1. What is a creditor's objective in performing an analysis of financial statements?

a) To decide whether or not the borrower has the ability to repay interest and principal on

borrowed funds.

b) To determine the firm's capital structure.

c) To determine the company's future earnings stream.

d) To decide whether or not the firm has operated profitably in the past.

2. What information does the auditor's report contain?

a) The results of operations.

b) An unqualified opinion.

c) An opinion as to the fairness of the financial statements.

d) A detailed coverage of the firm's liquidity, capital resources, and operations

3. What is an investor's objective in financial statement analysis?

a) To determine if the firm is risky.

b) To determine the stability of earnings.

c) To determine changes necessary to improve future performance.

d) To determine whether or not an investment is warranted by estimating a company's

future earnings stream.

4. XYZLimited has current assets worth Rs.6,00,000/-, current liabilities worth Rs.1,00,000/-,

zero long-term liabilities and shareholders equity totaling Rs.6,00,000/-. The total assets of the

company would be:-

a) Rs.5,00,000/-

b) Rs.8,00,000/-

c) Rs.7,00,000/-

d) Rs.7,50,000/-

5. 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

6. When assets are subtracted from liabilities it will be equal to?

a) Capital

b) Net income

c) Working capital

d) Goodwill

7. Which of the following options is not recorded in the Balance sheet?

a) Cash

b) Rent expenses

c) Building

d) Goodwill

8. Current assets are also known as:

a) Cash

b) Assets

c) Invested capital

d) Working capital

9. Preference shares have preference over equity shares with regards to:-

a) Payment of dividend

b) Repayment of capital

c) Payment of interest

d) Both (a) and (b)

e) Both (a), (b) and (c)

10. There are several dates that are relevant when a company pays a dividend. Which date is irrelevant when a company pays a dividend?

a) Declaration date

b) Date of record

c) Payment date

d) Date of the financial statement

e) None of the above

11. The main operation expenses of a business are termed as:

a) Operating expenses

b) Non-administration expense

c) Selling expenses

d) Administration expense

12. A current asset that can be transferred into cash within three months is known as:

a) Cash equivalent

b) Intangible asset

c) Operating asset

d) Cash asset

13. Double entry accounting reflects:-

a) The matching concept

b) The prudence concept

c) The accruals concept

d) All of the above

e) None of the above

14. A method used in a comparative analysis of financial statement is:

a) Returning analysis

b) Common size analysis

c) Preference analysis

d) Graphical analysis

15. Interpretation of Financial Statements includes:

a) Criticisms and Analysis

b) Comparison and Trend Study

c) Drawing Conclusion

d) All the above

16. Tangible assets of company increased from T 4,00,000 to T 5,00,000. What is the percentage of change ?

a) 20%

b) 25%

c) 33%

d) 50%

17. A company's net sales are 15,00,000; cost of sales is 10,00,000 and indirect expenses are 3,00,000, the amount gross profit will be:

(a) 13,00,000

(b) 5,00,000

(c) 2,00,000

(d) 12,00,000

18. An annual report is issued by company to its :

a) Directors

b) Auditors

c) Shareholders

d) Management

19. Balance Sheet provides information about financial position of the enterprise :

a) At a Point of Time

b) Over a Period of Time

c) For a Period of Time

d) None of the above

20. If a sole trader purchases Furniture for Rs.50,000/- for business use, paying by cheque, when

completing his double entry accounts he will:-

a) Debit furniture account and credit cash account

b) Credit furniture account and debit bank account

c) Debit furniture account and credit bank account

d) Debit furniture account and credit capital account

e) None of the above