FIN621 - Financial Statement Analysis - Final Term 2010Spring
Time: 90 min
Marks = M= 69
FIN621 - Financial Statement Analysis - Q.No. 1 ( M - 1 )
After recording the transactions in journal, posting is made to which of the following?
۩ Trial Balance
۩ Financial Statements
۩ Ledger
۩ After-closing Trial Balance
FIN621 - Financial Statement Analysis - Q.No. 2 ( M - 1 )
Which of the following is TRUE about the preparation of Trial Balance?
۩ It is prepared at the beginning of the year
۩ It is prepared at the end of the fiscal year
۩ It is prepared at the beginning of the accounting period
۩ It is prepared at the end of the accounting period
Ref..
Use of Trial Balance for Final Accounting
The trial balance is generally prepared at a time when all the ledger accounts are balanced like at the end of the accounting period.
http://www.futureaccountant.com/final-accounts-financial-accounting/study-notes/trial-balance-use-final-accounting.php
FIN621 - Financial Statement Analysis - Q.No. 3 ( M - 1 )
Prepaid Expense is a(n) _________ account and has a _________ normal balance.
۩ Revenue, credit
۩ Liability, credit
۩ Asset, debit
۩ Expense, debit
FIN621 - Financial Statement Analysis - Q.No. 4 ( M - 1 )
One purpose of closing entries is to give zero balances to which of the following accounts?
۩ Asset and liability accounts
۩ Liability and capital accounts
۩ Revenue and expense accounts
۩ Expense and capital accounts
FIN621 - Financial Statement Analysis - Q.No. 5 ( M - 1 )
Which of the following would be considered as cash flow from investing activities?
۩ Proceeds from issuance of long-term debt
۩ Expenditure for sale of plant and equipment
۩ Payments to suppliers
۩ Receipts from sale of goods or services
ref by fuad
. from wiki pedia
Investing activities
Examples of Investing activities are
Purchase or Sale of an asset (assets can be land, building, equipment, marketable securities, etc.)
Loans made to suppliers or received from customers
Payments related to mergers and acquisitions
FIN621 - Financial Statement Analysis - Q.No. 6 ( M - 1 )
The cash flow from investing activities shows the cash effects of which of the following?
۩ Income statement items
۩ Long term assets items
۩ Long term liability & stockholder’s equity
۩ Long term liability and long term assets
FIN621 - Financial Statement Analysis - Q.No. 7 ( M - 1 )
In a perpetual inventory system, which of the following is NOT part of the series of journal entries made when merchandise is sold on credit?
۩ Credit the Cost of Goods Sold account
۩ Credit the Sales account
۩ Credit the Merchandise Inventory account
۩ Debit the Accounts Receivable account
Ref by Mehreen
MCQ#17
Ref: http://highered.mcgraw-hill.com/sites/0072996536/student_view0/chapter5/interactive_quiz_a.html
FIN621 - Financial Statement Analysis - Q.No. 8 ( M - 1 )
Which of the following is NOT an example of accelerated depreciation method?
۩ Straight-line method
۩ Sum-of-the-years digit method
۩ Double-declining balance method
۩ Modified Accelerated Cost Recovery System
FIN621 - Financial Statement Analysis - Q.No. 9 ( M - 1 )
As stated in the audit report, or Report of Independent Accountants, the primary responsibility for a company’s financial statements lies with which of the following?
۩ The owners of the company
۩ Independent financial analysts
۩ The auditors
۩ The company’s management
:A management report should include these key features:
• It states that management bears the primary responsibility for a company's financial statements
FIN621 - Financial Statement Analysis - Q.No. 10 ( M - 1 ) - Please choose one
Which of the following is NOT a typical classification of partnerships?
۩ General partnerships
۩ Limited partnerships
۩ Limited liability partnerships
۩ Limited capital partnerships
FIN621 - Financial Statement Analysis - Q.No. 11 ( M - 1 )
Capital stock is normally listed on which of the following financial statements of a business enterprise?
۩ Cash flow Statement
۩ Income Statement
۩ Statement of Retained Earnings
۩ Balance Sheet
FIN621 - Financial Statement Analysis - Q.No. 12 ( M - 1 )
The money that a company gets from potential investors in addition to the stated value of the stock is referred to which of the following?
۩ Paid in capital
۩ Additional paid in capital
۩ Capital stock
۩ Contributed capital
Ref by Mehreen,
Paid in capital
`Paid in capital`, also called contributed capital, refers to the capital contributed to a corporation by investors on top of the par value of capital stock. In other words, the money that a company gets from potential investors in addition to the stated value of the stock.
FIN621 - Financial Statement Analysis - Q.No. 13 ( M - 1 )
Generally , investors want to buy shares at which of the following prices?
