Please refer to Chapter 4 Analysis of Financial Statement MCQ Class 12 Accountancy with answers below. These multiple-choice questions have been prepared based on the latest NCERT book for Class 12 Accountancy. Students should refer to MCQ Questions for Class 12 Accountancy with Answers to score more marks in Grade 12 Accountancy exams. Students should read the chapter Analysis of Financial Statement and then attempt the following objective questions.

MCQ Questions Class 12 Accountancy Chapter 4 Analysis of Financial Statement

Analysis of Financial Statement MCQ Class 12 Accountancy provided below covers all important topics given in this chapter. These MCQs will help you to properly prepare for exams.

Question: Net Reserve and Surplus means total of all reserves less
(a) Office Expense
(b) Miscellaneous Expenditure
(c) Direct expenses
(d) All of the options

Question: Which of the following items appear in the Statement of Profit and Loss
(a) Goodwill
(b) Creditors
(c) Sales
(d) Trade payables

Question: Main limitation of Analysis of Financial Statement is
(a) Affected by window dressing
(b) Difficulty in forecasting
(c) Donot reflect changes in price level
(d) All the above

Question: Which analysis is considered as Static?
(a) Horizontal Analysis
(b) vertical Analysis
(c) internal Analysis
(d) external Analysis

Question: Main Objective of Analysis of Financial Statement is
(a) To know the financial strength
(b) To make a comparative study with other firms
(c) To know ther efficiency of management
(d) All the above

Question:Financila Analysis becomes significant because it
(a) Ignores price level changes
(b) Measures the efficiency of business
(c) Lacks qualitative analysis
(d) Is effected by personal bias

Question: Feature of financial analysis is to present the data contained in financial statements in
(a) Easy form
(b) Convenient and rational groups
(c) Comparable form
(d) All of the above

Question: Analysis of Financial Statement is significant
(a) For creditors
(b) For Managers
(c) For employees
(d) All the above

Question: Main limitation of Analysis of Financial Statement is
(a) Affected by window dressing
(b) Difficulty in forecasting
(c) Donot reflect changes in price level
(d) All the above

Question: Financial Analysis becomes useless because it
(a) Measures the profitability
(b) Measures the solvency
(c) Lacks qualitative analysis
(d) Makes a comparative study

Question: Which analysis is considered as dynamic?
(a) Horizontal Analysis
(b) vertical Analysis
(c) internal Analysis
(d) external Analysis

Question: Which Analysis is based on one year’s data?
(a) Horizontal Analysis
(b) vertical Analysis
(c) Cash Flow Statement
(d) Dividend Analysis

Question: When bad position of the business is tried to be depicted as good it is known as
(a) Personal bias
(b) Pricelevel changes
(c) Window dressing
(d) All the above

Question: Companies that help to set benchmarks are classified as
(a) Benchmark companies
(b) Analytical companies
(c) Return companies
(d) None of the options

Question: Total assets divided common equity is a formula uses for calculating
(a) Turnover multiplier
(b) Graphical multiplier
(c) Equity multiplier
(d) None of the options

Question: Financial Analysis becomes useless because it
(a) Measures the profitability
(b) Measures the solvency
(c) Lacks qualitative analysis
(d) Makes a comparative study

Question: Study of relationship between various items is known as
(a) Horizontal Analysis
(b) Vertical Analysis
(c) Accounting Ratios
(d) None of the options

Question: Operating Expenses is include
(a) Provision for doubtful debts
(b) Office and Administrative expenses
(c) Selling and Distribution expenses
(d) All of the options

Question: Main Objective of Analysis of Financial Statement is
(a) To know the financial strength
(b) To make a comparative study with other firms
(c) To know ther efficiency of management
(d) All the above

Question: Analysis of Financial Statement is significant
(a) For creditors
(b) For Managers
(c) For employees
(d) All the above

Question: Non operating Expenses are
(a) Intangible assets written off such as goodwill, patents etc
(b) Interest on long term debts
(c) Loss on sale of fixed assets
(d) All of the options

Question: Importance of Comparative Statement is
(a) compare the firm performance with the performance of other firm in the same business
(b) Make the data simple and more understandable
(c) Indicate the trend with respect to the previous year
(d) All of the options

Question: Which analysis is considered as dynamic?
(a) Horizontal Analysis
(b) vertical Analysis
(c) internal Analysis
(d) external Analysis

Question: Which analysis is considered as Static?
(a) Horizontal Analysis
(b) vertical Analysis
(c) internal Analysis
(d) external Analysis

Question: When analysis is made on the basis of Published statements, reports and information it is known as
(a) Vertical Analysis
(b) Horizontal analysis
(c) External analysis
(d) None of the options

Question: Who is interested in the analysis of financial statement?
(a) Investors
(b) Creditors
(c) Government
(d) All of the options

Question: Payment of Income Tax is considered as
(a) Direct Expenses
(b) Indirect Expenses
(c) Operating Expenses
(d) None of the Above

Ques: Interest on Loans is
(a) Direct Expenses
(b) Indirect Expenses
(c) Operating Expenses
(d) None of the Above

