Chapter: Introduction
1.

………………………Accounting is concerned with measurement of the cost and value of people for the organization.

A. financial accounting
B. management accounting
C. corporate accounting
D. human resource accounting
Answer» D. human resource accounting
2.

The important objective of …………………..accounting is to organize the accumulated financial data into meaningful information.

A. financial accounting
B. management accounting
C. corporate accounting
D. human resource accounting
Answer» A. financial accounting
3.

……………………..accounting is the adoption and analysis of accounting
information and its diagnosis and explanation in such a way so as to assist the
decision -makers.

A. financial accounting
B. management accounting
C. corporate accounting
D. human resource accounting
Answer» B. management accounting
4.

Planning is that function of ……………………..which requires an efficient system of decision – making.

A. finance
B. management
C. h.r
D. administration.
Answer» B. management
5.

…………………..costs are pre-determined targets adainst which actual results are evaluated.

A. marginal
B. standard
C. actual
D. budgeted
Answer» B. standard
6.

Financial Accounting data is primarily meant for …………………

A. external users
B. internal users
C. employees
D. bank
Answer» A. external users
7.

Cost Accountant should report to the ……………management.

A. top
B. middle.
C. administration
D. lower
Answer» A. top
8.

The transaction which increase working capital are ………….. of funds

A. sources
B. application
C. utilization
D. diversion
Answer» A. sources
9.

Management accounting begins where………………. accounting ends.

A. financial accounting
B. management accounting
C. cost accounting
D. human resource accounting
Answer» C. cost accounting
Chapter: Analysis & interpretation of financial statement
10.

Stock is considered as a liquid asset as anytime it can be converted into cash immediately.

A. yes
B. no
C. only yes
D. none of the above
Answer» B. no
11.

. Return on properties funds is also known as.

A. return on net worth
B. return on shareholders fun
C. return on the shareholders investment
D. all the above
Answer» D. all the above
12.

What will be the Gross Profit if , total sales is Rs 2,60,000,cost of net goods sold is Rs 2,00,000 & sales return is Rs10,000 ?

A. 13 %
B. 28%
C. 26%
D. 20%
Answer» D. 20%
13.

Which of the following is not included in current assets.

A. debtors
B. stock
C. cash at bank
D. cash in hand
Answer» B. stock
14.

Liquidity ratios are expressed in

A. pure ratio form
B. percentage
C. rate or time
D. none of the above
Answer» A. pure ratio form
15.

Working capital turnover ratio can be determined by :

A. ( gross profit / working capital )
B. ( cost of goods sold / net sales )
C. ( cost of goods sold / working capital)
D. none of the above
Answer» A. ( gross profit / working capital )
16.

Determine Working capital turnover ratio if, Current asset is Rs 1,50,000, current liability is Rs 1,00,000 & cost of goods sold is Rs 3,00,000.

A. 5 times
B. 6 times
C. 3 times
D. 1.5 times
Answer» B. 6 times
17.

The ratio analysis is helpful to management in taking several decisions, but as a mechanical substitute for judgement and thinking, it is worse than useless.

A. true
B. false
C. may be false
D. both a and b
Answer» A. true
18.

Profit for the objective of calculating a ratio may be taken as

A. profit before tax but after interest
B. profit before interest &tax
C. profit after interest & tax
D. all the above
Answer» D. all the above
19.

If sales is Rs 5,00,000 & net profit is Rs 1,20,000 Net profit ratio is

A. 24%
B. 416%
C. 60%
D. none of the above
Answer» A. 24%
20.

General profitability ratios are based on

A. investment
B. sales
C. a & b
D. none of the above
Answer» B. sales
21.

The ratios which reveal the final result of the managerial policies and performance is .

A. turnover ratios.
B. profitability ratios.
C. short term solvency ratio.
D. long term solvency ratio.
Answer» B. profitability ratios.
22.

Return on investment is a .

A. turnover ratios.
B. short term solvency ratio.
C. profitability ratios.
D. long term solvency ratio.
Answer» C. profitability ratios.
23.

Net profit ratio is a .

A. turnover ratio.
B. long term solvency ratio.
C. short term solvency ratio
D. profitability ratio.
Answer» D. profitability ratio.
24.

Stock turnover ratio is a .

A. turnover ratio.
B. profitability ratio.
C. short term solvency ratio.
D. long term solvency ratio.
Answer» A. turnover ratio.
25.

Current ratio is a

A. short-term solvency ratio.
B. long-term solvency ratio.
C. profitability ratio.
D. turnover ratio.
Answer» A. short-term solvency ratio.
26.

Proprietary ratio is a .

A. short-term solvency ratio.
B. long-term solvency ratio.
C. profitability ratio.
D. turnover ratio.
Answer» B. long-term solvency ratio.
27.

Fixed assets ratio is a

A. short-term solvency ratio.
B. long-term solvency ratio.
C. profitability ratio.
D. turnover ratio.
Answer» B. long-term solvency ratio.
28.

