MCQ questions on Ratio Analysis
1. Determine Debtors turnover ratio if, closing debtors is Rs
40,000, Cash sales is 25% of credit sales and excess of
closing debtors over opening debtors is Rs 20,000.
a. 4 times
b. 2 times
c. 6 times
d. 8 times
2. Higher the ratio, the more favorable it is, doesn’t stand true
for
a. Operating ratio
b. Liquidity ratio
c. Net profit ratio
d. Stock turnover ratio
3. Given Sales is 1,20,000 and Gross Profit is 30,000, the
gross profit ratio is
a. 24%
b. 25%
c. 40%
d. 44%
4. If selling price is fixed 25% above the cost, the Gross
Profit ratio is
a. 13% b. 28%
c. 26% d. 20%
5. Overall Profitability ratios are based on
a. Investments b. Sales
c. Both a and b d. None of the above
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6. Stock is considered as a liquid asset as anytime it can be
converted into cash immediately.
a. Yes
b. No
1. analysis and interpretations of the financial statement will
reveal_________
a. The profitability b. The financial position
c. Both d. None
2. The rearrangement of accounting figures and methodical
classification of data is called…
a. Interpretations b. Summarization
c. Analysis d. None
3. The process of explaining the meaning, significance and
relationship between two financial factors is called…
a. Interpretation b. Analysis
c. Summarization d. None
4. Which of the following is technique of financial statement
analysis?
a. Common size statement
b. Comparative statement
c. Trend analysis
d. All of the above.
5. In ______ figures of two or more periods are placed side by
side to facilitate easy and meaningful comparisons…
a. Common‐size statement analysis
b. Comparative statement analysis
c. Trend percentage analysis
d. None
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6. ________ are required to show figures to the previous year
figures of financial statements.
a. Partnership firms
b. Cooperatives
c. Companies
d. Government companies
7. What is shown by a comparative balance sheet?
a. Two years balance sheet figures
b. Increase or decrease in figures
c. Percentage of increase or decrease
d. All of the above
8. The comparative income statement shows the increase or
decrease of _______ over the previous year.
a. Sales b. Profit c. Expense d. All of the
above
9. The technique of converting figures into percentage in some
common base is called…
a. Ratio analysis b. Common size statement
analysis
c. Trend percentages d. None
10. In common size balance sheet analysis, the _______ are
taken as cent percent.
a. Total assets b. Fixed assets
c. Total capital d. None
11. The technique of taking first year figures as base and
comparing with subsequent years is called…
a. Ratio analysis
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b. Common size statement
c. Trend analysis
d. None
12. Ratio analysis is a technique of ________ of financial
statement
a. Analysis
b. Interpretation
c. Both
d. None
13. Which of the following is an important step in ratio
analysis?
a. Calculation of ratios
b. Comparison
c. Interpretation
d. All of the above
14. Who is the user of ratio analysis?
a. Management
b. Creditors and financial institutions
c. Investors
d. All
15. Which of the following technique shows the financial
condition of a business in a simplified manner?
a. Balance sheet
b. Ratios
c. Funds flow
d. None
16. What ratios are applied to find out the efficiency of
performance of a firm?
a. Activity ratio
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b. Profitability ratio
c. Both
d. None
17. What trend is projected by profitability ratio?
a. Costs b. Profits
c. Sales d. All of the above
18. Which of the following is the best for comparing the firms?
a. Ratios
b. Absolute figures
c. Both
d. None
19. The ascertainment of trends helps in making…
a. Standards b. Forecasts c. Budgets
d. None
20. In what way the ratio analysis helps the management?
a. Planning b. Coordination
c. Control d. All .
21. On what basis can ratios be classified?
a. Financial statement b. Function
c. Both d. Subjective matter.
22. Inter‐firm comparison with ratios is not meaningful because
of …
a. Non availability of ideal standards
b. Different accounting periods followed
c. Both
d. None
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23. What is the serious limitation of ratio analysis?
a. Window dressing
b. Price level changes not considered
c. Personal bias
d. All of the above
24. Liquidity ratio indicates the ability of the company to meet
its ______
_ a. Current liability b. Tax liability
c. Long term obligations d. Shareholders claim
25. What is the expected standard for current ratio?
a. 1:2 b. 2:1
c. 2:3 d. 1:3
26. The shareholders funds consist of…
a. Preference shares
b. Equity shares
c. Reserves and surplus
d. All
27. Net profit ratio shows the relation between net profits and
________
a. Gross sales
b. Net sales
c. Sales return
d. Cost of sales
28. What level of operating ratio is ideal?
a. High b. Very high c. Low d.
Average
29. What is main component of operating expenses?
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a. Selling expenses b. Distribution expenses
c. Production expenses d. None
30. Return on capital employed shows the ________ of a firm.
a. Profitability b. Overall efficiency
c. Both d. Subjective matter
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