capital receipts are shown in Trading & Profit and Loss A/c
c. Both revenue and capital receipts are shown in Trading & Profit and Loss A/c
d. Both revenue and capital receipts are shown in Balance Sheet
Answer
Answer: A
Which of the following are capital receipt
i. receipt from sale proceeds of fixed assets ii. Receipt from sale of old newspapers
iii. Profits prior to incorporation iv. Profit on redemption of debentures
v. Profit on revaluation of fixed asset & liabilities
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a. i, ii, iii and iv b. ii, iii, iv and v
c. i, iii, iv and v d. All of the above
Answer
Answer: C
Pick the correct one
i. Trial Balance is also known as Statement of Affairs shows the head wise ledger balance of a given date.
ii. Trading and Profit and Loss account is also known as Income statement, shows the financial performance in the form of profit earned or loss sustained by the business.
iii. Balance Sheet shows financial position in the form of assets, liabilities and capital.
iv. These are prepared on the basis of trial balance and additional information, if any.
a. i, ii and iii b. ii, iii and iv
c. i, iii and iv d. All of the above
Answer
Answer: B
Pick the correct one
a. Balances on the debit side of the Trading and a Profit and Loss account represent expenses and losses whereas balances on the credit side represent revenues and gains
b. Balances on the debit side of the Trading and a Profit and Loss account represent revenues and gains whereas balances on the credit side represent expenses and losses
c. There are no debit and credit sides in a Trading and a Profit and Loss account
d. None of the above
Answer
Answer: A
Which of the following are shown on the debit side of a Trading and a Profit and Loss account
i. Opening stock ii. Packaging material and Packing charges
iii. Purchases including purchase return iv. salaries
iv. Carriage inwards/Freight inwards
a. i, ii, iii and iv b. i, ii, iv and v
c. ii, iii, iv and v d. All of the above
Answer
Answer: B
Cost of goods sold
a. Opening stock + Net purchases + All direct expenses – Closing stock
b. Closing stock + Net purchases + All direct expenses – Opening stock
c. Opening stock + Gross purchases + All direct expenses – Closing stock
b. Closing stock + Gross purchases + All direct expenses – Opening stock
Answer
Answer: A
Gross Profit
a. Net sales + Cost of goods sold
b. Net sales – Cost of goods sold
c. Net sales + Direct Expense + Cost of goods sold
d. Net sales+ Direct Expenses – Cost of goods sold
Answer
Answer: B
To ascertain the result from basic operational activities of the business, the account prepared is
a. Trial Balance b. Trading Account
c. Profit & Loss Accounts d. All of the above
Answer
Answer: B
If the total of the credit side of the Trading account is more than the total of the debit side, the difference is the
a. Gross Loss b. Net Profit
c. Net Loss d. Gross Profit
Answer
Answer: B
If the total of the debit side of the profit and loss account is more than the total of the credit side, the difference is the
a. Gross Loss b. Gross Profit
c. Net Profit d. Net Loss
Answer
Answer: D
Gross profit or gross loss is transferred
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a. from trading account to profit & loss account b. from trading account to balance sheet
c. from profit & loss account to trading account d. from trial balance to trading account
Answer
Answer: A
Pick the correct one
a. The gross profit or the gross loss is transferred to profit and loss account on debit side and credit side respectively.
b. The gross profit or the gross loss is transferred to profit and loss account on credit side and debit side respectively.
c. The gross profit is transferred to profit and loss account on credit side and loss directly to balance sheet under capital account
d. The gross loss is transferred to profit and loss account on debit side and profit directly to balance sheet under capital account
Answer
Answer: B
Indirect expenses are shown in
a. Trading Account b. Profit and Loss Account
c. Balance Sheet d. Trading Account and Profit & Loss Account
Answer
Answer: B
Net profit is
a. Gross Profit –( Other Incomes + Indirect Expenses)
b. Gross Profit + indirect expenses -Other Incomes
c. Gross Profit + Other Incomes + Indirect Expenses
d. Gross Profit + Other Incomes – Indirect Expenses
Answer
Answer: D
Which is transferred to the capital account in the balance sheet
a. Gross Profit b. Gross Profit or Gross Loss
c. Net profit d. Net profit or net loss
Answer
Answer: D
The excess of operating revenue over operating expenses is
a. Operating Profit b. Normal profit
c. Net Profit d. Business Profit
Answer
Answer: A
Profit before interest and tax (EBIT) is known as
a. Non-operating profit b. Running Profit
c. Operating Profit d. Adjusting Profit
Answer
Answer: C
While calculating operating profit, the incomes and expenses that are not taken into account are
a. incomes and expenses of a purely financial nature
b. abnormal items of incomes and expense such as loss by fire, etc.
c. Both A&B
d. the incomes and expenses of all nature whether financial or non-financial are taken into account.
