Analysis of Financial Statements Multiple Choice Questions
1. Business finance includes……..
a. procurement of funds and utilization of funds
b. management of funds
c. allocation
d. insurance
Answer:
a. procurement of funds and utilization of funds
2. Funds are required for the……….
a. purchase of land & building
b. purchase of machinery
c. purchase of another fixed asset
d. all of the above
Answer:
d. all of the above
3. Which report gives a review on the profitability of a business?
a. statement of changes in equity
b. cash flow statement
c. balance sheet
d. income statement
Answer:
d. income statement
4. The term ‘Financial Statement’ covers
a. profit & loss statement
b. balance sheet and profit & loss statement appropriation account
c. profit & loss statement and balance sheet
d. all of above are false
Answer:
c. profit & loss statement and balance sheet
5. Which of the following is true about financial statements? A) Financial statement gives a summary of accounts. B) Financial statements can be stated as recorded facts.
a. only a
b. only b
c. both a and b
d. none of the above
Answer:
c. both a and b
6. P&L statement is also known as
a. statement of operations
b. statement of income
c. statement of earnings
d. all of the above
Answer:
b. statement of income
7. Which statement shows the flow of cash and cash equivalents during the financial period?
a. statement of changes in equity
b. cash flow statement
c. balance sheet
d. income statement
Answer:
b. cash flow statement
8. Subtracting all expenses from revenues yields?
a. net profit / net loss
b. carrying value
c. long term assets
d. net liabilities
Answer:
a. net profit / net loss
9. Balance sheet of a company is required to be prepared in the format given in ………………………
a. schedule iii part ii
b. schedule iii part i
c. schedule iii part iii
d. table a
Answer:
b. schedule iii part i
10. As per Companies Act, the Balance Sheet of a company is required to be presented in ………………………
a. horizontal form
b. vertical form
c. either horizontal or vertical form
d. neither of the above
Answer:
b. vertical form
11. Which of the following is not required to be prepared under the Companies Act?
a. statement of profit and loss
b. balance sheet
c. report of director’s and auditor’s
d. funds flow statement
Answer:
d. funds flow statement
12. According to prescribed order of assets in a Company’s Balance Sheet ……………………… assets should be shown first of all.
a. non-current assets
b. current assets
c. current investments
d. loans and advances
Answer:
a. non-current assets
13. Calls in Arrears appear in a Company’s Balance Sheet under ………………..
a. reserve & surplus
b. shareholder’s funds
c. contingent liabilities
d. short-term borrowings
Answer:
b. shareholder’s funds
14. Calls in advance appear in a Company’s Balance Sheet under ………………..
a. share capital
b. current liability
c. long-term borrowings
d. reserve & surplus
Answer:
b. current liability
15. Bills Receivables appear in a Company’s Balance Sheet under the Sub-head ……………………..
a. current investments
b. cash equivalents
c. trade receivables
d. short term loans and advances
Answer:
c. trade receivables
16. Which of the following options is not recorded in the Balance sheet?
a. cash
b. rent expenses
c. building
d. goodwill
Answer:
b. rent expenses
17. Which of the given area is NOT addressed by Business Finance?
a. financing
b. investing
c. managing day today expenses
d. none of the given options
Answer:
d. none of the given options
18. Which of the following is measured by profit margin?
a. operating efficiency
b. asset use efficiency
c. financial policy
d. dividend policy
Answer:
a. operating efficiency
19. Business Finance addresses which of the following?
a. capital budgeting
b. capital structure
c. working capital management
d. all of the given options
Answer:
d. all of the given options
20. Finance is vital for which of the following business activity (activities)?
a. marketing research
b. product pricing
c. design of marketing and distribution channels
d. all of the given options
Answer:
d. all of the given options
21. Which of the following refers to the difference between the sale price and cost of inventory?
a. net loss
b. net worth
c. markup
d. markdown
Answer:
c. markup
22. Who of the following make a broader use of accounting information?
a. accountants
b. financial analysts
c. auditors
d. marketers
Answer:
b. financial analysts
23. Which of the following statement is considered as the accountant’s snapshot of firm’s accounting value as of a particular date?