۩ At face value
۩ Below face value
۩ Above face value
۩ At market value
FIN621 - Financial Statement Analysis - Q.No. 14 ( M - 1 )
By computing component percentages for several successive balance sheets, which of the following canNOT be found?
۩ The increasing items
۩ The decreasing items
۩ The unchanged items
۩ The future profitable items
FIN621 - Financial Statement Analysis - Q.No. 15 ( M - 1 )
Which of the following are the ratios that are used to determine an entity’s short-term debt paying ability?
۩ Times interest earned, inventory turnover, current ratio, and receivables turnover
۩ Times interest earned, acid-test ratio, current ratio, and inventory turnover
۩ Current ratio, acid-test ratio, receivables turnover, and inventory turnover
۩ Asset turnover, times interest earned, current ratio, and receivables turnover
FIN621 - Financial Statement Analysis - Q.No. 16 ( M - 1 )
If a company had a current ratio of 0.5, then which of the following statements regarding that company's working capital would be true?
۩ The company's working capital would be positive
۩ The company's working capital would be zero
۩ The company's working capital would be negative
۩ The company's working capital would be 2:1
FIN621 - Financial Statement Analysis - Q.No. 17 ( M - 1 )
A company has an inventory turnover ratio of 1.05 times, and cost of goods sold of Rs. 50,000. Calculate the average inventory of the company.
۩ Rs. 47, 500
۩ Rs. 47, 619
۩ Rs. 47, 500
۩ Rs. 47, 650
FIN621 - Financial Statement Analysis - Q.No. 18 ( M - 1 )
Which of the following is a possible reason for company's average debtor’s collection period falling from one year to the next?
۩ An improvement in the state of the economy
۩ A large credit customer facing severe cash shortages
۩ Economic recession
۩ A shortening of the credit period offered by suppliers
FIN621 - Financial Statement Analysis - Q.No. 19 ( M - 1 )
Which of the following ratio is calculated in order to know the liquidity of the accounts receivables?
۩ Accounts receivables turnover
۩ Accounts receivables turnover in days
۩ Operating cycle
۩ Activity ratios
FIN621 - Financial Statement Analysis - Q.No. 20 ( M - 1 )
A company can improve (lower) its debt-to-total asset ratio by doing which of the following?
۩ Borrow more
۩ Shift short-term to long-term debt
۩ Shift long-term to short-term debt
۩ Sell common stock
FIN621 - Financial Statement Analysis - Q.No. 21 ( M - 1 )
Nishat Corporation had net income of Rs. 100,000, paid income taxes of Rs. 30,000, and had interest expense of Rs. 8,000. What was Nishat's times interest earned ratio?
۩ 12.5
۩ 16.25
۩ 17.25
۩ 17.85
FIN621 - Financial Statement Analysis - Q.No. 22 ( M - 1 )
Most consumer-oriented stores and catalogue companies are an example of which of the following type of business?
۩ Manufacturing
۩ Service
۩ Merchandise
۩ Both merchandise and manufacturing
FIN621 - Financial Statement Analysis - Q.No. 23 ( M - 1 )
All of the following statements are true regarding ratios that measure a company's ability to pay short-term and long-term debt EXCEPT:
۩ The average debt ratio is between 0.57 and 0.67
۩ High times-interest-earned ratio indicates a company can pay interest expense easily
۩ Debt ratio of 60% indicates 60% of assets are financed with debt
۩ Debt ratio of 90% indicates lower financial risk than a debt ratio of 60%
FIN621 - Financial Statement Analysis - Q.No. 24 ( M - 1 )
Which of the following performance measures would be of most direct interest to shareholders?
۩ Return on net assets
۩ Gross profit margin
۩ Debt ratio
۩ Dividend yield
FIN621 - Financial Statement Analysis - Q.No. 25 ( M - 1 )
The total legal capital of the company consists of which of the following?
۩ Only common stocks issued
۩ Only preferred stocks issued
۩ Common stocks and preferred stocks
۩ Common stocks and retained earnings
FIN621 - Financial Statement Analysis - Q.No. 26 ( M - 1 )
What will be the dividend requirement on outstanding preferred stocks, if the number of preferred shares is 50,000, number of common shares is 40,000 and the dividend per share is Rs. 10.
۩ Rs. 500,000
۩ Rs. 400,000
۩ Rs. 5,000
۩ Rs. 4,000
FIN621 - Financial Statement Analysis - Q.No. 27 ( M - 1 )
Which of the following options indicate how quickly accounts receivables are converted into cash?
۩ Accounts receivable turnover
۩ Days to collect accounts receivable
۩ Working capital
۩ Total assets turnover
FIN621 - Financial Statement Analysis - Q.No. 28 ( M - 1 )
Operating cycle belongs to which group of ratios?
