# Test: Tools Of Financial Analysis - 1

## 10 Questions MCQ Test Accountancy Class 12 | Test: Tools Of Financial Analysis - 1

Description
Attempt Test: Tools Of Financial Analysis - 1 | 10 questions in 10 minutes | Mock test for Commerce preparation | Free important questions MCQ to study Accountancy Class 12 for Commerce Exam | Download free PDF with solutions
QUESTION: 1

### While preparing Statement of Profit and Loss , net sales is Recorded as:

Solution:

A Profit and Loss (P & L) statement measures a company's sales and expenses during a specified period of time. The function of a P & L statement is to total all sources of revenue and subtract all expenses related to the revenue. It shows a company's financial progress during the time period being examined.

QUESTION: 2

### While preparing statement of P/L, salaries and wages are shown under:

Solution:

Salaries and wages are shown under employee benefit expense while preparing statement of P/L.

QUESTION: 3

### Vinod Limited takes loan from HDFC Bank of Rs.25 Lakhs which is to be paid in 15 years. Where will you show this loan amount in balance sheet?

Solution:

Loan taken from which is to be paid in 15 years is a long term borrowing.

QUESTION: 4

Loss on sale of investment is:

Solution:

While preparing Statement of Profit and Loss, loss on sale investment is shown under the head other expenses.

QUESTION: 5

Rent received is shown under:

Solution:

Rent received is shown as other income and it is added to the revenue from operations to find out the total revenue.

QUESTION: 6

An ideal Current Ratio is:

Solution:

An ideal current ratio is 2:1. It means a business must try to maintain its current assets twice of current liabilities.

QUESTION: 7

Liquid Ratio is also known as:

Solution:

Liquid Ratio is also known as 'acid test ratio' which helps in assessing the short term liquidity position of the firm.

QUESTION: 8

Quick Assets do not include:

Solution:

The correct option is B.

• Quick assets are any assets that can be converted into cash on short notice.
• These assets are a subset of the current assets classification, for they do not include inventory because it can take an excess amount of time to convert into cash.
• Since it may be difficult to convert them into cash within a reasonable period of time, they are not a part of quick assets.
QUESTION: 9

Low ‘Working Capital Turnover Ratio’ indicates:

Solution:

Low working capital turnover ratio indicates that the working capital of business is under-utilized. It means firm is not using its working capital effectively and efficiently.

QUESTION: 10

Deferred Tax Asset is treated as:

Solution:

Deferred tax asset is treated as a fictitious asset because it doesn’t play any role in the firm. It is just an asset by name which cannot be realized or sold.

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