a. income statement
b. balance sheet
c. cash flow statement
d. retained earning statement
Answer:
b. balance sheet
24. Balance Sheet is based upon which of the following formula?
a. assets = liabilities – stockholder’s equity
b. assets + liabilities = stockholder’s equity
c. assets + stockholder’s equity = liabilities
d. assets = liabilities + stockholder’s equity
Answer:
d. assets = liabilities + stockholder’s equity
25. The conflict of interest between stockholders and management is known as:
a. agency problem
b. interest conflict
c. management conflict
d. agency cost
Answer:
a. agency problem
26. Which from the following is NOT an example of intangible assets?
a. trademarks
b. patents
c. buildings
d. technical expertise
Answer:
c. buildings
27. The following are the examples of financial assets except?
a. stocks
b. bank loan
c. bond
d. raw material
Answer:
d. raw material
28. Business finance refers to …… and …….. employed in a business.
a. money
b. credit
c. both a & b
d. none of the above
Answer:
c. both a & b
29. Business finances is concerned with _________ funds and _______ funds from different sources.
a. estimation of funds
b. raising of funds
c. short term finance
d. both a & b
Answer:
d. both a & b
30. Which of the following is not a function of finance manager?
a. mobilization of funds
b. deployment of funds
c. control over use of funds
d. manipulate share price of the company
Answer:
d. manipulate share price of the company
31. Which is the following main decision taken by the financial manager in a company?
a. income decision
b. financing decision
c. appraisal decision
d. budget decision
Answer:
b. financing decision
32. Finance Function comprises
a. safe custody of funds only
b. expenditure of funds only
c. procurement of finance only
d. procurement & effective use of funds
Answer:
d. procurement & effective use of funds
33. The finance manager is accountable for.
a. earning capital assets of the company
b. effective management of a fund
c. arrangement of financial resources
d. proper utilization of funds
Answer:
c. arrangement of financial resources
34. The focal point of financial management in a firm is:
a. the number and types of products or services provided by the firm.
b. the minimization of the amount of taxes paid by the firm.
c. the creation of value for shareholders.
d. the dollars profits earned by the firm.
Answer:
c. the creation of value for shareholders.
Introduction to Analysis and Interpretation of Financial Statements
35. The term financial statement refers to…
a. income statement
b. cash flow and fund flow
c. balance sheet
d. all
Answer:
d. all
36. Which of the following is the main objective of a financial statement?
a. to know the solvency
b. to know the debt capacity
c. to know the earning capacity
d. all
Answer:
d. all
37. In financial statements, the fixed assets are shown at …
a. market price
b. cost price
c. replacement price
d. none
Answer:
a. market price
38. What is followed while preparing the financial statements?
a. accounting conventions
b. accounting principles
c. accounting concepts
d. all
Answer:
d. all
39. In financial statement the stock is valued at cost or market price whichever is less on the basis of…
a. accounting concepts
b. accounting conventions
c. accounting principles
d. none
Answer:
b. accounting conventions
40. The balance sheet shows …
a. the source of working capital
b. the change in working capital
c. both
d. none
Answer:
d. none
41. The analysis and interpretations of the financial statement will reveal …
a. the financial position
b. the profitability
c. none
d. both
Answer:
d. both
42. The process of explaining the meaning, significance and relationship between two financial factors is called …
a. summarization
b. analysis
c. interpretation
d. none
Answer:
c. interpretation
43. The process of comparing various financial factors of a company over a period of time is known as …
a. inter‐firm comparison
b. ratio analysis
c. intra‐firm comparison
d. inter‐industry comparison
Answer:
c. intra‐firm comparison
44. Which of the following is technique of financial statement analysis?
a. common‐size statement
b. comparative statement
c. trend analysis
d. all
Answer:
d. all
45. ________is a simply the amount of cash coming in to a business.
a. cash flow
b. inflow
c. both a and b
d. none of the above.
