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Test: Techniques of Financial Statement Analysis - B Com MCQ


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10 Questions MCQ Test - Test: Techniques of Financial Statement Analysis

Test: Techniques of Financial Statement Analysis for B Com 2024 is part of B Com preparation. The Test: Techniques of Financial Statement Analysis questions and answers have been prepared according to the B Com exam syllabus.The Test: Techniques of Financial Statement Analysis MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Techniques of Financial Statement Analysis below.
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Test: Techniques of Financial Statement Analysis - Question 1
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Which of the following financial statements provides information about a company's financial position as of a specific date?

Detailed Solution for Test: Techniques of Financial Statement Analysis - Question 1
The correct answer is Option C. A balance sheet (also known as a statement of financial position) provides information about a company's financial position as of a specific date. It lists the company's assets, liabilities, and shareholders' equity, allowing stakeholders to understand the company's financial health at a given point in time.
Test: Techniques of Financial Statement Analysis - Question 2
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Comparative financial statements are useful for:

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The correct answer is Option A. Comparative financial statements provide a comparison of an entity's financial performance over multiple periods, which can be useful for predicting future performance. However, it's important to note that relying solely on historical performance for predicting future outcomes should be supplemented with operational and leading indicators.
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Test: Techniques of Financial Statement Analysis - Question 3
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In a common size income statement, how are income statement items usually expressed?

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The correct answer is Option A. In a common size income statement, income statement items are typically expressed as a percentage of total revenue. This format helps in understanding the proportion of each expense or profit component in relation to the total revenue.
Test: Techniques of Financial Statement Analysis - Question 4
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Which financial statement provides information about a company's cash inflows and outflows over a specific period?
Detailed Solution for Test: Techniques of Financial Statement Analysis - Question 4
The correct answer is Option C. A statement of cash flows provides information about a company's cash inflows and outflows over a specific period, categorized into operating, investing, and financing activities. It helps in assessing a company's liquidity and cash management.
Test: Techniques of Financial Statement Analysis - Question 5
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In a vertical analysis of an income statement, if the cost of goods sold is calculated as 45% of gross sales, what would this ratio indicate?
Detailed Solution for Test: Techniques of Financial Statement Analysis - Question 5
The correct answer is Option C. In a vertical analysis, the cost of goods sold as a percentage of gross sales indicates the proportion of gross sales that is used to cover the cost of producing goods. This ratio is known as the gross profit margin, and it represents the company's gross profit relative to its total sales.
Test: Techniques of Financial Statement Analysis - Question 6
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What is the purpose of financial statement trend analysis?
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The correct answer is Option D. The purpose of financial statement trend analysis is to gauge fluctuations in corporate operating data. It helps senior leadership and stakeholders understand changes in a company's financial position, operating performance, and cash flows over time.
Test: Techniques of Financial Statement Analysis - Question 7
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Horizontal analysis involves comparing current operating data with:
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The correct answer is Option B. Horizontal analysis involves comparing current operating data with data from previous periods. This analysis helps identify trends, fluctuations, and changes in the company's financial performance over time.
Test: Techniques of Financial Statement Analysis - Question 8
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What does a common size balance sheet express items as a percentage of?
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The correct answer is Option D. A common size balance sheet expresses items as a percentage of total assets. This format allows for the comparison of different line items in relation to the total value of the company's assets.
Test: Techniques of Financial Statement Analysis - Question 9
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When comparing multiple companies at the same point in time, which type of analysis is especially useful for companies of different sizes?
Detailed Solution for Test: Techniques of Financial Statement Analysis - Question 9
The correct answer is Option D. Common size analysis, when comparing multiple companies at the same point in time, is especially useful for companies of different sizes. It involves expressing financial statement items as percentages of a reference item, allowing for standardized comparison.
Test: Techniques of Financial Statement Analysis - Question 10
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What is a limitation of common size financial statements?
Detailed Solution for Test: Techniques of Financial Statement Analysis - Question 10
The correct answer is Option C. A limitation of common size financial statements is that they rely on the accuracy of the underlying accounting data. Differences in accounting policies and practices among firms can impact the comparability of common size ratios.
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