Answer
Answer: C
Operating profit =
a. Net Profit + Non-Operating Expenses-Non Operating Incomes
b. Net profit + Non-Operating Incomes- Non-Operating Expenses
c. Net profit + Non-Operating Incomes + Non-Operating Expenses
d. Net profit –(Non-Operating Incomes + Non-Operating Expenses)
Answer
Answer: A
Closing stock is credited to
a. Trial Balance b. Profit & Loss Account
c. Trading Account d. Balance Sheet
Answer
Answer: C
Which is prepared to test the arithmetic accuracy of books of account
a. Position Statement b. Profit & Loss Account
c. Trading Account d. Trial Balance
Answer
Answer: D
Balance Sheet is called so because it is a statement of balances of ledger accounts that have not been transferred to trading and profit and loss account and are to be carried forward to the next year
a. True b. False
Answer
Answer: A
The orders in which a Balance sheet may be prepared
i. Liquidity order ii. Permanency order
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iii. Share order iv. chronological order
a. i, ii and iv b. i and ii
c. ii, iii and iv d. All of the above
Answer
Answer: B
Assets and Liabilities are shown in Balance sheet prepared on liquidity order
a. Assets and liabilities of highest liquidity and of shortest term respectively is written first and next higher follows and so on
b. Assets and liabilities of lowest liquidity and of longest term respectively is written first and next higher/lower follows and so on
c. Assets of highest liquidity and liabilities of longest term is written first and next lower follows and so on
d. In either way i.e. highest first and then descending order or lowest first then ascending order.
Answer
Answer: A
Under permanency order of balance, the order of liabilities are
a. Long-term liabilities>Short-term liabilities>Capital
b. Long-term liabilities>Capital>Short-term liabilities
c. Capital>short-term liabilities>long-term liabilities
d. Capital>Long-term liabilities>short-term liabilities
Answer
Answer: D
Under permanency order of balance, the asset is which is written in last is
a. Building/Plant/Machinery b. Bills Payable
c. Investment d. Cash in hand
Answer
Answer: D
Under permanency order of balance, the liability is which is written in last is
a. Provision b. Long-term liabilities
c. Short-term liabilities d. Capital
Answer
Answer: A
The drawings account is
a. closed by transferring its balance to his capital account by way of deduction from capital in the balance sheet.
b. closed by transferring its balance to his profit appropriation account by way of deduction from profit after Interest and Income tax
c. carried forward to balance sheet over the years and closed when business is winded up.
d. closed by transferring its balance to secret reserve in the balance sheet
Answer
Answer: A
The profit or loss for an accounting year is not based on the revenues realised in cash and the expenses paid in cash during that year. There may exist some receipts and expenses in the current year which partially relate to the previous year or to the next year due to
a. matching concept of accounting b. revenue recognition concept of accounting
c. accrual concept of accounting d. consistency concept of accounting
Answer
Answer: C
The items need adjustment in Balance sheet are
i. Accrued income ii. Closing and opening stock
iii. Provision for doubtful debts and Provision for discount on debtors
iv. Outstanding and prepaid expenses and advance received
v. Interest on capital
a. i, ii, iii and iv b. i, iii, iv and v
c. ii, iii, iv and v d. All of the above.
Answer
Answer: B
The purchase is reduced by the amount of closing stock and increased by the amount of opening balance of stock. In such cases the purchase is called
a. Accelerated purchase b. Inflated purchase
c. Adjusted purchase d. Inclusive purchase
Answer
Answer: C
In case of adjusted purchase, the closing and opening stock are
a. not listed in Trading and Profit and Loss Account and Trial Balance as a separate item.
b. listed in Trading and Profit and Loss Account and Trial Balance as a separate item
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c. not listed in Balance sheet as a separate item.
d. listed in Balance sheet as a separate item.
