Financial Management Online MCQ Set 27

QN01. Which of the following statements is false?

  1. No rules of thumb apply to the interpretation of financial ratios
  2. Financial ratios can indicate areas of potential strength and weakness
  3. Financial ratios are predictive
  4. Financial ratios can serve as screening devices
Answer

(C)Financial ratios are predictive

QN02. Working Capital Turnover measures the relationship of Working Capital with:

  1. Fixed Assets
  2. Sales
  3. Purchases
  4. Stock
Answer

(A)Fixed Assets

QN03. In Net Profit Ratio, the denominator is:

  1. Net Purchases
  2. Net Sales
  3. Credit Sales
  4. Cost of goods sold
Answer

(B)Net Sales

QN04. Debt to Total Assets Ratio can be improved by:

  1. Borrowing More
  2. Issue of Debenture
  3. Issue of Equity Shares
  4. Redemption of Debt
Answer

(D)Redemption of Debt

QN05. Which of the following is a measure of Debt Service capacity of a firm?

  1. Current Ratio
  2. Acid Test Ratio
  3. Interest Coverage Ratio
  4. Debtors Turnover
Answer

(C)Interest Coverage Ratio

QN06. Return on Assets and Return on Investment Ratios belong to:

  1. Liquidity Ratios
  2. Profitability Ratios
  3. Solvency Ratios
  4. Turnover
Answer

(B)Profitability Ratios

QN07. If a company issues bonus shares the debt equity ratio will

  1. Remain unaffected
  2. Will be affected
  3. Will improve
  4. none of the above
Answer

(C)Will improve

QN08. Authorised capital of a company is Rs.5 lac,40% of it is paid up.Loss incurred during the year is Rs.50,000. Accumulated loss carried from last year is Rs.2 lac. The company has a Tangible Net Worth of

  1. Nil
  2. Rs.2.50 lac
  3. (-)Rs.50,000
  4. Rs.1 lac
Answer

(C)(-)Rs.50,000

QN09. Quick assets do not include

  1. Govt.bond
  2. Book debts
  3. Advance for supply of raw materials
  4. Inventories
Answer

(D)Inventories

QN10. Financial leverage means

  1. Use of more debt capital to increase profit
  2. High degree of solvency
  3. Low bank finance
  4. None of the above
Answer

(A)Use of more debt capital to increase profit

QN11. Creditors would not be interested in which group of ratios ?

  1. Solvency
  2. Shareholder
  3. Profitability
  4. Capital Structure
Answer

(B)Shareholder

QN12. The balance sheet is alternately known as:

  1. Assets statement
  2. Statement of financial position
  3. Statement of profit and loss
  4. None of the given options
Answer

(B)Statement of financial position

QN13. ______________ of a firm refers to the composition of its long -term funds and its capital structure:

  1. Capitalisation
  2. Over Capitalisation
  3. Under Capitalisation
  4. Market Capitalisation
Answer

(A)Capitalisation

QN14. ______________ is the ability of a firm to earn a profit.

  1. Profitability
  2. Liquidity
  3. Efficiency
  4. Effectiveness
  5. Stability
Answer

(A)Profitability

QN15. ______________ is how productively a firm utilizes its assets relative to its revenue and its profits.

  1. Efficiency
  2. Effectiveness
  3. Stability
  4. Liquidity
  5. Profitability
Answer

(A)Efficiency

QN16. ______________ are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

  1. Profitability statements
  2. Budgets
  3. Owners' equity statements
  4. Statements of cash flows
Answer

(B)Budgets

QN17. Ratio analysis allows a firm to compare its performance to:

  1. Other firms in the industry
  2. Other time periods within the firm
  3. Other industries
  4. None of the above
Answer

(A)Other firms in the industry

QN18. Which of the following statement is considered as the accountant's snapshot of firm's accounting value as of a particular date?

  1. Income Statement
  2. Balance Sheet
  3. Cash Flow Statement
  4. Retained Earnings Statement
Answer

(B)Balance Sheet

QN19. The ability of a firm to convert an asset to cash is called ______________.

  1. Liquidity
  2. Solvency
  3. Return
  4. Marketability
Answer

(A)Liquidity

QN20. The ______________ is the percentage change in operating income that results from a percentage change in sales.

