MCQs on Ratio Analysis
For AHSEC, CBSE Class 12
(CBSE, ASHEC and other state boards)
1. Choose the correct answer:
(i) 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
(ii) The _________ ratios are
primarily measures of return:
A.
liquidity
B.
activity
C.
debt
D. profitability
(iii) The _________ of business firm
is measured by its ability to satisfy its short-term obligations as they become
due:
A.
activity
B. liquidity
C.
debt
D.
profitability
(iv)
_________ ratios are a measure of the speed with which various accounts are
converted into revenue from operations or cash:
A. activity/Turnover
B.
liquidity
C.
debt
D.
profitability
(v) 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
(vi) 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
(vii) The _________ is useful in
evaluating credit and collection policies.
A.
average payment period
B.
current ratio
C. average collection period
D.
current asset turnover
Also Read: CHAPTERWISE MCQs (MULTIPLE CHOICE QUESTIONS AND ANSWERS)
5. MCQS ON ISSUE AND REDEMPTION OF DEBENTURES
6. FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS ANALYSIS MCQS
8. MCQS ON RATIO ANALYSIS
9. MCQS ON CASH FLOW STATEMENTS
(viii) The ___________ measures the
activity of a firm’s inventory.
A.
average collection period
B. inventory turnover
C.
liquid ratio
D.
current ratio
(ix) 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
(x) 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
(xi) ___________ 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
(xii) The __________ ratios provide
the information critical to the long run operation of the firm:
A.
liquidity
B.
activity
C. solvency
D.
profitability
(xiii) The measurement of a company’s
performance and conditions by ratio is:
A.
Definitive
B. Relative
C.
Qualitative
D.
None of the above
2. State which of the following
statements are True or False.
(a)
The only purpose of financial reporting is to keep the managers informed about
the progress of operations. FALSE
(b)
Analysis of data provided in the financial statements is termed as financial
analysis. TRUE
(c)
Long-term borrowings are concerned about the ability of a firm to discharge its
obligations to pay interest and repay the principal amount. TRUE
(d)
A ratio is always expressed as a quotient of one number divided by
another. FALSE
(e)
Ratios help in comparisons of a firm’s results over a number of accounting
periods as well as with other business enterprises. TRUE
(f)
A ratio reflects quantitative and qualitative aspects of results. FALSE
(g)
A ratio is an arithmetical relationship between two numbers. TRUE
(h)
Debt-equity ratio measures the short-term financial position. FALSE
(i)
The liquidity of a business is measured by current ratio. TRUE
(j)
The rule of thumb of current ratio is 2:1. TRUE
(k)
Quick/acid-test ratio more conservatively measures the short term liquidity
position of a firm. TRUE
(l)
Solvency ratios measures the extent to which the firm has been financed by the
outsiders. TRUE
(m)
Current ratio is the relationship between Current assets and current
liabilities. True 2019
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