۩ Leverage ratios
۩ Liquidity ratios
۩ Profitability ratios
۩ Activity ratios
FIN621 - Financial Statement Analysis - Q.No. 29 ( M - 1 )
If current assets are Rs. 15.6 million, current liabilities Rs. 11.2 million and stocks Rs. 1.8 million, what is the acid test ratio?
۩ 1.39
۩ 1.23
۩ 1.65
۩ 0.89
FIN621 - Financial Statement Analysis - Q.No. 30 ( M - 1 )
What will be effect of purchase of inventory on open account on quick ratio of the company?
۩ Increase
۩ Decrease
۩ No effect
۩ Can not be found from the given information
FIN621 - Financial Statement Analysis - Q.No. 31 ( M - 1 )
What will be the effect of conversion of a portion of bonds payable into common stock on the interest coverage ratio of the company?
۩ Increase
۩ Decrease
۩ No effect
۩ Can not be found from the given information
FIN621 - Financial Statement Analysis - Q.No. 32 ( M - 1 )
What will be the effect on the inventory turnover ratio of the company, if it changed from FIFO to LIFO during the period of inflation?
۩ Increase
۩ Decrease
۩ No effect
۩ Can not be found from the given information
FIN621 - Financial Statement Analysis - Q.No. 33 ( M - 1 )
Assume that a company has current assets of Rs. 60,000, current liabilities of Rs. 35,000 and prepaid expenses of Rs. 5,000. Calculate the quick ratio of the company?
۩ 1.57
۩ 1.71
۩ 1.86
۩ 0.58
FIN621 - Financial Statement Analysis - Q.No. 34 ( M - 1 )
A complete set of financial statements for Hartman Company, at December 31, 1999, would include each of the following, EXCEPT:
۩ Balance sheet as of December 31, 1999
۩ Income statement for the year ended December 31, 1999
۩ Statement of projected cash flows for 2000
۩ Notes containing additional information that is useful in interpreting the financial statements
FIN621 - Financial Statement Analysis - Q.No. 35 ( M - 1 )
Failure to record the receipt of a utility bill for services already received will result in which of the following?
۩ An overstatement of assets
۩ An overstatement of liabilities
۩ An overstatement of equity
۩ An understatement of assets
FIN621 - Financial Statement Analysis - Q.No. 36 ( M - 1 )
Which of the following is the proper journal entry to record Ransom Company's billing of clients for Rs. 500 of services rendered?
۩ Debit Cash 500; Credit Accounts Receivable 500
۩ Debit Accounts Receivable 500; Service Revenue 500
۩ Debit Accounts Receivable 500; Credit Capital Stock 500
۩ Cash 500; Credit Service Revenue 500
FIN621 - Financial Statement Analysis - Q.No. 37 ( M - 1 )
Which of the following transaction have an effect on expense account?
۩ Purchase of office equipment on credit
۩ Payment on accounts payable
۩ Repayment of principle of bank loan
۩ Payment of wages
FIN621 - Financial Statement Analysis - Q.No. 38 ( M - 1 )
Failure to record the receipt of a utility bill, which have already been received for services, will result in which of the following?
۩ An understatement of assets
۩ An overstatement of assets
۩ An overstatement of liabilities
۩ An overstatement of equity
FIN621 - Financial Statement Analysis - Q.No. 39 ( M - 1 )
A business has purchased machinery on credit, what will be its journal entry?
۩ Cash - (Debit); Machinery - (Credit)
۩ Machinery - (Debit) ; Accounts payable - (Credit)
۩ Accounts payable - (Debit) ; Machinery - (Credit)
۩ Machinery - (Debit) ;Cash - (Credit)
FIN621 - Financial Statement Analysis - Q.No. 40 ( M - 1 )
Which of the following is NOT normally required for revenue to be recognized according to the revenue principle for accrual basis accounting?
۩ The price is fixed or determinable
۩ Services have been performed
۩ Cash that has already been collected
۩ Evidence of an arrangement for customer payment exists
FIN621 - Financial Statement Analysis - Q.No. 41 ( M - 1 )
Using the following information calculate Net Income: Sales Revenue Rs.200, 000, Loss on Sale of Equipment Rs.10, 000, Amortization Expense Rs.20, 000 and Cost of Goods Sold Rs.50, 000.
۩ Rs. 170,000
۩ Rs. 120,000
۩ Rs. 130,000
۩ Rs. 180,000
FIN621 - Financial Statement Analysis - Q.No. 42 ( M - 1 )
Which of the following statements is CORRECT regarding depreciation methods?
