# MCQ Class 12 Accountancy Chapter 4 Analysis of Financial Statements

Check the below NCERT MCQ Class 12 Accountancy Chapter 4 Analysis of Financial Statements with Answers available with PDF free download. MCQ Questions for Class 12 Accountancy with Answers were prepared based on the latest syllabus and examination pattern issued by CBSE, NCERT and KVS. Our teachers have provided below Analysis of Financial Statements Class 12 Accountancy MCQs Questions with answers which will help students to revise and get more marks in exams

## Analysis of Financial Statements Class 12 Accountancy MCQs Questions with Answers

Refer below for MCQ Class 12 Accountancy Chapter 4 Analysis of Financial Statements with solutions. Solve questions and compare with the answers provided below

Question: Importance of Comparative Statement is
a) All of the options
b) Make the data simple and more understandable
c) Indicate the trend with respect to the previous year
d) compare the firm performance with the performance of other firm in the same business

All of the options

Ques. When bad position of the business is tried to be depicted as good, it is known as …………….
(A) Personal Bias
(B) Price Level Changes
(C) Window Dressing
(D) All of the Above

Window Dressing

Question: The Real object of Analysis of Financial Statement is
a) To measure the financial strength of the business
b) To assess the total expenses of the firm
c) To know about historical cost concept
d) To assess the total liabilities of the firm

To measure the financial strength of the business

Question. The financial statements of a business enterprise include :
(a) Balance sheet
(b) Statement of Profit and loss account
(c) Cash flow statement
(d) All the above

(d) All of the above

Question. Main limitation of analysis of financial statements is
(A) Affected by window dressing
(B) Difficulty in forecasting
(C) Do not reflect changes in price level
(D) All of the Above

All of the Above

Question. While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of
(a) Current Assets.
(b) Non-current Assets.
(c) Non-current Liabilities.
(d) Total Assets.

Total Assets.

Question. Which of the following is a type of Financial Analysis on the basis of material used ?
(a) Internal Analysis
(b) External Analysis
(c) Internal Audit
(d) Both (a) and (b)

Both (a) and (b)

Question: In which analysis Financial Statement for a single year analysed
a) Vertical Analysis
b) Dynamic Analyses
c) Vertical Analysis and Dynamic Analyses
d) None of the options

Vertical Analysis

Question: To whom Importance of Financial Analysis is
a) All of the options
b) For Management
c) For Investors
d) For Creditors

All of the options

Question. Main objective of Common Size statement is :
(A) To present the changes in various items
(B) To provide for a common base for comparison
(C) To establish relationship between various items
(D) All of the Above

All of the Above

Question. The most commonly used tools for financial analysis are :
(a) Horizontal analysis
(b) Vertical analysis
(c) Ratio analysis
(d) All the above

(d) All the above

Question. What is shown by Balance Sheet ?
(a) Accuracy of books of accounts
(b) Profit or loss of a specific period
(c) Financial position on a specific date
(d) None of the above

C

Question: Rent received, Profit on sale of fixed assets, Compensation for acquisition of land are example of
a) Non-operating Incomes
b) Operating Incomes
c) Operating expenses
d) None of the options

A

Question. In the Statement of Profit & Loss of a Common Size Statement:
(A) Figure of net revenue from operations is assumed to be equal to 100
(B) Figure of gross profit is assumed to be equal to 100
(C) Figure of net profit is assumed to be equal to 100
(D) Figure of assets is assumed to be equal to 100

A

Question: each item is expressed as a percentage of some common base in
a) Common size statement
b) Fund Flow Statement
c) Cash Flow Statement
d) Cash Flow Statement

Common size statement

Question: Importance of Comparative Statement is
a) All of the options
b) Make the data simple and more understandable
c) Indicate the trend with respect to the previous year
d) compare the firm performance with the performance of other firm in the same business

All of the options

Question. Comparative statements are also known as :
(a) Dynamic analysis
(b) Horizontal analysis
(c) Vertical analysis
(d) External analysis

(b) Horizontal analysis

Question: Common size analysis is also known as ______ Analysis
a) Vertical
b) Vertical
c) Vertical
d) None of the options

Vertical

Question The analysis of financial statement by a shareholder is an example of:
(a) External Analysis
(b) Internal Analysis
(c) Vertical Analysis
(d) Horizontal Analysis

External Analysis

Question. Which objective is not fulfilled by comparative financial statement:
(A) Indicate the extent of change in assets and liabilities
(B) Indicate the extent of change in items of Statement of Pofit & Loss
(C) Show effect of operative activities on assets and liabilities
(D) Show the direction of change in assets and liabilities

Indicate the extent of change in items of Statement of Pofit & Loss

Question. When bad position of the business is tried to be depicted as good, it is known as …………….
(A) Personal Bias
(B) Price Level Changes
(C) Window Dressing
(D) All of the Above

C

Question. The most commonly used tools for financial analysis are :
(A) Comparative Statements
(B) Common Size Statements
(C) Accounting Ratios
(D) All of the above

D

Question: Ratio analysis establishes relationship between
a) Two financial statements
b) Two Share Holder
c) Two Debentures Holder
d) None of the above

Two financial statements

Question: Financial year always begins on
a) 1st April-31st March
b) 1st January-31st December
c) 1st August -31st July
d) None of the options

1st April-31st March

Question. Financial analysis become useless because it:
(A) Measures the profitability
(B) Measures the Solvency
(C) Lacks Qualitative Analysis
(D) Makes a comparative study

C

Question: each item is expressed as a percentage of some common base in
a) Common size statement
b) Fund Flow Statement
c) Cash Flow Statement
d) Cash Flow Statement

A

Question: The analysis of financial statement by a shareholder is an example of:
(a) External Analysis
(b) Internal Analysis
(c) Vertical Analysis
(d) Horizontal Analysis

A

Question: Bring out the importance of Financial Analysis
a) All of the options
b) Helps in evaluating the profit earning capacity and financial feasibility of a business
c) Helps in evaluating the profit earning capacity and financial feasibility of a business
d) Helps in evaluating the relative financial status of a firm comparison to other competitive firms

All of the options

Question: Interpretation of Financial Statements includes:
(a) Criticisms and Analysis
(b) Comparison and Trend Study
(c) Drawing Conclusion
(d) All the above

D

Question: Common size statements can be classified into which broad categories
a) Common size statements can be classified into two broad categories and Common Size Balance Sheet
b) Common size statements can be classified into two broad categories
c) Common Size Balance Sheet
d) None of the options

A

Question. In a common size Balance Sheet, total liabilities are assumed to be equal to
(A) 1
(B) 10
(C) 100
(D) 1,000

C

Question. Creditors or Suppliers are interested to know the
(a) Profitability of the firm in relation to turnover.
(b) Profitability of the firm in relation to investments.
(c) Short-term solvency/liquidity of the concern.
(d) Effective utilisation of its (firm’s) resources.

C

Question. Analysis of Financial Statements is significant:
(A) For Creditors
(B) For Managers
(C) For Employees
(D) For all of the above