Tag: analysis of financial statements

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Questions Related to analysis of financial statements

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Common-size Income Statement is that statement in which amount of Revenue from Operations is taken as 100 and all other amounts are expressed as percentage thereof.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

True. Common-size Income statement is the vertical analysis of Income Statement. A vertical analysis is shows all items as percentages and not in absolute figures which provides better comparison. Each line item is expressed as a percentage figure of the base figure within the statement. The base is always shown as 100. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

A financial statement that shows both rupees and percentages in the report is referred to as ______________.

  1. A Balance sheet

  2. A Common size statement

  3. A Proportional financial statement

  4. A Relative statement of equity
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A common size statement expresses each item in the financial statement as a percentage of a base figure (like total assets or total revenue), allowing for easier comparison.

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Which of the following is/are objective of common-size income statement?

  1. To analyse change in individual items of statement of Profit and Loss.

  2. To study the trend in different items of Revenues and Expenses.

  3. To assess the efficiency.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Common-size income statements are used to analyze changes in individual items, study trends in revenues and expenses, and assess the overall efficiency of the business operations.

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Common-size Balance Sheet shows _______________.

  1. Assets, Equity and Liabilities in absolute values.

  2. Assets and Liabilities as percentage of total assets or total equity and liabilities.

  3. Both (a) and (b)

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A common-size balance sheet expresses all items as a percentage of a common base, typically total assets or total equity and liabilities. This allows for easier comparison between companies of different sizes or over different time periods.

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Common-size Income Statement is the vertical analysis of Income Statement.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

True. Common-size Income statement is the vertical analysis of Income Statement. A vertical analysis is shows all items as percentages and not in absolute figures which provides better comparison. Each line item is expressed as a percentage figure of the base figure within the statement. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Objectives of common-size income statement is/are ________________.

  1. To analyse change in individual items of statement of profit and loss.

  2. To study the trend in different items of revenues and expenses.

  3. To assess the efficiency.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Objectives of common-size income statement are to analyse change in individual items of statement of profit and loss, to study the trend in different items of revenues and expenses and to assess the efficiency of the enterprise. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

'To determine the trend of different items of statement', is one of the objectives of common-size statements.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

True. To determine the trend of different items of statement is one of the objectives of common size statements. It measure the relationship of different items of financial statements with a common variable. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Which of the following statements are true?
a. Common size balance sheet shows relative value of the various items.
b. In the common size income statement, each product is represented as a percentage of the net sales figure.
c. Common size income statements represents the various element as a percentage of the gross profit.

  1. Both (a) and (b)

  2. Both (a) and (c)

  3. Both (b) and (c)

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Common size statement, also known as component percentage statement, is a financial tool for studying the key changes and trends in the financial position and operational result of a company. Common size balance sheet shows relative value of the various items. In common size income statement, the item of expenditure are shown as percentage of the net sales. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Common size analysis is also known as ______ analysis.

  1. Horizontal

  2. Ratio

  3. Vertical

  4. Trend
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Common size statement is a financial tool for studying the key changes and trends in the financial position and operational result of a company. common size analysis is also known as vertical analysis. Common size statements are useful, both, in inter-firm comparisons for the same year or for several years.

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

A common size balance sheet shows the percentage of each asset to the _____, and that of each liability to the ___. 

  1. Total current assets, Total current liabilities

  2. Liabilities, Assets

  3. Total assets, Total liabilities

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Common size statement is stated as a percentage of the aggregate, of which that item is a part i.e. common size balance sheet shows the percentage of each asset to the total assets, and that of each liability to the total liabilities. The common size statement is also known as component percentage statement, is a financial tool for studying the key changes and trends in financial position and operational result of a company.