# Financial statement analysis MCQs

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Financial statement analysis MCQs an essential tool for investors, analysts, and other stakeholders who wish to evaluate a company’s financial performance and make informed decisions. It involves the examination of financial statements such as balance sheets, income statements, and cash flow statements to assess a company’s profitability, liquidity, solvency, and overall financial health.

Financial statement analysis helps stakeholders to understand a company’s financial position, its strengths, weaknesses, and potential risks. This set of MCQs is designed to test your knowledge of financial statement analysis and enhance your understanding of key concepts and principles used in this field. Whether you are a student, professional, or investor, these MCQs will help you sharpen your analytical skills and improve your ability to interpret financial statements.

## Financial statement analysis MCQs

Q1.Which financial statement shows the financial position of a company at a specific point in time?

a) Income Statement

b) Balance Sheet

c) Cash Flow Statement

d) None of the above

b) Balance Sheet

Q2. Which financial statement shows the revenues and expenses of a company over a period of time?

a) Income Statement

b) Balance Sheet

c) Cash Flow Statement

d) None of the above

a) Income Statement

Q3. What is the formula for calculating current ratio?

a) Current Assets / Current Liabilities

b) Current Liabilities / Current Assets

c) Total Assets / Total Liabilities

d) Total Liabilities / Total Assets

a) Current Assets / Current Liabilities

Q4. What does the debt-to-equity ratio measure?

a) A company’s ability to pay off its debt

b) A company’s profitability

c) The amount of debt a company has relative to its equity

d) The amount of equity a company has relative to its debt

c) The amount of debt a company has relative to its equity

Q5. What is the formula for calculating return on equity (ROE)?

a) Net Income / Average Total Assets

b) Net Income / Average Total Equity

c) Earnings Before Interest and Taxes (EBIT) / Total Assets

d) Earnings Before Interest and Taxes (EBIT) / Total Equity

b) Net Income / Average Total Equity

Q6. Which financial statement shows the changes in a company’s cash and cash equivalents over a period of time?

a) Income Statement

b) Balance Sheet

c) Cash Flow Statement

d) None of the above

c) Cash Flow Statement

Q7. What is the formula for calculating gross profit margin?

a) Gross Profit / Sales

b) Net Income / Sales

c) Sales / Gross Profit

d) Sales / Net Income

a) Gross Profit / Sales

Q8. Which financial ratio measures a company’s ability to meet its short-term obligations?

a) Debt-to-Equity Ratio

b) Current Ratio

c) Return on Equity

d) Gross Profit Margin

b) Current Ratio

Q9. What does the price-to-earnings (P/E) ratio measure?

a) A company’s ability to pay off its debt

b) A company’s profitability

c) The market’s valuation of a company’s stock relative to its earnings

d) The market’s valuation of a company’s stock relative to its sales

c) The market’s valuation of a company’s stock relative to its earnings

Q10. Which financial ratio measures a company’s overall efficiency in using its assets to generate profits?

a) Return on Equity

b) Return on Assets

c) Current Ratio

d) All of these

b) Return on Assets

Q11. Which financial statement shows a company’s net income or loss over a period of time?

a) Income Statement

b) Balance Sheet

c) Cash Flow Statement

d) None of the above

a) Income Statement

Q12. Which financial ratio measures a company’s ability to generate profits from its sales?

a) Gross Profit Margin

b) Return on Equity

c) Return on Sales

d) Current Ratio

c) Return on Sales

Q13. What is the formula for calculating working capital?

a) Current Assets – Current Liabilities

b) Current Liabilities – Current Assets

c) Total Assets – Total Liabilities

d) Total Liabilities – Total Assets

a) Current Assets – Current Liabilities

Q14. Which financial ratio measures a company’s liquidity and ability to meet its short-term debt obligations without relying on inventory sales?

a) Current Ratio

b) Quick Ratio

c) Debt-to-Equity Ratio

d) Return on Investment

b) Quick Ratio

Q15. Which financial statement reports the amounts of assets, liabilities, and equity at the end of the period?

A) Income Statement

B) Statement of Cash Flows

C) Balance Sheet

D) Statement of Retained Earnings

C) Balance Sheet

Q16. What is the formula for calculating net income?

A) Total Revenue – Total Expenses

B) Total Revenue / Total Expenses

C) Total Revenue + Total Expenses

D) Total Revenue x Total Expenses

A) Total Revenue – Total Expenses

Q17. What is the formula for calculating gross profit?

A) Total Revenue – Cost of Goods Sold

B) Total Revenue / Cost of Goods Sold

C) Total Revenue + Cost of Goods Sold

D) Total Revenue x Cost of Goods Sold

A) Total Revenue – Cost of Goods Sold

Q18. What is the formula for calculating earnings per share (EPS)?

A) Net Income / Total Assets

B) Net Income / Total Liabilities

C) Net Income / Total Equity

D) Net Income / Number of Shares Outstanding

D) Net Income / Number of Shares Outstanding

Q19. What is the formula for calculating the debt-to-equity ratio?

A) Total Debt / Total Equity

B) Total Equity / Total Debt

C) Total Assets / Total Equity

D) Total Equity / Total Assets

A) Total Debt / Total Equity

Q20. Which financial statement shows the percentage of net income that is paid out as dividends to shareholders?

A) Income Statement

B) Statement of Cash Flows

C) Balance Sheet

D) Statement of Retained Earnings

D) Statement of Retained Earnings

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## mcq on financial statement analysis class 12

Which financial statement provides information about a company’s profitability?

a) Balance Sheet

b) Income Statement

c) Statement of Cash Flows

d) Statement of Retained Earnings

Which financial ratio measures a company’s ability to pay its short-term obligations?

a) Current Ratio

b) Return on Investment (ROI)

c) Debt-to-Equity Ratio

d) Gross Profit Margin

Which financial statement shows the financial position of a company at a specific point in time?

a) Income Statement

b) Cash Flow Statement

c) Statement of Retained Earnings

d) Balance Sheet

Which financial ratio measures the efficiency of a company’s inventory management?

a) Return on Equity (ROE)

b) Current Ratio

c) Inventory Turnover Ratio

d) Debt Ratio

Which financial statement reports the changes in a company’s retained earnings over a period of time?

a) Statement of Cash Flows

b) Income Statement

c) Balance Sheet

d) Statement of Retained Earnings

Answer: d) Statement of Retained Earnings

Which financial ratio measures a company’s profitability relative to its total assets?

a) Return on Assets (ROA)

b) Current Ratio

c) Earnings per Share (EPS)

d) Price-to-Earnings (P/E) Ratio

Answer: a) Return on Assets (ROA)

Which financial statement shows the sources and uses of cash during a specific period?

a) Balance Sheet

b) Statement of Retained Earnings

c) Income Statement

d) Statement of Cash Flows

Answer: d) Statement of Cash Flows

Which financial ratio measures a company’s ability to generate profit from its sales?

a) Gross Profit Margin

b) Return on Equity (ROE)

c) Debt Ratio

d) Current Ratio

Which financial statement is also known as the statement of financial position?

a) Statement of Cash Flows

b) Income Statement

c) Statement of Retained Earnings

d) Balance Sheet

Which financial ratio measures the overall efficiency and profitability of a company?

a) Return on Investment (ROI)

b) Debt-to-Equity Ratio

c) Current Ratio

d) Return on Assets (ROA)

Answer: a) Return on Investment (ROI)