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

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 31–50 of 50.

Current Ratio is calculated asRead the answer and worked solution →Quick (Acid Test) Ratio EXCLUDES which item from current assets?Read the answer and worked solution →If Net Profit is Rs 50,000 on Sales of Rs 5,00,000, Net Profit Ratio isRead the answer and worked solution →Debt-Equity Ratio is calculated asRead the answer and worked solution →Knock out the three wrong rulesRead the answer and worked solution →Match each book or statementRead the answer and worked solution →True or false: the accounting processRead the answer and worked solution →Match each tool of analysisRead the answer and worked solution →Cash inflow or cash outflow?Read the answer and worked solution →An analyst sorts financial ratios into their main families: liquidity, solvency, profitability and:Read the answer and worked solution →Ratio results are used to spot trends, set budget expectations, compare competitors and establish:Read the answer and worked solution →A firm divides its current assets by its current liabilities. That figure is the:Read the answer and worked solution →A stricter test strips inventory and prepaid expenses out of current assets. That test is also called the:Read the answer and worked solution →Lenders often look at the ratio built on the single most liquid asset a company holds. That asset is:Read the answer and worked solution →Two ratios are named for assessing solvency: debt-to-equity and:Read the answer and worked solution →A ratio checks whether a firm can cover its interest expense as it falls due. That ratio is:Read the answer and worked solution →Operating efficiency ratios include total asset turnover, inventory turnover, days' sales in inventory and:Read the answer and worked solution →A manager wants to know how hard the asset base is working to produce sales. She should use:Read the answer and worked solution →Three profitability measures are named together: return on total assets, return on equity and:Read the answer and worked solution →An investor divides profit available to common shareholders by the shares outstanding. That figure is:Read the answer and worked solution →

Worked practice questions

Current Ratio is calculated as

  1. Current Assets ÷ Current Liabilities
  2. Quick Assets ÷ Current Liabilities
  3. Current Assets ÷ Total Assets
  4. Net Profit ÷ Sales
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Correct answer: A. Current Assets ÷ Current Liabilities

1. Current Ratio measures short-term solvency. 2. Formula: Current Assets / Current Liabilities. 3. An ideal ratio is around 2:1; below 1 signals liquidity risk. 4. Hence (A) is correct. _Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 9 "Analysis of Financial Statements", §9.1 ¶§9.1_

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Quick (Acid Test) Ratio EXCLUDES which item from current assets?

  1. Cash
  2. Debtors
  3. Inventory
  4. Bank balance
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Correct answer: C. Inventory

1. Quick assets = Current assets less inventory and prepaid expenses. 2. Inventory is excluded because it is the least liquid of current assets. 3. Cash, debtors and bank balances are quickly realisable. 4. Hence (C) is the excluded item. _Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 9 "Analysis of Financial Statements", §9.2 ¶§9.2_

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If Net Profit is Rs 50,000 on Sales of Rs 5,00,000, Net Profit Ratio is

  1. 1%
  2. 10%
  3. 5%
  4. 25%
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Correct answer: B. 10%

1. Net Profit Ratio = (Net Profit / Sales) × 100. 2. = (50,000 / 5,00,000) × 100 = 10%. 3. It measures the percentage of every rupee of sales that becomes profit after all expenses. 4. Hence (C) is correct. _Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 9 "Analysis of Financial Statements", §9.3 ¶§9.3_

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