Answer:
a. cash flow
46. If value of opening inventories increases, what happens to the value of gross profit?
a. decreases
b. increases
c. stays the same
d. gets closer to net profit
Answer:
a. decreases
47. Incorrect cash flow planning can lead to ________
a. solvency
b. insolvency
c. bankruptcy
d. failure
Answer:
c. bankruptcy
48. Analysis of any financial Statement comprises
a. balance sheet
b. p&l account
c. trading account
d. all of the above
Answer:
d. all of the above
49. Which of the following are techniques, tools or methods of analysis and interpretation of financial statements?
a. ratio analysis
b. average analysis
c. trend analysis
d. all of the above
Answer:
d. all of the above
50. Interpretation of accounts is the
a. art and science of translating the figures
b. to know financial strengths and weaknesses of a business
c. to know the causes for the prevailing performance of business
d. all of the above
Answer:
d. all of the above
51. The major device for measuring the profitability of a firm over a defined period of time is the
a. income statement.
b. balance sheet.
c. statement of cash flow.
d. none of the above.
Answer:
a. income statement.
52. The ________ does not represent continuing operations in any way, but is simply a snapshot of the total worth of a firm at a given point in time.
a. income statement
b. balance sheet
c. sources and uses of funds statement
d. none of the above
Answer:
b. balance sheet
53. Cash inflows arise from _____ assets, ________ liabilities, and ___________ stockholders’ equity.
a. increasing; increasing; decreasing
b. increasing; decreasing; decreasing
c. decreasing; increasing; increasing
d. decreasing; increasing; decreasing
Answer:
c. decreasing; increasing; increasing
54. Which of the following is NOT a key ratio in the prediction of bankruptcy as developed by Edward Altman?
a. debt to equity
b. current ratio
c. retained earnings as a percent of total assets
d. total assets
Answer:
a. debt to equity
55. __________ analysis is the process of studying a series of ratios for a company and/or industry over time.
a. dupont
b. trend
c. common size
d. all of the above.
Answer:
b. trend
56. The statement of cash flows tells us
a. accounting profit or loss
b. how cash was created
c. actual profit or loss
d. two of the above
Answer:
b. how cash was created
57. The primary sections of a statement of cash flows are:
a. cash flows from investing, operating, and financing activities.
b. cash flows from investing and operating activities plus investments.
c. cash flows from investing, financing, and accounting activities.
d. cash flows from investing, operating, financing, and accounting activities.
Answer:
a. cash flows from investing, operating, and financing activities.
58. Which of the following are Non-current assets?
a. land, building and plant
b. leasehold property
c. computer software
d. all of the above
Answer:
d. all of the above
59. Funds flow statements are prepared so as to
a. to identify the changes in working capital
b. to identify reasons behind change in working capital
c. to know the item-wise outflow of funds during given period
d. all of the above
Answer:
d. all of the above
60. Financial statements are ____________.
a. anticipated facts
b. recorded facts
c. estimated of facts
d. unknown facts
Answer:
b. recorded facts
61. Trend analysis is significant for ____________.
a. forecasting and budgeting
b. profit planning
c. capital rationing
d. working capital management
Answer:
b. profit planning
62. In common size income statement analysis, which is taken as 100 percent?
a. sales
b. cost of goods sold
c. purchases
d. total assets
Answer:
a. sales
63. Comparative statement analysis sheet is __________.
a. vertical analysis
b. horizontal analysis
c. either vertical or horizontal analysis
d. neither vertical nor horizontal analysis
Answer:
b. horizontal analysis
64. Financial statements are meaningful and useful only when they are ___________.
a. verified
b. presented to owners
c. analyzed and interpreted
d. published
Answer:
c. analyzed and interpreted
65. Vertical analysis is made on the basis of __________.
a. single set of financial statements
b. multiple sets of financial statements
c. different schedules attached to financial statements
d. similar set of financial statements
Answer:
a. single set of financial statements
66. Horizontal analysis is done by analyzing ____________.
a. quarterly statement
b. half yearly statement
c. financial statements of several years
d. financial statements of a particular year
Answer:
d. financial statements of a particular year
Ratio Analysis
67. When the concept of ratio is defined in respect to the item shown in the financial statements, it is termed as
a. accounting ratio
b. financial ratio
c. costing ratio
d. none of the above
Answer:
b. financial ratio
68. The relationship between two financial variables can be expressed in:
a. pure ratio
b. percentage
c. rate or time
d. all the above
Answer:
d. all the above
69. Stock is considered as a liquid asset as anytime it can be converted into cash immediately.
a. yes
b. no
c. only yes
d. none of the above
Answer:
b. no
70. Return on properties funds is also known as.
a. return on net worth
b. return on shareholders fun
c. return on the shareholders’ investment
d. all the above
Answer:
d. all the above
71. What will be the Gross Profit if , total sales is Rs 2,60,000,cost of net goods sold is Rs 2,00,000 & sales return is Rs10,000 ?
a. 13 %
b. 28%
c. 26%
d. 20%
Answer:
d. 20%
72. Which of the following is not included in current assets.
a. debtors
b. stock
c. cash at bank
d. cash in hand
Answer:
b. stock
73. Liquidity ratios are expressed in
a. pure ratio form
b. percentage
c. rate or time
d. none of the above
Answer:
a. pure ratio form
74. Working capital turnover ratio can be determined by :
a. ( gross profit / working capital )
b. ( cost of goods sold / net sales )
c. ( cost of goods sold / working capital)
d. none of the above
Answer:
a. ( gross profit / working capital )
75. Determine Working capital turnover ratio if, Current asset is Rs 1,50,000, current liability is Rs 1,00,000 & cost of goods sold is Rs 3,00,000.
a. 5 times
b. 6 times
c. 3 times
d. 1.5 times
Answer:
b. 6 times
76. Profit for the objective of calculating a ratio may be taken as
a. profit before tax but after interest
b. profit before interest &tax
c. profit after interest & tax
d. all the above
Answer:
d. all the above
77. If sales is Rs 5,00,000 & net profit is Rs 1,20,000 Net profit ratio is
a. 24%
b. 41%
c. 60%
d. none of the above
Answer:
a. 24%
78. General profitability ratios are based on
a. investment
b. sales
c. a & b
d. none of the above
Answer:
b. sales
79. Determine stock turnover ratio if, Opening stock is Rs 31,000 , Closing stock is Rs 29,000, Sales is Rs 3,20,000 & Gross profit ratio is 25% on sales.
a. 31 times
b. 11 times
c. 8 times
d. 32 times
Answer:
c. 8 times
80. The ratios which reveal the final result of the managerial policies and performance is .
a. turnover ratios.
b. profitability ratios.
c. short term solvency ratio.
d. long term solvency ratio.
Answer:
b. profitability ratios.
81. Return on investment is a
a. turnover ratios.
b. short term solvency ratio.
c. profitability ratios.
d. long term solvency ratio.
Answer:
c. profitability ratios.
82. Net profit ratio is a .
a. turnover ratio.
b. long term solvency ratio.
c. short term solvency ratio
d. profitability ratio.
Answer:
d. profitability ratio.
83. Stock turnover ratio is a .
a. turnover ratio.
b. profitability ratio.
c. short term solvency ratio.
d. long term solvency ratio.
Answer:
a. turnover ratio.
84. Current ratio is a
a. short-term solvency ratio.
b. long-term solvency ratio.
c. profitability ratio.
d. turnover ratio.
Answer:
a. short-term solvency ratio.
85. Proprietary ratio is a
a. short-term solvency ratio.
b. long-term solvency ratio.
c. profitability ratio.
d. turnover ratio.
Answer:
b. long-term solvency ratio.
86. Fixed assets ratio is a
a. short-term solvency ratio.
b. long-term solvency ratio.
c. profitability ratio.
d. turnover ratio.
