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Financial Analysis

Description: Financial analysis
Number of Questions: 25
Created by:
Tags: Accounts & Finance Financial Accounting
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Dividend coverage measures the ability of a firm

  1. to pay dividend on preference shares.

  2. to pay long term loan.

  3. to pay current liability.

  4. to pay income tax.


Correct Option: A
Explanation:

Preference Shares carry a stated Rate of Return. In ratio analysis, it measures the ability of the company, to pay dividend on preference shares, which is very critical for a company.

Trading on equity is calculated by

  1. operating ratio

  2. expenses ratio

  3. capital gearing ratio

  4. quick ratio


Correct Option: C
Explanation:

We can find trading on equity,  only by using the capital gearing ratio.

Goodwill appears in the balance sheet only when company has

  1. ignored it

  2. accepted it

  3. thought about it

  4. paid for it


Correct Option: D
Explanation:

Only when a company pays for the goodwill , does it appear in the balance sheet.

Operating Efficiency is calculated by

  1. operating ratio only

  2. expenses ratio only

  3. current ratio only

  4. operating and expenses ratio


Correct Option: D
Explanation:

Operating Efficiency is calculated with both Operating Ratio and Expenses Ratio.

Current assets should be ______ .

  1. twice the current liability

  2. equal to current liability

  3. less than current liability

  4. none of the above


Correct Option: A
Explanation:

If the current assets are twice the current liability, it indicates that the company is in a sound financial position and can easily pay it's debts.

Short term financial solvency is calculated by

  1. Current Ratio

  2. Fixed asset Ratio

  3. Liquidity Ratio

  4. Current and Liquid Ratio


Correct Option: D
Explanation:

We can analyze the short term financial solvency with the current ratio and liquid ratio. 

Gross profit ratio and Net Profit ratio is use to calculate

  1. dividends

  2. immediate Solvency

  3. short term financial Solvency

  4. dividends and immediate solvency


Correct Option: C
Explanation:

Gross Profit ratio and Net Profit ratio is used to analyze short term financial solvency. 

Fixed Assets to Net Worth ratio is calculated as

  1. Fixed Assets / Net Worth

  2. Net Worth / Fixed Assets

  3. Current Assets / Net Worth

  4. Current Assets / Fixed Assets


Correct Option: A
Explanation:

Right answer.  Because We can find fixed assets to net worth only by using this method.

Balance Sheet is used to analyse

  1. Fixed Assets

  2. Current Assets

  3. Current assets and Fixed assets

  4. Overall financial position for a fixed period at a given point of time


Correct Option: D
Explanation:

Right answer the Balance Sheet shows the  position of all financial aspects at a given point in time.

What are the main types of shares in the share market?

  1. Preference shares and debentures

  2. Preference shares and equity shares

  3. Preference shares only

  4. Equity shares only


Correct Option: B
Explanation:

Right answer because only two type of share issued by a company one is Pref Share and Second is Equity share so that is the main reason that it is Right answer here. 

Accounting is used in a company

  1. to record financial activity

  2. to keep creditor records only

  3. to keep debtors records only

  4. to keep cash records only


Correct Option: A
Explanation:

Right answer because Accounting is used to record all financial activities and it is the basic concept of accounting. 

Sale Ratio is calculated as

  1. Sale to Current Assets = Sales : Fixed Assets.

  2. Sale to Fixed Assets = Sale : Fixed Assets.

  3. Sale to Liquid Assets = Sale : Fixed Assets.

  4. Sale to Fixed Assets = Sale : Current Assets.


Correct Option: B
Explanation:

Right answer because we can measure it only by this method  and it plays an important part in financial analysis. 

In the accounting system, B/S is also known as

  1. Broker Stock

  2. Best System

  3. Balance Sheet

  4. Before System


Correct Option: C
Explanation:

Right answer because B/S is also very famous name for Balance Sheet and it is an important part of our financial statements. 

