Financial Analysis MCQ

What is a Comparative Statement?

• A Comparative Statement is a document that compares the prices of different products in a store.

• A Comparative Statement is a financial statement that compares different line items, figures, or ratios from the same company over different periods or with other companies in the same industry.

• A Comparative Statement is a financial statement that compares different line items, figures, or ratios from different industries.

• A Comparative Statement is a statement that compares the weather in different cities.

Why is the Common Size Statement important in financial analysis?

• It is not relevant in financial analysis.

• It only applies to certain industries.

• It facilitates standardized comparison of financial data.

• It confuses financial data analysis.

How is the Liquidity Ratio calculated?

• Total Liquid Assets * Total Current Liabilities

• Total Current Assets / Total Current Liabilities

• Total Liquid Assets / Total Current Liabilities

• Total Liquid Assets - Total Current Liabilities

How can you interpret a Comparative Statement?

• By ignoring industry benchmarks

• By analyzing only one financial statement

• By comparing financial data over different periods or against other companies to analyze trends and performance.

• By comparing financial data within the same period

What are the advantages of using a Common Size Statement?

• Standardization for easy comparison and trend analysis.

• Limited comparability with industry standards

• Difficulty in identifying trends

• Increased complexity in financial analysis

Name two types of Liquidity Ratios.

• Profit Margin Ratio

• Inventory Turnover Ratio

• Debt Ratio

• Current Ratio, Quick Ratio

Define Comparative Statement in financial analysis.

• Comparative Statement is used to compare physical assets only

• A Comparative Statement in financial analysis compares financial data from different periods or companies to assess performance and identify trends.

• Comparative Statement is not relevant in financial analysis

• Comparative Statement is used to predict future financial performance

Explain the significance of the Common Size Statement.

• The Common Size Statement is a popular social media trend

• The Common Size Statement is used for weather forecasting

• The Common Size Statement is significant for standardizing financial data and facilitating comparisons between companies of different sizes.

• The Common Size Statement is a type of dance routine

Calculate the Current Ratio using the formula.

• Current Ratio = Total Current Assets * Total Current Liabilities

• Current Ratio = Total Current Assets / Total Current Liabilities

• Current Ratio = Total Current Assets + Total Current Liabilities

• Current Ratio = Total Current Assets - Total Current Liabilities

What insights can be gained from a Comparative Statement?

• Insights on weather patterns

• Insights on trends, changes, performance, and decision-making.

• Insights on cooking recipes

• Insights on celebrity gossip