Answer:
b. long-term solvency ratio.
87. Fixed assets turnover ratio is a
a. short-term solvency ratio.
b. long-term solvency ratio.
c. profitability ratio.
d. turnover ratio.
Answer:
d. turnover ratio.
88. The ratio which measures the profit in relation to capital employed is known as
a. return on investment.
b. gross profit ratio.
c. operating ratio.
d. operating profit ratio.
Answer:
a. return on investment.
89. Return on equity is also called
a. return on investment.
b. gross profit ratio.
c. return on shareholders’ funds.
d. return on net worth.
Answer:
d. return on net worth.
90. Preliminary expenses is an example of .
a. fixed assets.
b. current assets.
c. fictitious assets.
d. current liabilities.
Answer:
c. fictitious assets.
91. Prepaid expenses is an example of .
a. fixed assets.
b. current assets.
c. fictitious assets.
d. current liabilities.
Answer:
b. current assets.
92. The ratio which is calculated to measure the productivity of total assets is
a. return on equity.
b. return on shareholders’ funds.
c. return on total assets.
d. return on equity share holders’ funds.
Answer:
c. return on total assets.
93. The ratio which shows the proportion of profits retained in the business out of the current year’s profits is
a. retained earnings ratio.
b. payout ratio
c. earnings per share.
d. price earnings ratio
Answer:
a. retained earnings ratio.
94. The ratio establishes the relationship between profit before interest and tax and fixed interest charges is
a. interest cover ratio.
b. fixed dividend cover ratio.
c. debt service coverage ratio.
d. dividend yield ratio.
Answer:
a. interest cover ratio.
95. The ratio shows the preference dividend as a proportion of profit available for shareholders is
a. interest cover ratio.
b. fixed dividend cover ratio.
c. debt service coverage ratio.
d. dividend yield ratio.
Answer:
b. fixed dividend cover ratio.
96. The dividend is related to the market value of shares in .
a. interest cover ratio.
b. fixed dividend cover ratio.
c. debt service coverage ratio.
d. dividend yield ratio.
Answer:
d. dividend yield ratio.
97. Turnover ratio is also known as .
a. activity ratios.
b. solvency ratios.
c. liquidity ratios.
d. profitability ratios.
Answer:
a. activity ratios.
98. Inventory or stock turnover ratio is also called .
a. stock velocity ratio.
b. debtors velocity ratio.
c. creditors velocity ratio.
d. working capital turnover ratio.
Answer:
a. stock velocity ratio.
99. The ratio which measures the relationship between the cost of goods sold and the amount of average inventory is
a. stock turnover ratio.
b. debtors velocity ratio.
c. creditors velocity ratio.
d. working capital turnover ratio.
Answer:
a. stock turnover ratio.
100. Sales – Gross Profit = .
a. net profit.
b. administrative expenses.
c. cost of production.
d. cost of goods sold.
Answer:
d. cost of goods sold.
101. Opening stock + purchases + direct expenses – closing stock =
a. net profit.
b. cost of production
c. administrative expenses.
d. cost of goods sold
Answer:
d. cost of goods sold
102. Which ratio measures the number of times the receivables are rotated in a year in terms of sales?
a. stock turnover ratio.
b. debtors turnover ratio.
c. creditors velocity ratio.
d. working capital turnover ratio.
Answer:
b. debtors turnover ratio.
103. Debtors turnover ratio is also called .
a. stock turnover ratio.
b. debtors velocity ratio.
c. creditors velocity ratio.
d. working capital turnover ratio
Answer:
b. debtors velocity ratio.
104. Creditors turnover ratio is also called
a. stock turnover ratio.
b. debtors velocity ratio.
c. accounts payables ratio.
d. working capital turnover ratio.
Answer:
c. accounts payables ratio.
105. The primary purpose of the liquidity ratios is to determine
a. how much working capital is tied up in inventory?
b. the relative level of short-term debt.
c. how well a firm is able to pay off short-term obligations?
d. more than one of the above.