Answer
Answer: A
Outstanding expenses should be duly charged against revenue for computation of the correct amount of profit or loss in accordance with the concept of
a. Revenue recognition b. Principle of Matching
c. Conservatism d. Going concern
Answer
Answer: B
Interest accrued but not paid within the accounting period is adjusted as
a. Interest Account Dr.
To Interest Accrued Account
b. Bank Account Dr.
To Interest Accrued Account
c. Interest Accrued Account Dr.
To Bank Account
d. Interest Accrued Account
To Interest Account
Answer
Answer: D
Income Received in Advance or unearned income is adjusted as
a. Concerned Income Account Dr.
To Income Received in Advance Account
b. Bank Account Dr.
To Income Received in Advance Account
c. Income Received in Advance Account Dr.
To Bank Account
d. Income Received in Advance Account
To Concerned income Account
Answer
Answer: A
The adjustment of Manager’s Commission will be
a. Only on the debit side of Profit and Loss A/c
b. Shown on the debit side of Profit and Loss A/c and on the Liability side of Balance Sheet
c. Only on the credit side of Profit and Loss A/c
d. Only on the Liability side of Balance Sheet
Answer
Answer: B
The adjustment of contingent Liability will be as
a. Only on the Liability side of Balance Sheet as Foot Note
b. as a separate item on the liability side of Balance Sheet
c. as an separate item on the asset side of Balance Sheet
d on the debit side of Profit and Loss A/c and as a separate item on the Liability side of Balance Sheet
Answer
Answer: A
Preparation of Balance Sheet is
a. Optional b. Mandatory
c. conditional d. none of the given
Answer
Answer: B
Users of Financial statements are
i.Owner and Management of Business ii. Investors
iii. Creditors of business iv. Government and Regulating authorities
a. i, ii and iii b. ii, iii and iv
c. i, iii and iv d. All of the above
Answer
Answer: D
Pick the correct one
a. Closing stock is shown in Trading Account and not in Balance sheet
b. Closing stock is shown in Balance sheet and not in Trading Account
c. Closing stock is shown in both Balance sheet and Trading Account
d. Closing stock is shown neither in Balance sheet nor in Trading Account
Answer
Answer: C
Total cost of goods sold – total sales is
a. Gross Profit b. Net Profit
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c. Net Loss d. Gross Loss
Answer
Answer: D
Choose the correct chronological order of ascertainment of the following profits from the profit and loss account
a. Operating Profit, Net Profit, Gross Profit b. Operating Profit, Gross Profit, Net Profit
c. Gross Profit, Operating Profit, Net Profit d. Gross Profit, Net Profit, Operating Profit
Answer
Answer: C
While calculating operating profit, the following are not taken into account.
a. Normal transactions and Expenses of a purely financial nature
b. Abnormal transactions and Expenses of a purely financial nature
c. Normal and abnormal transactions
d. Normal, abnormal transactions and Expenses of a purely financial nature
Answer
Answer: B
Arrange the following Assets in Liquidity order
i. Closing stock ii. Goodwill
iii. Bills Receivable iv. Debtors
v. Building
a. i>ii>iii>iv>v b. iv>iii>i>ii>v
c. i>iii>iv>ii>v d. iii>iv>i>v>ii
Answer
Answer: D
Arrange the following Assets in Permanency order
i. Closing stock ii. Goodwill
iii. Bills Receivable iv. Debtors
v. Building
a. v>ii>iv>iii>i b. v>ii>i>iii>iv
c. ii>v>i>iv>iii d. ii>v>iv>ii>iii
Answer
Answer: C
Arrange the following items of liabilities in Liquidity order
i. Bills Payable ii. Sundry Creditors
iii. Loan on Mortgage iv. Outstanding Expenses
v. Capital
a. iv>i>ii>iii>v b. ii>i>iv>iii>v
c. iv>i>ii>v>iii d. ii>i>iv>v>iii
Permanency order- Capital>Loan on Mortgage>Creditor>Bills Payable>Outstanding Expenses
Answer
Answer: A
Arrange the following items of liabilities in Liquidity order
i. Bills Payable ii. Sundry Creditors
iii. Loan on Mortgage iv. Outstanding Expenses
v. Capital
a. iv>i>ii>iii>v b. v>ii>iii>iv>i
c. v>iii>ii>i>iv d. ii>i>iv>v>iii
Answer
Answer: C
If Debtors ₹ 80,000, Bad debts ₹ 2,000 , Provision for doubtful debts ₹ 4,000. It is desired to maintain a provision for bad debts of ₹ 1,000 State the amount to be debited/credited in profit and loss account
a. ₹ 5,000 (Debit) b. ₹ 3,000 (Debit)
c. ₹ 1,000 (Credit) d. none of these.
