Significance of Ratios

Q.

Which of the following transactions would result in an increase in the current ratio?

1. Collection of cash from an account receivable.

2. Selling shares of stock to stockholders in exchange for cash.

3. Purchasing a building with cash.

4. Declaration of a cash dividend by the board of directors.

Q.

The relationship between two financial variables can be expressed as:

1. Pure ratio

2. Percentage

3. Either of all of these

4. Rate or times

Q. What are various types of ratios?

Q.

Which of the following statements are not true about ratio analysis?

1. Ratio analysis is useful in financial analysis

2. Ratio analysis is helpful in communication and coordination

3. Ratio Analysis is not helpful in identifying weak spots of the business

4. Ratio Analysis is helpful in financial planning and forecasting

Q.

The following groups of ratios are primarily measure risk:

1. liquidity, activity, and profitability

2. liquidity, activity, and inventory

3. liquidity, activity, and debt

4. liquidity, debt and profitability

Q.

What Are the Different Phases in Law of Variable Proportion?

Q.

When a ratio is defined in respect to the items shown in the financial statements, it is termed as ___

1. Costing ratio

2. Accounting ratio

3. Financial ratio

4. None of these

Q.

The ratio analysis is helpful to management in taking several decisions, but as a mechanical substitute for judgment and thinking, it is worse than useless.

1. True

2. False

3. Partially True

4. None of these

Q. Bring out the importance of Financial Analysis.

Q. A/an is an arithmetical expression of a relationship between two interdependent or related quantities.

1. mean
2. average
3. ratio
4. progression

Q.

A ____________ is an arithmetical expression of a relationship between two interdependent or related quantities.

1. Average

2. Mean

3. Ratio

4. None of these

Q. ratios are ratios calculated on the basis of accounting information.

1. Accounting
2. Financial
3. Costing
4. Information

Q. What do you understand by analysis and interpretation of financial statements? Discuss their importance.

Q. What do you mean by Ratio Analysis?

Q.

What are liquidity ratios? Discuss the importance of current and liquid ratio.

Q. ratios describes about the ability of the company to meet its short term financial needs.

1. Financial
2. Liquidity
3. Costing
4. Accounting

Q. Which of the following statements are true about Ratio analysis?
a. Ratio analysis is useful in financial analysis.
b. Ratio analysis is helpful in communication and coordination.
c. Ratio analysis is not helpful in identifying weak spots of the business.
d. Ratio analysis is helpful in financial planning and forecasting.

1. A, B, and D
2. A, B, and C
3. A, C, and D
4. A, B, C, D

Q. Advantage(s) of Ratio analysis.

1. Simplifies financial statements
2. Facilitates inter-firm comparisin
3. Helps in planning
4. All the above

Q. ratios enables comparison of two different scenarios on the basis of accounting information.

1. Financial
2. Costing
3. Information
4. Accounting

Q. Which of the following are limitations of ratio analysis?
a. Ratio analysis may result in false result if variation in price levels are not considered.
b. Ratio analysis ignores qualitative factors.
c. Ratio analysis ignores quantitative factors.
d. Ratio analysis is historical analysis

1. a, c, and d
2. a, b, c, d
3. a, b, and d
4. a, b and c

Q.

The current ratio provides a better measure of overall liquidity only when a firm’s inventory cannot easily be converted into cash. If inventory is liquid, the quick ratio is a preferred measure of overall liquidity. Explain.

Q. Forecasting of future trends based only on historical analysis is ______ .

1. Feasible
2. Not feasible
3. Non financial
4. Financial

Q. A ______ is a schedule or list of balances of both debit and credit extracted from various accounts.

1. Balance Sheet
2. Cash Flow Statement
3. Profits & Loss Account
4. Trial balance

Q. It is a check on the accuracy of posting. If the trial balance agrees it proves that -
1. The books are arithmetically accurate
2. Both the aspects of the transactions have correctly recorded in the books of original entry as well as in the ledger.
The correct answer is ___________________.

1. $1$ but not $2$
2. $2$ but not $1$
3. Both $1$ & $2$
4. Either $1$ or $2$

Q. In case the individual ledger account were accurate in all respect but a trial balance did not tally, there may be:

1. Wrong recording in book of original entry.
2. Wrong recording in Journal Proper but not posted at all
3. Errors of posting involving the position to wrong account on correct side with correct amount
4. Omission of an account from Trial Balance

Q. Ratio analysis provides users with crucial financial information and points out the area which require ______.

1. Investigation
2. Finalization
3. Classification
4. Automation

Q. Which of the following is the long term liquidity ratio?

1. Interest coverage ratio
2. Current ratio
3. Stock turnover ratio
4. Operating ratio

Q. Financial ratios indicate ___________.

1. the financial position of the company
2. the insolvency condition of the company
3. the sales position of the company
4. the value of fixed assets of the company

Q. If both variables are from balance sheet, the ratios are classified as ____________ ratios.

1. Income statement
2. Balance sheet
3. Profitability
4. Liquidity

Q. Ratio analysis helps business in _______ the problem area as well as the bright areas of the business.

1. Identifying
2. Calculating
3. Summarizing
4. None of the above