Answer:
c. how well a firm is able to pay off short-term obligations?
106. Which of the following statements about liquidity ratios is true?
a. the higher the current ratio, the more likely a firm is able to pay its short-term obligations.
b. the lower the quick ratios relative to the current ratio, the safer a firm is in terms of liquidity.
c. the ratio of net working capital to total assets always lies between 0 and 1.
d. relatively high current ratios are usually a sign of efficient working capital management.
Answer:
a. the higher the current ratio, the more likely a firm is able to pay its short-term obligations.
107. The ________ ratios help determines the degree of financial risk and earnings volatility present in a firm.
a. profitability
b. asset utilization
c. liquidity
d. none of the above.
Answer:
d. none of the above.
108. Which of the following statements are true?
a. debt to equity and debt to asset ratios measure capital structure and vary widely among industries.
b. debt utilization ratios alone do not measure a firm\s ability to meet its cash obligations.
c. dupont analysis considers the impact of debt on the profitability of the firm.
d. two of the above are true.
Answer:
d. two of the above are true.
109. Debt-equity ratio is a sub-part of
a. short-term solvency ratio
b. long-term solvency ratio
c. debtors turnover ratio
d. none of the above
Answer:
d. none of the above
110. The most precise test of liquidity is
a. quick ratio
b. current ratio
c. absolute liquid ratio
d. none of the above
Answer:
c. absolute liquid ratio
111. Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs 60,000. Determine value of stock.
a. rs 54,000
b. rs 60,000
c. rs 1, 62,000
d. none of the above
Answer:
a. rs 54,000
Cash Flow Statement
112. Statement of cash flows includes
a. financing activities
b. operating activities
c. investing activities
d. all of the above
Answer:
d. all of the above
113. In cash flows, when a firm invests in fixed assets and short-term financial investments results in
a. increased equity
b. increased liabilities
c. decreased cash
d. increased cash
Answer:
c. decreased cash
114. A firm that issues stocks and bonds to raise funds results in
a. decreases cash
b. increases cash
c. increases equity
d. indian overseas bank
Answer:
b. increases cash
115. The purchase value of assets over its serviceable life is categorised as
a. appreciated liabilities
b. appreciated assets
c. depreciation
d. appreciation
Answer:
c. depreciation
116. The basic financial statements include
a. statement of cash flows
b. income statement
c. balance sheet
d. all of the above
Answer:
d. all of the above
117. Cash flow example from a financing activity is
a. payment of dividends
b. receipt of dividend on investment
c. cash received from customers
d. purchase of fixed asset
Answer:
a. payment of dividends
118. Cash flow example from an investing activity is
a. issue of debenture
b. repayment of long-term loan
c. purchase of raw materials for cash
d. sale of investment by non-financial enterprise
Answer:
d. sale of investment by non-financial enterprise
119. Cash flow example from an operating activity is
a. purchase of own debenture
b. sale of fixed assets
c. interest paid on term-deposits by a bank
d. issue of equity share capital
Answer:
c. interest paid on term-deposits by a bank
120. Which item comes under financial activities in cash flow?
a. redemption of preference share
b. issue of preference share
c. interest paid
d. all the above
Answer:
d. all the above
121. As per Accounting Standard-3, Cash Flow is classified into
a. operating activities and investing activities
b. investing activities and financing activities
c. operating activities and financing activities
d. operating activities, financing activities and investing activities
Answer:
d. operating activities, financing activities and investing activities
122. Cash Flow Statement is also known as
a. statement of changes in financial position on cash basis
b. statement accounting for variation in cash
c. both a and b
d. none of the above.
