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AP Intermediate 2nd Year Analysis of Financial Statements — practice questions

Explore 50 free Analysis of Financial Statements questions in AP Intermediate 2nd Year Accountancy. Open each question or exercise to read its content, reference answers and available explanation.

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Analysis of Financial Statements questions and exercises with answers

Showing questions 1–30 of 50.

Comparative statement analysis is also known as:Read the answer and worked solution →Common size statement analysis is also known as:Read the answer and worked solution →In a common size statement, each item is expressed as a percentage of:Read the answer and worked solution →Which tool studies operational results and financial position over a series of years using a base year?Read the answer and worked solution →In financial analysis, the term 'analysis' refers to:Read the answer and worked solution →In financial analysis, 'interpretation' means:Read the answer and worked solution →Trade payables analyse a company's financial statements mainly to judge its:Read the answer and worked solution →Suppliers of long-term debt (lenders) are primarily concerned with the firm's:Read the answer and worked solution →Investors who hold a firm's shares focus their analysis mainly on its:Read the answer and worked solution →Comparing a firm's performance with that of other firms for the same year is called:Read the answer and worked solution →Comparing a firm's own performance across several years is called:Read the answer and worked solution →In a comparative statement, the percentage change in an item is calculated with respect to:Read the answer and worked solution →The technique that expresses each balance-sheet item as a percentage of total assets is the:Read the answer and worked solution →Cash flow analysis studies the:Read the answer and worked solution →Ratio analysis is used to assess a firm's:Read the answer and worked solution →A key limitation of financial statement analysis is that it:Read the answer and worked solution →Common size statements are particularly useful for comparing:Read the answer and worked solution →Labour unions analyse a firm's financial statements mainly to:Read the answer and worked solution →If revenue from operations rises from ₹2,00,000 to ₹2,50,000, the percentage increase shown in a comparative statement is:Read the answer and worked solution →Which of the following is NOT a tool of financial statement analysis?Read the answer and worked solution →Financial statement analysis is best described as a:Read the answer and worked solution →In a common size statement of profit and loss, the various items are usually expressed as a percentage of:Read the answer and worked solution →In a vertical analysis of an income statement, each line item is expressed as a percentage of which figure?Read the answer and worked solution →Current assets are $911,000 and current liabilities are $364,000. What is the current ratio (to one decimal)?Read the answer and worked solution →Which current assets are excluded when computing the quick ratio?Read the answer and worked solution →Total liabilities are $1,275,000 and total stockholders' equity is $2,675,000. What is the ratio of liabilities to stockholders' equity (to two decimals)?Read the answer and worked solution →Income before income tax is $314,000 and interest expense is $55,000. What is the number of times interest charges are earned (to one decimal)?Read the answer and worked solution →Gross profit is $580,000 and sales are $994,000. What is the gross profit percentage (to one decimal)?Read the answer and worked solution →Net income is $248,000 and sales are $994,000. What is the profit margin (to one decimal)?Read the answer and worked solution →Dividends per share are $0.96 and the market price per share is $70.00. What is the dividend yield (to one decimal)?Read the answer and worked solution →

Worked practice questions

Comparative statement analysis is also known as:

  1. ratio analysis
  2. horizontal analysis
  3. vertical analysis
  4. cash flow analysis
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Correct answer: B. horizontal analysis

Comparative statements compare figures across time periods side by side, so the method is called horizontal analysis.

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Common size statement analysis is also known as:

  1. vertical analysis
  2. trend analysis
  3. horizontal analysis
  4. cash flow analysis
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Correct answer: A. vertical analysis

Common size statements express items as a percentage of a common base within one period, so it is vertical analysis.

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In a common size statement, each item is expressed as a percentage of:

  1. a common base item
  2. the previous year's figure
  3. total cash flow
  4. the base year's figure
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Correct answer: A. a common base item

In a common size statement every item is shown as a percentage of a common base item, bringing figures to a common scale.

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