Fixed assets turnover ratio is a

A. short-term solvency ratio.
B. long-term solvency ratio.
C. profitability ratio.
D. turnover ratio.
Answer» D. turnover ratio.
29.

The ratio which measures the profit in relation to capital employed is known as

A. return on investment.
B. gross profit ratio.
C. operating ratio.
D. operating profit ratio.
Answer» A. return on investment.
30.

The ratio which determines the profitability from the shareholder’s point of view is .

A. return on investment.
B. gross profit ratio.
C. return on shareholders funds.
D. operating profit ratio.
Answer» C. return on shareholders funds.
31.

Return on equity is also called

A. return on investment.
B. gross profit ratio.
C. return on shareholders funds.
D. return on net worth.
Answer» D. return on net worth.
32.

Preliminary expenses is an example of

A. fixed assets.
B. current assets.
C. fictitious assets.
D. current liabilities.
Answer» C. fictitious assets.
33.

Prepaid expenses is an example of .

A. fixed assets.
B. current assets.
C. fictitious assets.
D. current liabilities.
Answer» B. current assets.
34.

The ratio which is calculated to measure the productivity of total assets is

A. return on equity.
B. return on share holders funds.
C. return on total assets.
D. return on equity share holders’ funds.
Answer» C. return on total assets.
35.

The ratio which shows the proportion of profits retained in the business out of the current year’s profits is

A. retained earnings ratio.
B. pay out ratio
C. earnings per share.
D. price earnings ratio.
Answer» A. retained earnings ratio.
36.

The ratio which indicates earnings per share reflected by the market price is .

A. retained earnings ratio.
B. pay out ratio.
C. earnings per share.
D. price earnings ratio.
Answer» D. price earnings ratio.
37.

The ratio establishes the relationship between profit before interest and tax and fixed interest charges is .

A. interest cover ratio.
B. fixed dividend cover ratio.
C. debt service coverage ratio.
D. dividend yield ratio.
Answer» A. interest cover ratio.
38.

The ratio shows the preference dividend as a proportion of profit available for shareholders is

A. interest cover ratio.
B. fixed dividend cover ratio.
C. debt service coverage ratio.
D. dividend yield ratio.
Answer» B. fixed dividend cover ratio.
39.

The dividend is related to the market value of shares in .

A. interest cover ratio.
B. fixed dividend cover ratio.
C. debt service coverage ratio.
D. dividend yield ratio.
Answer» D. dividend yield ratio.
40.

Turnover ratio is also known as .

A. activity ratios.
B. solvency ratios.
C. liquidity ratios.
D. profitability ratios.
Answer» A. activity ratios.
41.

Inventory or stock turnover ratio is also called .

A. stock velocity ratio.
B. debtors velocity ratio.
C. creditors velocity ratio.
D. working capital turnover ratio.
Answer» A. stock velocity ratio.
42.

Which ratio is calculated to ascertain the efficiency of inventory management in terms of capital investment?

A. stock velocity ratio.
B. debtors velocity ratio.
C. creditors velocity ratio.
D. working capital turnover ratio.
Answer» A. stock velocity ratio.
43.

The ratio which measures the relationship between the cost of goods sold and the amount of average inventory is

A. stock turnover ratio.
B. debtors velocity ratio.
C. creditors velocity ratio.
D. working capital turnover ratio.
Answer» A. stock turnover ratio.
44.

Sales – Gross Profit = .

A. net profit.
B. administrative expenses.
C. cost of production.
D. cost of goods sold.
Answer» D. cost of goods sold.
45.

Opening stock + purchases + direct expenses – closing stock =

A. net profit.
B. cost of production
C. administrative expenses.
D. cost of goods sold
Answer» D. cost of goods sold
46.

Debtors turnover ratio is also called .

A. stock turnover ratio.
B. debtors velocity ratio.
C. creditors velocity ratio.
D. working capital turnover ratio
Answer» B. debtors velocity ratio.
47.

Creditors turnover ratio is also called .

A. stock turnover ratio.
B. debtors velocity ratio.
C. accounts payables ratio.
D. working capital turnover ratio.
Answer» C. accounts payables ratio.
48.

Which of the following shows details and results of the company's profitrelated activities for a period of time?

A. balance sheet
B. income statement
C. statement of cash flows
D. statement of financial position
Answer» B. income statement
49.

Which of the following financial statements is also known as a statement of financial position?

A. balance sheet
B. statement of cash flows
C. income statement
D. none of the above
Answer» A. balance sheet
50.

A firm has Capital of Rs. 10,00,000; Sales of Rs. 5,00,000; Gross Profit of Rs. 2,00,000 and Expenses of Rs.1,00,000. What is the Net Profit Ratio?

