MCQ On Analysis Of Financial Statements

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| By Mehtajimmit
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MCQ On Analysis Of Financial Statements - Quiz

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Questions and Answers
  • 1. 

    In comparative analysis of financial statement, technique used is

    • A.

      Graphical analysis

    • B.

      Preference analysis

    • C.

      Common size analysis

    • D.

      Returning analysis

    Correct Answer
    C. Common size analysis
    Explanation
    Common size analysis is a technique used in comparative analysis of financial statements. It involves expressing each line item on the financial statement as a percentage of a base item, typically the total assets or total sales. This allows for easy comparison and identification of trends and patterns across different periods or companies. By converting the financial data into percentages, common size analysis eliminates the effect of scale and size, making it easier to identify areas of strengths or weaknesses in a company's financial performance.

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  • 2. 

    Net income available to stockholders $125 and total assets $1,096 then return on common equity is

    • A.

      0.11%

    • B.

      11.40%

    • C.

      0.12 times

    • D.

      12%

    Correct Answer
    B. 11.40%
    Explanation
    Return on common equity is calculated by dividing net income available to stockholders by average common equity. Since the average common equity is not given in the question, it is not possible to calculate the exact return on common equity. Therefore, an explanation cannot be provided for the given answer of 11.40%.

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  • 3. 

    Price per share $30 and earning per share $3.5 then price to earning ratio is

    • A.

      8.57 times

    • B.

      8.57%

    • C.

      0.11 times

    • D.

      11%

    Correct Answer
    A. 8.57 times
    Explanation
    The price to earnings ratio is calculated by dividing the price per share by the earnings per share. In this case, the price per share is $30 and the earnings per share is $3.5. Therefore, the price to earnings ratio is $30 / $3.5 = 8.57 times.

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  • 4. 

    Price per share $25 and cash flow per share $6 then price to cash flow ratio is

    • A.

      0.24 times

    • B.

      4.16 times

    • C.

      4.16%

    • D.

      24%

    Correct Answer
    B. 4.16 times
    Explanation
    The price to cash flow ratio is calculated by dividing the price per share by the cash flow per share. In this case, the price per share is $25 and the cash flow per share is $6. Therefore, the price to cash flow ratio is 4.16 times.

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  • 5. 

    Low price to earning ratio is result of

    • A.

      Low riskier firms

    • B.

      High riskier firms

    • C.

      Low dividends paid

    • D.

      High marginal rate

    Correct Answer
    A. Low riskier firms
    Explanation
    A low price to earnings ratio indicates that the stock price is relatively low compared to the company's earnings. This can be a result of low riskier firms, as investors may perceive these companies as less risky and therefore be willing to pay a lower price for their earnings. Low riskier firms may have stable financials, strong market position, or a track record of consistent performance, which makes them attractive to investors.

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  • Current Version
  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 11, 2016
    Quiz Created by
    Mehtajimmit
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