Answer
Answer: B
If the rent of one month is still to be paid the adjustment entry will be
a. Debit outstanding rent account and Credit rent account
b. Debit profit and loss account and Credit rent account
c. Debit rent account and Credit profit and loss account
d. Debit rent account and Credit outstanding rent account.
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Answer
Answer: D
If the rent received in advance ₹ 2,000. The adjustment entry will be
a. Debit profit and loss account and Credit rent account
b. Debit rent account Credit rent received in advance account
c. Debit rent received in advance account and Credit rent account
d. None of these.
Answer
Answer: B
If the opening capital is ₹ 50,000 as on April 01, 2017 and additional capital introduced ₹ 10,000 on January 01, 2018. Interest charge on capital 10% p.a. The amount of interest on capital shown in profit and loss account as on March 31, 2018 will be
a. ₹ 5,250 b. ₹ 6,000
c. ₹ 4,000 d. ₹ 3,000.
Answer
Answer: A
If the insurance premium paid ₹ 1,000 and pre-paid insurance ₹ 300. The amount of insurance premium shown in profit and loss account will be
a. ₹ 1,300 b. ₹ 1,000
c. ₹ 300 d. ₹ 700.
Answer
Answer: D
If net profit of a firm is ₹ 20000/- and manager is provided a commission @5% on the profit before charging such commission, the amount of manager commission that to be shown in Profit & Loss Accounts will be
a. ₹ 1000 b. ₹ 1905
c. ₹ 952 d. ₹ 2000
Answer
Answer: A
If net profit of a firm is ₹ 150000/- and manager is provided a commission @10% on the profit after charging such commission, the amount of manager commission that to be shown in Profit & Loss Accounts will be
a. ₹ 15000 b. ₹ 16667
c. ₹ 13636 d. ₹ 15136
Answer
Answer: C
Office equipment is a asset for a computer manufacturer and the same office equipment is a _ asset for a company that deals in these equipment
a. Current, Fixed b. Fixed, intangible c. Tangible, intangible d. Fixed, current
Answer
Answer: D
Statement shows analytical percentage.
a. Comparative Financial Statement b. Common-Size Financial Statement
c. Time series Financial Statement d. Trend Percentage Financial Statement
Answer
Answer: B
Balance sheet items are expressed in the ratio of each asset to total assets and ratio of each liability to total liability.
a. Ratio Financial Statement b. Trend Percentage Financial Statement
c. Comparative Financial Statement d. Common-Size Financial Statement
Answer
Answer: D
Analysis is a technique of studying several financial statements over a series of years
a. Trend Percentage Financial Statement b. Common-Size Financial Statement
c. Time series Financial Statement d. Comparative Financial Statement
Answer
Answer: A
Trend percentage is calculated on the basis of
a. Current year b. Average of year involved
c. Base year d. Estimate figure
Answer
Answer: C
Generally, the base year for Trend percentage analysis is
a. First Year b. Last Year
c. Current Year d. Average of period.
Answer
Answer: A
Which is called the Acid Ratio
a. Current Ratio b. Turnover Ratio
c. Quick Ratio d. Long-Term Ratio
Answer
Answer: C
Current ratio is calculated
a. Total Assets/Total Liabilities b. Current Assets/Total Liabilities
c. Total Assets/Current Liabilities d. Current Assets/Current Liabilities
Answer
Answer: D
The ideal current ratio is
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a. 1:1 b. 2:1
c. 1:2 d. 3:1
Answer
Answer: B
Pick the incorrect about current ratio
a. Higher the ratio, the greater is the short term solvency of a firm and vice a versa.
b. Lower the ratio, the greater is the short term solvency of a firm and vice a versa.
c. If the ratio is very high it means the current assets are lying idle and if very low it means that short term solvency of the firm is not good.
d. For an ideal current ratio there should be twice the current assets to meet current liabilities
Answer
Answer: B
Quick ratio is calculated
a. Quick Assets/Quick Liabilities b. Quick Assets/Current Liabilities
c. Current Assets/Quick Liabilities d. Quick Assets/Total Liabilities
Answer
Answer: B
The ideal quick ratio is
a. 1:1 b. 2:1
c. 1:2 d. 3:1
Answer
Answer: A
Calculate stock turnover ratio
Opening stock Rs 19,000 Closing stock Rs 21,000
Sales Rs 2,00,000 Gross Profit 25% of sale.