  1. Degree of financial leverage
  2. Breakeven point
  3. Degree of operating Leverage
  4. Degree of combined leverage
Answer

(C)Degree of operating Leverage

QN21. The management of current assets is known as

  1. Current asset management
  2. working capital management
  3. Both a & b
  4. None
Answer

(C)Both a & b

QN22. The asset which can be converted into cash when ever required with out loosing its value is

  1. Current asset
  2. Current liability
  3. Fixed asset
  4. Variable asset
Answer

(A)Current asset

QN23. The regular funds invested in the working capital known as

  1. Net working capital
  2. Fixed working capital
  3. Temporary working capital
  4. Gross working capital
Answer

(D)Gross working capital

QN24. Above permanent working capital which is required by the firm is knows as

  1. Gross working capital
  2. Permanent working capital
  3. Temporary working capital
  4. Net working capital
Answer

(C)Temporary working capital

QN25. In his traditional role the finance manager is responsible for ______________.

  1. arrange of utilization of funds
  2. arrangement of financial resources
  3. acquiring capital assets of the organization
  4. effective management of capital
Answer

(D)effective management of capital

QN26. The rate of return on investment ______________ with the shortage of working capital.

  1. falls
  2. going
  3. constant
  4. change
Answer

(B)going

QN27. Which of the following is/are the problem(s) encountered in financial statement analysis?

  1. Development of benchmarks
  2. Window dressing
  3. Interpretation of results
  4. All of the above
Answer

(D)All of the above

QN28. The overall financial condition of the organization is listed in the

  1. income statement
  2. profit and loss statement
  3. balance sheet
  4. statement of cash flows
Answer

(C)balance sheet

QN29. If capital expense is recorded as revenue expense then which calculation will be wrong ?

  1. Bank Balance
  2. Debtors
  3. Creditors
  4. Net profit
Answer

(D)Net profit

QN30. The Company's cost of capital is called

  1. Leverage rate
  2. Hurdle rate
  3. Risk rate
  4. Return rate
Answer

(A)Leverage rate

QN31. If a company reports a net loss, it

  1. may still have a net increase in cash
  2. will not be able to pay cash dividends
  3. will not be able to get a loan
  4. will not be able to make capital expenditures
Answer

(A)may still have a net increase in cash

QN32. Cash receipts from interest and dividends are classified as

  1. financing activities
  2. investing activities
  3. operating activities
  4. either financing or investing activities
Answer

(C)operating activities

QN33. In preparing a statement of cash flows, a conversion of bonds into common stock will bereported in

  1. the financing section
  2. the “extraordinary” section
  3. a separate schedule or note to the financial statements
  4. the stockholders' equity section
Answer

(C)a separate schedule or note to the financial statements

QN34. If a company revalues its assets,its net worth:

  1. Will improve
  2. Will remain same
  3. Will be positively affected
  4. None of the above
Answer

(A)Will improve

QN35. In last year the current ratio was 3:1 and quick ratio was 2:1. Presently current ratio is 3:1 but quick ratio is 1:1. This indicates comparably

  1. high liquidity
  2. higher stock
  3. lower stock
  4. low liquidity
Answer

(B)higher stock

QN36. The ideal quick ratio is

  1. 2:1
  2. 1:1
  3. 5:1
  4. None of the above
Answer

(B)1:1

QN37. What does a decreasing inventory turnover ratio usually indicate about a rirm?

  1. The firm is selling more inventory
  2. The firm is managing its inventory we//
  3. The firm is inefficient in the management of inventory
  4. Both (a) and (b)
Answer

(C)The firm is inefficient in the management of inventory

QN38. If a firm is using financial/ leverage successfully what would be the impact of doubling operating earnings?

  1. The returns on equity will more than double
  2. The return on equity will decline by half
  3. The return on equity will double
  4. The return on equity will increase, but not double
Answer

(A)The returns on equity will more than double

QN39. In Ratio Analysis, the term Capital Employed refers to:

  1. Equity Share Capital
  2. Net worth
  3. Shareholders' Funds
  4. None of the above
Answer

(D)None of the above

QN40. There is deterioration in the management of working capital of XYZ Ltd. What does it refer to?

  1. That the Capital Employed has reduced
  2. That the Profitability has gone up
  3. That debtors collection period has increased
  4. That Sales has decreased
Answer

(C)That debtors collection period has increased

ed010d383e1f191bdb025d5985cc03fc?s=120&d=mm&r=g

DistPub Team

Distance Publisher (DistPub.com) provide project writing help from year 2007 and provide writing and editing help to hundreds student every year.