Question: Shareholders are interested in the analysis of financial statement because
(a) For the assessment of tax
(b) They want to judge the present and future earning capacity of the business
(c) For Research
(d) All of the options

Question: Horizontal Analysis is
(a) Cross Section Analysis
(b) Time Series Analysis
(c) Profitability Analysis
(d) All of the options

Question: This item is not used as a tool for Analysis of Financial Statements :
(a) Cash Flow Statement
(b) Fund Flow Statement
(c) Ratio Analysis
(d) No. of Employees Statement

Question: Which one of the following items is not a tool used for financial analysis?
(a) Comparative Statements
(b) Ratio Analysis
(c) Common Size Statements
(d) Statement of Dividend Distribution

Question: Which is not a limitation of financial statement?
(a) Assess the financial position and profitability
(b) Qualitative aspect is ignored
(c) Ignores price level changes
(d) All of the options

Question: Rent received, Profit on sale of fixed assets, Compensation for acquisition of land are example of
(a) Operating Incomes
(b) Non-operating Incomes
(c) Operating expenses
(d) None of the options

Question: Main objective of Trend Analysis is
(a) To make comparative study of the financial statements for a number of years
(b) To indicate the direction of movement
(c) To help in forecasts of various items
(d) All of the Above

Question: While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of
(a) Current Assets
(b) Non-current Assets
(c) Non-current Liabilities
(d) Total Assets

Question: Comparison of two or more departments or divisions of the same business unit with the objective of meaningful analysis
(a) Intra-firm comparison
(b) Inter firm analysis
(c) Intra-firm comparison and Inter firm analysis
(d) None of the options

Question: Internal analysis is done
(a) By Management
(b) By Shareholders
(c) By debenture holder
(d) None of the options

Question: If net revenue from operations of a firm are Rs. 1,20,000; cost of revenue from operations is Rs.66,000 and operating expenses are Rs.21,600, what will be the percentage of operating income on net revenue from operations?
(a) 55%
(b) 45%
(c) 73%
(d) 27%

Question: If net revenue from operations of a firm are Rs. 15,00,000; Gross Profit is Rs.9,00,000 and operating expenses are Rs.75,000, what will be percentage of operating income on net revenue from operations?
(a) 45%
(b) 55%
(c) 35%
(d) 65%

Question: Shareholders fund is divided into
(a) Money received against share warrant
(b) Share Capital
(c) Reserves and Surplus
(d) All of the options

Question: A technique uses in comparative analysis of financial statement is
(a) Common size analysis
(b) Graphical analysis
(c) Preference analysis
(d) Returning analysis

Question: When bad position of the business is tried to be depicted as good, it is known as …………….
(a) Personal Bias
(b) Price Level Changes
(c) Window Dressing
(d) All of the Above

Question: For whom the analysis of financial statements is not significant?
(a) Investor
(b) Government
(c) Ambassador of India
(d) Company’s Employee

Question: Formula such as net income available for common stockholders divided by total assets is used to calculate
(a) Return on sales
(b) Return on total equity
(c) Return on debt
(d) Return on total assets

Question: A techniques uses to identify financial statements trends are included
(a) Common size analysis and Percent change analysis
(b) Common size analysis
(c) Percent change analysis
(d) None of the options

Question: Profit margin multiply assets turnover multiply equity multiplier is used to calculate
(a) Return on turnover
(b) Return on equity
(c) Return on stock
(d) None of the options

Question: Company low earning power and high interest cost cause financial changes which have
(a) Low return on equity
(b) Low return on assets
(c) High return on assets
(d) None of the options

Question: Financial analysis becomes significant because it:
(a) Ignores price level changes
(b) Measures the efficiency of business
(c) Lacks qualitative analysis
(d) Is effected by personal bias

Question: Price per ratio is divided by cash flow per share ratio which is used for calculating
(a) Price to cash flow ratio
(b) Dividend to stock ratio
(c) Sales to growth ratio
(d) Cash flow to price ratio

Question: A formula such as net income available to common stockholders divided by common equity is used to calculate
(a) Return on common equity
(b) Return on interest
(c) Return on earning power
(d) None of the options

Question: While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of
(a) Non-current Assets
(b) Current Assets
(c) Non-current Liabilities
(d) Total Assets

Question: Comparative Statement of Profit & Loss provides information about:
(a) Rate of increase or decrease in revenue from operations
(b) Rate of increase or decrease in cost of revenue from operations
(c) Rate of increase or decrease in net profit
(d) All of the above

Question: Financial Statement Analysis Objectives/Need is
(a) Make comparative study within the firm and with other forms
(b) Measure the profitability of the business
(c) Measure the financial strength of the business
(d) All of the options

Question: Significance or Importance of Financial Analysis is
(a) To know the solvency Condition
(b) To know the profitability Condition
(c) To know the liquidity Condition
(d) All of the options

Question: Which analysis depicts the relationship between two figures :
(a) Ratio Analysis
(b) Trend Analysis
(c) Cumulative figures and averages
(d) Dividend Analysis