a. 10 b. 12.5
c. 5 d. 7.5
Answer
Answer: D
Calculate Inventory conversion period
Opening stock Rs 19,000 Closing stock Rs 21,000
Sales Rs 2,00,000 Gross Profit 25% of sale.
a. 36.5 b. 29.2
c. 48.67 d. 73
Answer
Answer: C
Calculate interest coverage ratio
Net Profit after tax ₹ 60,000; 15% Long-term debt 10,00,000 and Tax rate 40%.
a. 0.67 b. 1.67
c. 1.5 d. 2.5
Answer
Answer: B
The following groups of ratios are primarily measure risk
a. liquidity, activity, and profitability b. liquidity, activity, and inventory
c. liquidity, activity, and debt d. liquidity, debt and profitability
Answer
Answer: D
The _ ratios are primarily measures of return
a. liquidity b. activity
c. debt d. profitability
Answer
Answer: D
The ratio that measures a business firm’s ability to satisfy its short-term obligations as they become due
a. activity b. liquidity
c. debt d. profitability
Answer
Answer: B
_ ratios are a measure of the speed with which various accounts are converted into revenue from operations or cash
a. activity b. liquidity
c. debt d. profitability
Answer
Answer: A
The two basic measures of liquidity are
a. inventory turnover and current ratio b. current ratio and liquid ratio
c. gross profit margin and operating ratio d. current ratio and average collection period
Answer
Answer: B
The _ is a measure of liquidity which excludes _, generally the least liquid asset
a. current ratio, trade receivable b. liquid ratio, trade receivable
c. current ratio, inventory d. liquid ratio, inventory
Answer
Answer: D
The _ is useful in evaluating credit and collection policies.
a. average payment period b. current ratio
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c. average collection period d. current asset turnover
Answer
Answer: C
The _ measures the activity of a firm’s inventory.
a. average collection period b. inventory turnover
c. liquid ratio d. current ratio
Answer
Answer: B
The _ may indicate that the firm is experiencing stock outs and lost sales.
a. average payment period b. inventory turnover ratio
c. average collection period d. quick ratio
Answer
Answer: A
ABC Co. extends credit terms of 45 days to its customers Its credit collection would be considered poor if its average collection period was.
a. 30 days b. 36 days
c. 47 days d. 37 days
Answer
Answer: C
_ are especially interested in the average payment period, since it provides them with a sense of the bill-paying patterns of the firm.
a. Customers b. Stockholders
c. Lenders and suppliers d. Borrowers and buyers
Answer
Answer: C
The __ ratios provide the information critical to the long run operation of the firm
a. liquidity b. activity
c. solvency d. profitability
Answer
Answer: C
Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount.
a. True b. False
Answer
Answer: B
Part of financial statement that indicate profitability or non-profitability of a business entity is a. Income statement b. Balance sheet c. Cash flow statement d. Statement of changes in equity
Answer
Answer: A
Financial statements shows the movement of cash and cash equivalents in during an accounting period? a. Income statement b. Balance sheet c. Cash flow statement d. Statement of changes in equity
Answer
Answer: C
The measure of how efficiently the assets resources are employed by the firm is called
a. Liquidity ratio b. Leverage ratios
c. Activity ratios d. Profitability ratios
Answer
Answer: C
The following is also known as External Internal Equity ratio
a. Current ratio b. Acid test ratio
c. Debt service coverage ratio d. Debt Equity ratio
Answer
Answer: D
Lower the Debt Equity ratio
a. Lower the protection to creditors b. Higher the protection to creditors
c. It does not affect creditors d. None of the above
Answer
Answer: B
A higher inventory ratio indicates
a. Better inventory management b. Quicker turnover
c. Both ‘A’ and ‘B’ d. None of the above
Answer
Answer: C
Return on Investment Ratio (ROI) or capital employed=
a. (Gross profit / Capital Employed) x 100 b. (Profit before Interest & Tax/Capital Employed) x 100
c. (Profit after Interest & Tax/Capital Employed) x 100
d. (Profit after Interest & Tax / Total assets) x 100
Answer
Answer: B
A Low Return on Investment Ratio (ROI) indicates
a. Improper utilization of resources b. Over investment in assets
c. Both ‘A’ and ‘B’ d. None of the above
Answer
Answer: C
Which provides clues to the financial position of a concern and are the indicators of financial strength, soundness, position or weakness of an enterprise?
