Commerce Accountancy · Banking Financial Awareness

Corporate Profit and Loss

226 Questions

Corporate profit and loss questions evaluate financial literacy through profitability ratios and investment returns. These concepts help assess the financial health of a business entity. The topic is essential for commerce students and banking aspirants.

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Corporate Profit and Loss Questions

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Given following data calculate cost of capital under Net Income (NI) Approach 
(1) EBIT is Rs. 20 Lakhs.
(2) 4,00,000 shares of Rs. 10 each & market capitalisation is $16\%$ 
(3) 25,000, $14\%$ debentures of Rs. 150 each.

  1. $16\%$
  2. $14\%$
  3. $15\%$
  4. $15.42\%$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

First calculate net earnings available to equity shareholders deducting interest on debt i.e. NI then calculate market value of equity i.e. $\frac{NI}{K _e}$ where $k _e$ = market capitalization rate then value of firm V = S + B lastly $K _e$ = $\frac{EBIT}{V}$.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Degree of total leverage can be applied in measuring change in ______________________,

  1. EBIT to a percentage change in quantity

  2. EPS to a percentage change in EBIT

  3. EPS to a percentage change in quantity

  4. DFL to a percentage change in DOL

  5. Quantity to a percentage change in EBIT
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Degree of total leverage is combination of the operating and financial leverages. Thus it is a measure of the output and EPS of the company.
DOL = percentage change in EBIT/percentage change in output.
DFL = percentage change in EPS/percentage change in EBIT
Hence, DTL = DOL X DFL = Change in EPS / change in output.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Any firm that goes bankrupt gradually will face one or more of the following symptoms _______________.

  1. Persistent cash loses

  2. Failure of pay taxes

  3. Cost overruns

  4. All of the above

  5. Both (A) and (C) above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Persistent cash losses, failure to pay taxes, cost overruns, low capacity utilization, accumulation of finished goods, etc.are the symptoms of bankruptcy.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

For a weak unit which of the following should hold good _____________.

  1. Accumulated losses greater or equal to $50\%$ of its peak net worth during immediately preceding our accounting years

  2. A current ratio of less than 1:1

  3. Suffering losses in the previous accounting year

  4. All of the above

  5. Both (A) and (C) above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A non-small scale industrial unit is defined as weak if the accumulated losses at the end of any accounting year, resulting in the erosion of fifty percent or more of its peak net worth during the immediately preceding four accounting years.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

The amount of debt, equity share capital, preference share capital are __________ by financial decisions, which is a part of financial management.

  1. affected

  2. not affected

  3. minutely affected

  4. largely affected
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The primary goal of both investment and financing decisions is to maximize shareholder value. Investment decisions revolve around how to best allocate capital to maximize their value. Financing decisions revolve around how to pay for investments and expenses. Companies can use existing capital, borrow, or sell equity.

The amount of debt, equity share capital, preference share capital are affected by financial decisions, which is a part of financial management.
Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Under the amount of long term and short term financing to be used, the current liabilities cost is  ______ than long term liabilities.

  1. more

  2. less

  3. equal

  4. nil
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Financial management involves decisions about the proportion of long term and short term finance. An organisation wanting to be more liquid would raise relatively more amount on long term basis. There is a choice between liquidity and profitability. The underlying assumption here is that current liabilities cost less than long term liabilities.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

An expansion of business which is a result of capital budgeting decision is likely to affect virtually all items in the __________ account of the business.

  1. Balance sheet

  2. Trading

  3. Profit and loss

  4. Trading and profit and loss
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

All items in the Profit and Loss Account, e.g., Interest, Expense, Depreciation, etc. and an expansion of business which is a result of capital budgeting decision is likely to affect virtually all items in the profit and loss account of the business.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

The quantum of ________ assets as well as its break-up is an aspect affected by finance.

  1. current

  2. non-current

  3. tangible

  4. intangible
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The above statement is used to describe the function of financial management. The quantum of current assets and its breakup into cash, inventory and receivables means financial management decisions regarding how much to invest in current assets and its breakup into cash, inventory i.e stock, debtors.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Under the amount of long term and short term financing to be used, the underlying assumption is that current liabilities cost _______ than long term liabilities.

  1. more

  2. less

  3. equal

  4. nil
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Current liabilities have high interest rates with shorter duration to pay off hence,

Under the amount of long term and short term financing to be used, the underlying assumption is that current liabilities cost less than long term liabilities.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

The size as well as the composition of _______ assets of the business is an aspect affected by finance.

  1. current

  2. fixed

  3. non-current

  4. tangible
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Finance decisions, particularly capital budgeting, are heavily concerned with the acquisition and management of fixed assets, as these represent long-term investments that dictate the company's productive capacity.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

The total cost of goods available for sale with a company during the current year is Rs. $12,00,000$ and the total sales during the period are Rs. $13,00,000$. If the gross profit margin of the company is $33$ $1/3\%$ on cost, the closing inventory during the current year is __________?

  1. Rs. $4,00,000$
  2. Rs. $3,00,000$
  3. Rs. $2,25,000$
  4. Rs. $2,60,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Gross profit is 33 1/3% on cost, which is 25% on sales. Sales = 13,00,000. Gross Profit = 13,00,000 * 0.25 = 3,25,000. COGS = Sales - GP = 13,00,000 - 3,25,000 = 9,75,000. Closing Inventory = Goods Available - COGS = 12,00,000 - 9,75,000 = 2,25,000.

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

Wages and other benefits, provided to assembly line workers and operators of machine are classified under ________________.

  1. work in process costs

  2. finished costs

  3. direct manufacturing labour costs

  4. indirect manufacturing labour costs
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Wages and benefits for workers directly involved in manufacturing on the assembly line are classified as direct manufacturing labour costs. These costs can be easily and cost-effectively traced to the creation of specific products. Indirect labour, by contrast, involves support staff whose work cannot be directly linked to a single unit.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

From the following details calculated Opening stock of BNT Ltd.
Purchases  Rs. 1,00,000
Manufacturing expenses = Rs. 45,000
Selling and Distribution expenses =Rs. 25,000
Administrative expenses =Rs. 10,000
Financial expenses =Rs. 5,000
Sales Rs. 2,40,000
Closing Stock  Rs. 25,000
Gross profit on sales  25 %

  1. Rs. 55,000

  2. Rs. 35,000

  3. Rs. 60,000

  4. Rs. 45,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Gross is profit is equal to ___________.

  1. Net profit minus expenses

  2. Purchases plus stock minus net sales

  3. Net sales plus selling price of stock minus purchases

  4. Net sales minus cost price of sales
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products (COGS) from its revenue (Net Sales).

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

From the following details calculate Opening stock.
Purchases  Rs. 1,50,000
Manufacturing expenses =  Rs. 30,000
Selling and distribution expenses = Rs. 20,000
Administrative expenses = Rs. 10,000
Financial expenses = Rs. 5000
Sales Rs. 2,40,000
Closing stock  Rs. 30,000
Gross profit 25 % on sale 

  1. Rs. 65,000

  2. Rs. 30,000

  3. Rs. 85,000

  4. Rs. 95,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Calculation of Opening stock = (Sales + closing stock ) - (Purchase + manufacturing expense + Gross Profit*)

=( 240000 + 30000 ) - ( 150000 + 30000 + 60000)
= Rs 30000

Gross profit = 240000 * 25/100
                     = 60000