# MCQ Questions for Class 12 Accountancy Chapter 4 Analysis of Financial Statements

Class 12 Analysis of Financial Statements MCQ is one of the best strategies to prepare for the CBSE Class 12 Board exam. If you want to complete a grasp concept or work on one’s score, there is no method except constant practice. Students can improve their speed and accuracy by doing more Financial Statement Analysis Class 12 MCQ Class 12 which will help them all through their board test.

## Class 12 Analysis of Financial Statements MCQ Questions with Answers

Class 12 Accountancy MCQ with answers are given here to chapter the Analysis of Financial Statements. These MCQs are based on the latest CBSE board syllabus and relate to the latest Class 12 Accountancy syllabus. By Solving these Class 12 MCQs, you will be able to analyze all of the concepts quickly in the chapter and get ready for the Class 12 Annual exam.

Learn Analysis of Financial statements Class 12 MCQ with answers pdf free download according to the latest CBSE and NCERT syllabus. Students should prepare for the examination by solving CBSE Class 12 Analysis of Financial Statements MCQ with answers given below.

Question 1. 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 2: 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 3. 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 4: 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 5. 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 6. 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 7. 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 8. 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 9: 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 10: 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 11. 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 12: 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 13. 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 14: 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 15. 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 16: Common size analysis is also known as ______ Analysis
a) Vertical
b) Vertical
c) Vertical
d) None of the options

Vertical

Question 17: 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

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Question 18. Comparative statements are also known as :
(a) Dynamic analysis
(b) Horizontal analysis
(c) Vertical analysis
(d) External analysis

(b) Horizontal analysis

Question 19. 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 20. 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 21. 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 22: 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 23: 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 24. 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 25: 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 26: 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 27. 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 28: 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 29. 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 30: Interpretation of Financial Statements includes:
(a) Criticisms and Analysis
(b) Comparison and Trend Study
(c) Drawing Conclusion
(d) All the above

D

Question 31: 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 32. Analysis of Financial Statements is significant:
(A) For Creditors
(B) For Managers
(C) For Employees
(D) For all of the above

D

Question 33. 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

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