a. ratio b. foreword
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c. auditor comment d. All of the given
Answer
Answer: A
Advantages of ratio analysis are i. Helps to understand efficacy of decisions ii. Simplify complex figures and establish relationships iii. Enables various comparisons, cross-sectional and time period.
iv. Helps to understand qualitative or Non-monetary Aspects
v. Enables Strength-Weakness-Opportunity-Threat analysis
a. i, ii, iii and iv b. ii, iii, iv and v
c. i, ii, iii and v d. All of the above
Answer
Answer: C
disadvantages of ratio analysis are i. Limitations of Accounting Data ii. Ignores Price-level Changes
iii. Ignore Qualitative or Non-monetary Aspects iv. Variations in Accounting Practices
v. Forecasting of future trends based only on historical analysis
a. i, ii, iii and iv b. ii, iii, iv and v
c. i, ii, iii and v d. All of the above
Answer
Answer: D
If a ratio is computed with one variable from the statement of profit and loss and another variable from the balance sheet, it is called a. compound ratio b. composite ratio c. mixed ratio d. intermittent ratio
Answer
Answer: B
Inventory or stock turnover is calculated as
a. Cost of goods/Average stock b. Net sale/Average stock
c. Gross Sale/Average Stock d. Average sale/Average stock
Answer
Answer: C
Which of the following is not a traditional classification ratio analysis? a. statement of profit and loss ratio b. Balance Sheet ratio
c. Trading Account ratio d. composite ratio
Answer
Answer: A
High inventory turnover ratio indicates
a. efficiency b. inefficiency
c. profit d. loss
Answer
Answer: A
105. Pick the correct one i. Debtor turnover ratio is calculated as Net Annual credit Sales/Average Debtor
ii. Debt Collection Period refers to an average period for which the credit sales remain unpaid and measures the quality of debtors
iii. Debt Collection Period is calculated as 365 days/52 weeks/12 months ÷ Debtor Turnover Ratio (Average credit sales per day)
iv. A high ratio indicates the longer collection period/delayed payment by debtor and a low ratio indicates a shorter collection period/prompt payment for debtor
a. ii, iii and iv b. i, iii and iv
c. i, ii and iii d. All of the above
Answer
Answer: C
Working capital is measured as
a. Total Assets-Total Liabilities b. Long-term Assets-Long-term Liabilities
c. Long-term assets-current liabilities d. current assets-current liabilities
Answer
Answer: D
Working Capital Turnover is calculated as
a. Net Revenue ÷ average of working capital b. Gross Revenue ÷ average of working capital
c. Net Revenue÷ Current Liabilities d. Net Revenue÷ Current Assets
Answer
Answer: A
A higher Working Capital Turnover ratio indicates efficient utilisation of working capital and a low ratio indicates the working capital is not properly utilised.
a. True b. False
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Answer
Answer: A
Pick the correct one
i. Net Assets or capital employed Turnover is calculated as Revenue from Operation ÷ Capital Employed
ii. Capital employed means the long-term funds employed in the business and includes shareholders’ funds, debentures and long-term loans
iii. Alternatively, capital employed may be taken as the total of non-current assets and non-current liabilities
iv. Higher turnover means better activity and profitability.
a. ii, iii and iv b. i, ii and iv
c. i, iii and iv d. All of the above
Answer
Answer: B
A business entity’s ability to meet its contractual obligations towards stakeholders, particularly towards external stakeholders determines
a. Solvency ratios b. Activity/ Turnover ratios
c. Liquidity ratios d. Profitability ratios
Answer
Answer: A
Pick the correct one i. Debt-equity Ratio measures the relationship between long-term debt and equity.