۩ Accumulated depreciation represents a fund being accumulated fro the replacement of assets
۩ The cost of a machine includes the cost of repairing damage to the machine during the installation process
۩ A company may use different depreciation methods in its financial statements and its income tax returns
۩ The use of an accelerated depreciation method causes an asset to wear out more quickly than does the straight line method
FIN621 - Financial Statement Analysis - Q.No. 43 ( M - 1 )
The actions taken by the management to make company appear as strong as possible in its financial statements is termed as which of the following?
۩ Window dressing
۩ Understanding
۩ Comprehensiveness
۩ Materiality
FIN621 - Financial Statement Analysis - Q.No. 44 ( M - 1 )
Persons, who sign articles/memorandum of the company, contribute in the initial share capital of the company. They are called as:
۩ Subscribers
۩ Undertakers
۩ Investors
۩ Shareholders
FIN621 - Financial Statement Analysis - Q.No. 45 ( M - 1 )
ABC Company now wants to further raise its capital; it is going to offer its shares first to current shareholders. The issuance of further capital to Present Shareholders is called:
۩ Paid-in capital
۩ Preferred-stock Issue
۩ Right Issue
۩ Additional capital
FIN621 - Financial Statement Analysis - Q.No. 46 ( M - 1 )
Which one of the following ratios measures general liquidity of a company?
۩ Quick ratio
۩ Current ratio
۩ Investments ratio
۩ Defensive interval ratio
FIN621 - Financial Statement Analysis - Q.No. 47 ( M - 1 )
Which of the following is MORE concerned with the short-term solvency?
۩ Short term Creditors
۩ Long term Creditors
۩ Short term Debtors
۩ Long term Debtors
FIN621 - Financial Statement Analysis - Q.No. 48 ( M - 1 )
The increasing Return on Sales (ROS) shows:
۩ Company is facing financial troubles
۩ Company is retaining more than 65% of its profit for operational efficiency
۩ Company is paying dividends consistently over the past years
۩ Company is growing by leaps and bounds
FIN621 - Financial Statement Analysis - Q.No. 49 ( M - 3 )
If a company uses Rs.20, 000 to buy merchandise for inventory. What do you think would be the effect on working capital? Give reason.
FIN621 - Financial Statement Analysis - Q.No. 50 ( M - 3 )
Ahmad Incorporation has Owner’s Equity of amount Rs.75, 000 as an opening balance. During the period, three major transactions occurred:
Issuance of stock: Rs.22, 000
Dividend distribution: Rs.10, 000
Net Loss: Rs.6, 000.
Based on these transactions, what would be the Ahmad’s ending balance of Owner’s Equity?
Answer
Owner's Equity (beg) 75000
Add; Stocks Issued 22000
Less; Dividend distribution 10000
Less; Net Loss 6000
Owner's Equity (end) 81000
FIN621 - Financial Statement Analysis - Q.No. 51 ( M - 5 )
ABC Company is famous for its automobiles. The business has undergone the following changes in the month of March. Prepare the journal entries for the transactions.
1. Mar. 1 Owner deposited Rs. 50,000 cash in a bank account in the name of the business.
2. Mar. 5 Purchased land for Rs. 160,000, of which Rs. 40,000 was paid in cash. A short-term note payable was issued for the balance of Rs. 120,000
3. Mar. 6 An arrangement was made with the XYZ Company to provide parking privileges for its customers. XYZ Company agreed to pay Rs. 1,200 monthly, payable in advance. Cash was collected for the month of March.
4. Mar. 7 Arranges with Times Printing Company for a regular advertisement in the Times at a monthly cost of Rs. 390. Paid for advertisement during March by check, Rs. 390
5. Mar. 15 Parking receipts for the first half of the month were Rs. 1,836, exclusive of the monthly fee from XYZ Company
FIN621 - Financial Statement Analysis - Q.No. 52 ( M - 5 )
Following data is taken from the ABC Corporation.
1999 (Rs.) |
2000 (Rs.) |
|
| Total assets | 400,000 | 300,000 |
| Total liabilities | 300,000 | 180,000 |
| Share capital (Rs. 10 par | 100,000 | 90,000 |
| Total debt | 120,000 | 140,000 |
Requirement:
Calculate the following.
a) Debt ratio (2.5)
b) Debt to total asset ratio (2.5)
FIN621 - Financial Statement Analysis - Q.No. 53 ( M - 5 )
Assume that you wish to invest in the stocks of a high-tech corporation and that one of your investments goals is to receive dividend income from the stocks that you purchase. You begin your research by examining Microsoft, one of the world’s most successful software corporations. You quickly discover that, as of 1997, Microsoft had never paid a dividend. Furthermore, the company’s 1997 balance sheet reported holdings of nearly Rs. 9 billion in cash and highly liquid securities. With all of these liquid resources available, why do you suppose that Microsoft has never paid a cash dividend to its stockholders?