Question: In which analysis total cost are equal to total revenue from Operations :
(a) Trend Analysis
(b) Ratio Analysis
(c) Break-Even Point Analysis
(d) Fund Flow Statement Analysis

Question: Financial year always begins on
(a) 1st August -31st July
(b) 1st January-31st December
(c) 1st April-31st March
(d) None of the options

Question: Comparative Financial Statement is an example of
(a) External analysis
(b) Vertical Analysis
(c) Horizontal analysis
(d) None of the options

Question: Under which tool of financial analysis, 100% is taken as base and all other related amounts are expressed as a percentage of base?
(a) Comparative Statement
(b) Common-size Statement
(c) Ratio Analysis
(d) Cash Flow Statement

Question: The most commonly used tools for financial analysis are :
(a) Comparative Statements
(b) Common Size Statements
(c) Accounting Ratios
(d) All of the above

Question: Statement of Profit and Loss is prepared to assess the
(a) Net Loss
(b) Net Profit
(c) Net Profit and Net Loss
(d) None of the options

Question: If the different financial data is analysed and compared over a period of time it is called
(a) Inter firm analysis
(b) Intra firm analysis
(c) Trade analysis
(d) None of the options

Question: Amount left after deducting gross profit from Revenue from Operations is generally :
(a) Cost of Revenue from Operations
(b) Material consumed
(c) Opening Inventory + Purchases – Closing Inventory
(d) All of the above

Question: What is gross profit + materials consumed?
(a) Purchases
(b) Revenue from Operations
(c) Opening Inventory
(d) Closing Inventory

Question: Horizontal Analysis is also known as
(a) Vertical Analysis
(b) Dynamic Analyses
(c) Dynamic Analyses and Vertical Analysis
(d) None of the options

Question: In which analysis Financial Statement for a single year analysed
(a) Vertical Analysis
(b) Dynamic Analyses
(c) Vertical Analysis and Dynamic Analyses
(d) None of the options

Question: Main objective of Common Size statement is :
(a) To present the changes in various items
(b) To provide for a common base for comparison
(c) To establish relationship between various items
(d) All of the Above

Question: Financial analysis become useless because it:
(a) Measures the profitability
(b) Measures the Solvency
(c) Lacks Qualitative Analysis
(d) Makes a comparative study

Question: The point where total of sales is exactly equal to the total of cost.
(a) Loss Point
(b) Profit Point
(c) Break-even Point
(d) All of the options

Question: Non-operating Incomes refers to
(a) Which are not from the main revenue producing activities
(b) Which are earned in the form of sales
(c) the indirect expenses relating to the principal revenue generating activities of the enterprise
(d) The expenses and losses which are not related to the operating activities

Question: Parties interested in financial analysis are :
(a) Investors
(b) Government
(c) Financial Institutions
(d) All of the Above

Question: Main limitation of financial analysis is :
(a) To know earning capacity
(b) To know financial strength
(c) Do not reflect changes in price level
(d) Comparative study with other firms

Question: Intra – Firm Analysis is also known as :
(a) Cross- section Analysis
(b) Trend analysis
(c) Dividend decision Analysis
(d) Debt Analysis

Question: Feature of financial analysis is to present the data contained in financial statements in
(a) Easy form
(b) Convenient and rational groups
(c) Comparable form
(d) All of the above

Question: The Real object of Analysis of Financial Statement is
(a) To assess the total expenses of the firm
(b) To measure the financial strength of the business
(c) To know about historical cost concept
(d) To assess the total liabilities of the firm

Question: Limitations of financial analysis except
(a) Single years Analysis of financial statement have limited use
(b) Dont reflect changes in price level
(c) Affected by the personal ability and bias of the Analyst
(d) All of the options

Question: Which analysis is considered as dynamic?
(a) Horizontal Analysis
(b) vertical Analysis
(c) internal Analysis
(d) external Analysis

Question: Which Analysis is based on one year’s data?
(a) Horizontal Analysis
(b) vertical Analysis
(c) Cash Flow Statement
(d) Dividend Analysis

Question: Tool of Financial Analysis is
(a) Comparative Statement and Common Size Statement
(b) Comparative Statement
(c) Common Size Statement
(d) None of the options

Question: Comparative Statement is a form of
(a) Horizontal Analysis
(b) Vertical Analysis
(c) Horizontal Analysis and Vertical Analysis
(d) None of the options

Question: Financila Analysis becomes significant because it
(a) Ignores price level changes
(b) Measures the efficiency of business
(c) Lacks qualitative analysis
(d) Is effected by personal bias

Question: When bad position of the business is tried to be depicted as good it is known as
(a) Personal bias
(b) Pricelevel changes
(c) Window dressing
(d) All the above

Question: To whom Importance of Financial Analysis is
(a) For Creditors
(b) For Management
(c) For Investors
(d) All of the options

Question: Which is Types of financial Analysis
(a) Vertical Analysis
(b) Horizontal Analysis
(c) Horizontal Analysis and Vertical Analysis
(d) None of the options

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