ii. A low debt equity ratio reflects more security whereas a high ratio is considered risky
iii. Normally, it is considered to be safe if debt equity ratio is 1:1
iv. Debt-equity ratio is calculated as Long term Debts ÷ Shareholders’ Funds
a. i, ii and iii b. ii, iii and iv
c. i, ii and iv d. All of the above
Answer
Answer: C
Shareholder fund is a. Share capital (Equity + Preference) + Reserves and Surplus + Money received against share warrants
b. Non-current assets + Working capital – Non-current liabilities
c. Both A & B
d. None of the above
Answer
Answer: C
Ratio that expresses relationship of shareholders’ funds to net assets is
a. Debt to capital employed Ratio b. Total Assets to Debt Ratio
c. Return on Capital Employed or Investment Ratio
d. Propriety Ratio
Answer
Answer: D
The total of debt to capital employed ratio and proprietary ratio is equal to 1
a. True b. False
Answer
Answer: A
Profitability ratio is calculated
a. Gross Profit ÷ Gross Revenue(Sales) of Operations X 100
b. Gross Profit ÷ Net Revenue(Sales) of Operations X 100
c. Net Profit ÷ Net Revenue(Sales) of Operations X 100
d. Net Profit ÷ Gross Revenue(Sales) of Operations X 100
Answer
Answer: C
Calculate the manager’s commission on the profit before charging such commission when the net profit of the firm is ₹ 50000/- and the rate of commission is 10%
a. ₹ 5000 b. ₹ 4500
c. ₹ 5500 d. ₹ 4950
Answer
Answer: A
Calculate the manager’s commission on the profit and after charging such commission when the net profit of the firm is ₹ 150000/- and the rate of commission is 15%
a. ₹ 22500 b. ₹ 17647
c. ₹ 13043 d. ₹ 20294
Answer
Answer: C
Calculate current ratio from the data given below
Sundry debtors 4,00,000 Stock 160,000 Marketable securities 80,000 Cash 120,000
Prepaid expenses 40,000 Bill payables 80,000 Sundry creditors 160,000
Debentures 2,00,000 Outstanding Expenses 160,000
12
a. 3:3 b. 1:4 c. 1:6 d. 2:1
Answer
Answer: D
Calculate liquid or quick ratio from the data given below
Sundry debtors 4,00,000 Stock 160,000 Marketable securities 80,000 Cash 120,000
Prepaid expenses 40,000 Bill payables 80,000 Sundry creditors 160,000
Debentures 2,00,000 Outstanding Expenses 160,000
a. 2:1 b. 1.5:1
c. 1.9:1 d. 1.75:1
Answer
Answer: B
Calculate stock turnover ratio
Annual sales Rs 4,00,000, Gross profit 20% on sales, Opening stock Rs 38,500, Closing stock Rs 41,500
a. 10:1 b. 12:1
c. 8:1 d. 6:1
Answer
Answer: C
Calculate inventory conversion period for 2018. Assume 360 days in the year
Annual sales Rs 4,00,000, Gross profit 20% on sales, Opening stock Rs 38,500, Closing stock Rs 41,500
a. 45 days b. 36 days
c. 30 days d. 60 days
Answer
Answer: A
Calculate current ration from the data given below
Inventories ₹ 50,000, Trade receivables ₹50,000, Advance tax ₹4,000, Cash and cash equivalents 30,000
Trade payables ₹ 1,00,000 and Short-term borrowings (bank overdraft) ₹4,000
a. 1.3:1 b. 1.29:1
c. 1.25: 1 d. 1.20:1
Answer
Answer: B
Find the debtor turnover from the data given below
Annual credit sales ₹ 500000 Debtors in the beginning ₹ 80000 Debtors at the end ₹100000
a. 5:1 b. 6.25
c. 5.56 d. 6.0
Answer
Answer: C
Find the average collection period from the data given below when period for the year is 360 days
Annual credit sales ₹ 500000 Debtors in the beginning ₹ 80000 Debtors at the end ₹100000
a. 72 days b. 64.75 days
c. 57.6 days d. 60.0 days
Answer
Answer: B
Find the Debt Equity Ratio from the data given