Direct expenses mean

  1. office expenses

  2. expenses on Current Assets

  3. expenses on Fixed Assets

  4. expenses on Production of Goods


Correct Option: D
Explanation:

Right answer because when we incur expenses to produce the goods it is known as Direct Expenses.

Breakeven Point indicates

  1. High Profit

  2. Low Profit

  3. Loss

  4. No Profit and No Loss


Correct Option: D
Explanation:

Right answer because Break Even Point gives the point of No Loss and No Profit for a business.

Generator Running Expenses come under

  1. Indirect Expenses

  2. Direct Expenses

  3. Office Expenses

  4. Indirect and Office Expenses


Correct Option: B
Explanation:

Right answer generator helps to produce the goods directly because we can operate the machinery with generator set so it is directly attached with to produce the goods in company so generator running expenses also comes in Direct Expenses that is the main reason that  it is Right answer here.

DCF is known in Accounting as

  1. Discounted Cash Flow

  2. Demand Cash Flow

  3. Demand Current Flow

  4. Discounted Current Fund


Correct Option: A
Explanation:

Right  answer because  the DCF is known in accounting by Discounted Cash Flow so  Discounted Cash Flow is right answer here. 

What is the type of Electricity Expenses in Accounting?

  1. Direct Expenses

  2. Indirect Expenses

  3. Direct And Indirect Expenses

  4. None of these


Correct Option: A
Explanation:

Right answer Because Electricity Expenses is directly help for a company to produce the goods and that kind of expenses comes in the Range of Direct Expenses so that is the main Reason that it is right answer here. 

Earning yield is measured by

  1. Earnings Per Share / Market Price per Share

  2. Earnings on All Shares / Actual Price per Share

  3. Earnings on All Shares / Market Price per Share

  4. Earning Per Share / Actual Price per Share


Correct Option: A
Explanation:

Right answer because we can find it only by Earning Per Share/Market Price Per share.

Equity Ratio, Debt Ratio, Debt Equity Ratio, Shareholder Equity Ratio, all these ratios are used to compute

  1. Long Term Financial Solvency

  2. Short Term Financial Solvency

  3. Capital Gearing Ratio

  4. Immediate Solvency


Correct Option: A
Explanation:

Right answer because all the ratios like Equity Ratio, Debt Ratio, Debt Equity Ratio and Shareholder Equity Ratio are used to analyse  long term financial solvency. 

On which side of the balance sheet does Bank Balance come?

  1. Liability Side

  2. Assets Side

  3. In P and L Account

  4. In Trading Account


Correct Option: B
Explanation:

Right answer.  Bank Balance comes only in Asset Side in Balance Sheet Becasue it is the asset for a company. 

Consumable material purchase comes under

  1. Indirect Expenses

  2. Office Expenses

  3. Direct Expenses

  4. Fixed Assets Expenses


Correct Option: C
Explanation:

Right answer because purchase of consumable material helps to produce the products in a company. It means it is used directly for production of goods.

On which side of the balance sheet does equity share capital come?

  1. Liability Side

  2. Assets Side

  3. Comes in P and L Account

  4. Comes in Trading Account


Correct Option: A
Explanation:

Right answer because It is liability for a company.

Stock is a type of

  1. Current Asset for a company

  2. Fixed Asset for a company

  3. Liability for a company

  4. Loss for a company


Correct Option: A
Explanation:

Right answer because it is easily convertible in money.

Which kinds of ratios are helpful for a manager for control and Management in a company?

  1. Current Ratio

  2. Quick Ratio

  3. Stock Turnover Ratio

  4. All Concern Ratio


Correct Option: D
Explanation:

Right answer because all concern ratio help for management for analysis all financial position and it also help us to increase the management efficiency with the help of all concern ratio because all ratio define all parts Result  in a company and we can never do management with only one or Two ratio so that is the main reason that All Concern Ration  is right answer here.

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