Answer:
c. both a and b
123. The objectives of Cash Flow Statement are
a. analysis of cash position
b. short-term cash planning
c. evaluation of liquidity
d. comparison of operating performance
Answer:
d. comparison of operating performance
124. Cash Flow Statement is based upon
a. cash basis of accounting
b. accrual basis of accounting
c. credit basis of accounting
d. none of the above
Answer:
a. cash basis of accounting
125. Which of the following statements are true?
a. cash flow reveals only the inflow of cash
b. cash flow reveals only the outflow of cash
c. cash flow is a substitute for income statement
d. cash flow statement is not a replacement of funds flow statement.
Answer:
d. cash flow statement is not a replacement of funds flow statement.
126. In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ________ while dividends and interest received should be stated as cash flow from ____.
a. operating activities, financing activities
b. financing activities, investing activities
c. investing activities, operating activities
d. none of the above
Answer:
b. financing activities, investing activities
127. When a fixed asset is bought as hire purchase, interest element is classified under ______ and loan element is classified under________.
a. operating activities, financing activities
b. financing activities, investing activities
c. investing activities, operating activities
d. none of the above
Answer:
b. financing activities, investing activities
128. Which of the following statements are false?
a. old furniture written off doesn’t affect cash flow.
b. cash flow statement is a substitute for cash account.
c. appropriation of retained earnings is not shown in cash flow statement.
d. net cash flow during a period can never be negative.
Answer:
b. cash flow statement is a substitute for cash account.
129. Which of the following is not a cash outflow?
a. increase in prepaid expenses
b. increase in debtors
c. increase in stock
d. increase in creditors
Answer:
d. increase in creditors
130. Cash flow statement is prepared for financial planning of
a. long range
b. medium range
c. short range
d. very long range
Answer:
c. short range
131. Which of the following is source of cash?
a. cash deposited into bank
b. cash withdrawn from bank
c. sale of goods costing ₹10,000 for ₹8,000
d. sale of marketable securities for cash
Answer:
c. sale of goods costing ₹10,000 for ₹8,000
132. Which of the following is not source of cash?
a. issue of shares
b. purchase of machinery
c. sale of asset
d. dividend received
Answer:
b. purchase of machinery
133. Which of the following is not application of cash?
a. increase in debtors
b. increase in inventory
c. increase in bills payable
d. increase in prepaid expenses
Answer:
c. increase in bills payable
134. If 6% Pref. share capital ₹2,00,000 were redeemed at a premium of 5%, while preparing Cash Flow Statement its effect on cash flow will be :
a. cash used from financing activities ₹2,12,000
b. cash received from financing activities ₹2,12,000
c. cash used (payment) from financial activities ₹2,10,000
d. cash used (payment) from financial activities ₹2,00,000
Answer:
c. cash used (payment) from financial activities ₹2,10,000
135. If the amount of goodwill is ₹40,000 at the beginning of a year and ₹48,000 at the end of that year then while preparing cash flow statement its effect on cash flow will be :
a. cash used (payment) in investing activities ₹8,000
b. cash received from operating activities ₹8,000
c. cash used (payment) from operating activities ₹8,000
d. cash used (payment) from financial activities ₹8,000
Answer:
a. cash used (payment) in investing activities ₹8,000
136. How will you deal increase in the balance of ‘Securities Premium Reserve’ while preparing a Cash Flow Statement?
a. cash flow from operating activities
b. cash flow from investing activities
c. cash flow from financing activities
d. cash equivalent
Answer:
c. cash flow from financing activities
137. A Ltd., engaged in the business of retailing of two wheelers, invested ₹50,00,000 in the shares of a manufacturing company. Dividend received on this investment will be :
a. cash flow from operating activities
b. cash flow from investing activities
c. cash flow from financing activities
d. cash equivalent
Answer:
b. cash flow from investing activities
138. How will you treat Bank Overdraft in a Cash Flow Statement?
a. cash flow from operating activities ’
b. cash flow from investing activities
c. cash flow from financing activities
d. cash equivalent
Answer:
c. cash flow from financing activities
139. Where will you show purchase of Goodwill in a Cash Flow Statement?
a. cash flow from operating activities
b. cash flow from investing activities
c. cash flow from financing activities
d. cash equivalent
Answer:
b. cash flow from investing activities
140. How will you treat payment of ‘Interest on Debentures’ while preparing a Cash Flow Statement?
a. cash flow from operating activities
b. cash flow from investing activities
c. cash flow from financing activities
d. cash equivalent
Answer:
c. cash flow from financing activities
141. State whether cash deposited in bank will be classified under which kind of activity?
a. cash flow from operating activities
b. cash flow from investing activities
c. cash flow from financing activities
d. no cash flow
Answer:
d. no cash flow
Fund Flow Statement
142. A company has to prepare its balance sheet once in..
a. six months
b. two years
c. a year
d. as and when it needs
Answer:
c. a year
143. Income statement of a business shows…
a. net profit
b. net operating result of specified period
c. net loss
d. none of these
Answer:
b. net operating result of specified period
144. The statement which shows the periodical increase or decrease of funds is called___________ statement.
a. funds flow
b. cash flow
c. income
d. working capital
Answer:
a. funds flow
145. Fund flow statement is based on the concept of…
a. business entity
b. accounting period
c. going concern
d. all of the above
Answer:
c. going concern
146. Funds means…
a. money
b. cash
c. machinery
d. any form of financial resources
Answer:
d. any form of financial resources
147. Which of the following is the component of current assets?
a. stock
b. prepaid expenses
c. income earned but not received
d. all of the above
Answer:
d. all of the above
148. The term flow of funds refers to…
a. change in funds
b. change in working capital
c. both
d. none
Answer:
c. both
149. Transaction between_________ may cause the flow of funds.
a. current assets and fixed assets
b. current assets and long term liabilities, and capital
c. current liabilities and fixed assets
d. all of the above
Answer:
d. all of the above
150. The term current account refers to….
a. current assets
b. current liabilities
c. both
d. none
Answer:
c. both
151. The term non-current account refers to…
a. capital
b. liabilities
c. long term liabilities
d. both (a) & (c)
Answer:
d. both (a) & (c)
152. Share premium, share forfeited, profit and loss account, balance of profit are the examples of…
a. current assets
b. permanent liabilities
c. fixed assets
d. current liabilities
Answer:
b. permanent liabilities
153. The funds flow analysis is of primary importance to…
a. personnel management
b. financial management
c. quality control management
d. auditing
Answer:
b. financial management
154. Basically, the funds flow statement is considered a tool for…
a. cost control
b. financial analysis
c. performance analysis
d. none
Answer:
b. financial analysis
155. Who uses the funds flow statement widely?
a. financial institutions
b. financial managers
c. analysts
d. all of the above
Answer:
d. all of the above
156. Basically, the funds flow statement shows the causes for changes of _________ during a period.
a. assets
b. liabilities
c. both
d. none
Answer:
c. both
157. The sources of side of funds flow statement shows the______ sources of funds of a firm.
a. internal
b. external
c. both
d. none
Answer:
c. both
158. Funds flow statement is a substitute for…
a. income statement
b. balance sheet
c. both
d. none
Answer:
d. none
159. Which of following are original statements?
a. funds flow statement
b. financial statement
c. cash flow statement
d. working capital statement
Answer:
b. financial statement
160. Which of the following statement is dynamic in nature?
a. balance sheet
b. funds flow
c. both
d. income statement
Answer:
b. funds flow
161. Funds flow statement is complementary to…
a. balance sheet
b. income statement
c. both
d. none
Answer:
c. both
162. Which of the following is the source of funds?
a. issue of shares
b. raising long term loans
c. sale of fixed assets
d. all of these
Answer:
d. all of these
163. Which of the following is an application of funds?
a. funds lost in operation
b. income from investment
c. funds from operations
d. all of these
Answer:
a. funds lost in operation
164. What is meant by funds from operation?
a. operating profit
b. net profit
c. gross profit
d. all of the above
Answer:
a. operating profit
165. Working capital requirements depends on the credit policy of …
a. the company
b. the suppliers
c. both
d. none
Answer:
c. both