Share capital ₹ 400000, Reserve & Surplus ₹ 100000, Non-current liabilities ₹ 150000, Current Liabilities ₹ 50000, Fixed Assets ₹ 500000 and Current Assets ₹ 200000
a. 3:1 b. 0.375:1
b. 0.3:1 d. 2.5:1
Answer
Answer: C
Find the Total Assets to Debt Ratio from the data given
Share capital ₹ 400000, Reserve & Surplus ₹ 100000, Non-current liabilities ₹ 150000, Current Liabilities ₹ 50000, Fixed Assets ₹ 500000 and Current Assets ₹ 200000
a. 4.67:1 b. 3.33:1
b. 3.5:1 d. 2.5:1
Answer
Answer: A
Find the Proprietary Ratio from the data given
Share capital ₹ 400000, Reserve & Surplus ₹ 100000, Non-current liabilities ₹ 150000, Current Liabilities ₹ 50000, Fixed Assets ₹ 500000 and Current Assets ₹ 200000
a. 0.57:1 b. 1.4:1
c. 0.93:1 d. 0.71: 1
Answer
Answer: D
Find the Debt to Capital Employed Ratio from the data given
Share capital ₹ 400000, Reserve & Surplus ₹ 100000, Non-current liabilities ₹ 150000, Current Liabilities ₹ 50000, Fixed Assets ₹ 500000 and Current Assets ₹ 200000
a. 0.3:1 b. 0.27:1
c. 0.4:1 d. 0.23: 1
Answer
Answer: D
Calculate ‘Liquidity Ratio’ from the following information
13

Current liabilities ₹ 50,000, Current assets ₹ 80,000, Inventories ₹ 20,000 Advance tax ₹ 5,000 Prepaid expenses ₹ 5,000
a. 1:1 b. 1.6:1
c. 1.1:1 d. 1.2:1
Answer
Answer: A
X Ltd., has a current ratio of 3.5:1 and quick ratio of 2:1. If excess of current assets over quick assets represented by inventories is ₹ 24,000, calculate current assets and current liabilities.
a. ₹ 56,000 & ₹ 16,000 b. ₹ 42,000 & ₹ 12,000
c. ₹ 49,000 & ₹ 14,000 d. ₹ 52,500 & ₹ 15,000
Answer
Answer: A
Current liabilities of a company are ₹ 5,60,000, current ratio is 2.5:1 and quick ratio is 2:1. Find the value of the Inventories.
a. ₹ 2,60,000 b. ₹ 2,40,000
c. ₹ 2,80,000 d. ₹ 3,00,000
Answer
Answer: C
Current assets of a company are ₹ 5,00,000. Current ratio is 2.5:1 and Liquid ratio is 1:1. Calculate the value of current liabilities, liquid assets and inventories.
a. ₹ 5,00,000, ₹ 3,00,000 and ₹ 3,00,000 b. ₹ 2,00,000, ₹ 2,00,000 and ₹ 3,00,000
c. ₹ 3,00,000, ₹ 3,00,000 and ₹ 2,00,000 d. None of the above
Answer
Answer: B
Current ratio = 4.5:1, quick ratio = 3:1.Inventory is Rs. 36,000. Calculate the current assets and current liabilities.
a. ₹ 1,62,000 and ₹ 36,000 b. ₹ 1,48,500 and ₹ 33,000
c. ₹ 1,35,000 and ₹ 30,000 d. ₹ 1,08,000 and ₹ 24,000
Answer
Answer: D
Calculate inventory turnover ratio when revenue from operations is ₹4,00,000, average Inventory is ₹ 55,000 and Gross Profit Ratio is 10%
a. 7.27 times b. 8 times
c. 6.55 times d. 8.27 times
Answer
Answer: C
Calculate the Trade receivables turnover ratio from the following information
Total Revenue from operations ₹ 4,00,000, Cash Revenue from operations 20% of Total Revenue from operations, Trade receivables as at 1.4.2018 ₹ 40,000 and Trade receivables as at 31.3.2019 ₹1,20,000
a. 4 times b. 5 times
c. 2.5 times d. 6 times
Answer
Answer: A
Revenue from Operations (Cash ₹ 25,000, Credit ₹ 75,000), Purchases (Cash ₹ 15,000, Credit ₹ 60,000), Carriage Inwards ₹ 2,000, Salaries ₹ 25,000, Decrease in Inventory ₹ 10,000, Return Outwards ₹ 2,000 and Wages ₹ 5,000, find the gross profit ratio
a. 25% b. 20%
c. 15% d. 10%
Answer
Answer: D
Revenue from Operations ₹ 3,40,000, Cost of Revenue from Operations ₹ 1,20,000, Selling expenses ₹ 80,000 and Administrative Expenses ₹ 40,000, calculate the operating ratio
a. 64.71% b. 70.59%
c. 100% d. 85.26%

Answer

Answer: B

PC 13/14 MCQ on Chapter 5 (Financial Statement) | SAS PC14 MCQ

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