A. 20%,
B. 50%,
C. 10%,
D. 40%
Answer» A. 20%,
51.

Which technique used for figures of two or more periods are placed side by side to facilitate easy and meaningful comparisons?

A. comparative statement
B. common‐size statement
C. trend analysis
D. none
Answer» A. comparative statement
52.

Which of the following are techniques, tools or methods of analysis and interpretation of financial statements?

A. ratio analysis
B. average analysis
C. trend analysis
D. all of the above
Answer» D. all of the above
53.

Which of the following is NOT a key ratio in the prediction of bankruptcy as developed by Edward Altman?

A. debt to equity
B. current ratio
C. retained earnings as a percent of total assets
D. total assets
Answer» A. debt to equity
54.

_______________ ratios measure the ability of a firm to earn an adequate return on sales, total assets and invested capital.

A. asset utilization
B. liquidity
C. profitability
D. debt utilization
Answer» C. profitability
55.

The ________ ratios help determines the degree of financial risk and earnings volatility present in a firm.

A. profitability
B. asset utilization
C. liquidity
D. none of the above.
Answer» C. liquidity
56.

__________ analysis is the process of studying a series of ratios for a company and/or industry over time.

A. dupont
B. trend
C. common size
D. all of the above
Answer» C. common size
57.

The ideal level of current ratio is

A. 4:2
B. 2:1
C. both a and b
D. none of the above
Answer» B. 2:1
58.

The most precise test of liquidity is

A. quick ratio
B. current ratio
C. absolute liquid ratio
D. none of the above
Answer» C. absolute liquid ratio
59.

Debt-equity ratio is a sub-part of

A. short-term solvency ratio
B. long-term solvency ratio
C. debtors turnover ratio
D. none of the above
Answer» A. short-term solvency ratio
60.

Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs 60,000. Determine value of stock.

A. rs 54,000
B. rs 60,000
C. rs 1, 62,000
D. none of the above
Answer» C. rs 1, 62,000
61.

Funds flow statements are prepared so as to

A. to identify the changes in working capital
B. to identify reasons behind change in working capital
C. to know the item-wise outflow of funds during given period
D. all of the above
Answer» D. all of the above
62.

Net Profit ratio is calculated by

A. (gross profit/gross sales) *100
B. (gross profit/net sales) *100
C. (net profit/net sales) *100
D. none of the above
Answer» C. (net profit/net sales) *100
63.

If sales is Rs 5, 00,000 and net profit is Rs 1, 20,000 Net Profit ratio is

A. 24%
B. 41%
C. 60%
D. none of the above
Answer» A. 24%
64.

Operating ratio is calculated by

A. (operating cost/gross sales) *100
B. (operating cost/gross sales) *100
C. (operating cost/net sales) *100
D. none of the above
Answer» A. (operating cost/gross sales) *100
Chapter: working capital
65.

The financial decision making that relates to current assets or short term asset is known as __________________.

A. working capital
B. non-working capital
C. venture capital
D. all of the above
Answer» A. working capital
66.

In what order should current assets be present on a statement of financial position?

A. cash, bank, trade receivables, inventories
B. trade receivables, bank, cash, inventories
C. inventories, cash, bank, trade receivables
D. inventories, trade receivables, bank, cash
Answer» D. inventories, trade receivables, bank, cash
67.

If value of opening inventories increases, what happens to the value of gross profit?

A. decreases
B. increases
C. stays the same
D. gets closer to net profit
Answer» A. decreases
68.

What does the statement of comprehensive income show?

A. the liquidity position of a business at a point in time
B. the value of assets bought by a business over a period point in time
C. the profit or loss made by a business over a period of time
D. the value of a business at a point in time
Answer» C. the profit or loss made by a business over a period of time
69.

Depreciation is applied to non-current assets in the statement of financial position in order to

A. show a profitability valuation of the non-current assets
B. show a true and fair value of the non-current assets
C. show how the non-current assets are affected by inflation
D. show what the non-current assets could make if leased out
Answer» B. show a true and fair value of the non-current assets
70.

What would be the most likely impact on trade receivables days if invoice discounting was offered to and accepted by a large customer of a business?

A. trade receivables days would no longer exist
B. trade receivables days would reduce
C. trade receivables days would increase
D. trade receivable days would not be affected
Answer» B. trade receivables days would reduce
71.

___________in accounting, is when the costs to acquire an asset are expensed over the life of that asset rather than in the period it was incurred?

A. purchasing.
B. capitalization.
C. selling.
D. financing
Answer» B. capitalization.
72.

Capitalization is the sum of a corporation’s stock, long term debts &________?

A. liquid liability
B. retained earnings
C. fixed asset.
D. short term debts.
Answer» B. retained earnings
73.

__________ is a situation in which actual profits of a company are not sufficient enough to pay interest on debentures, on loans and pay dividends on shares over a period of time?

A. under capitalization
B. over capitalization
C. market capitalization
D. none of the above
Answer» B. over capitalization
74.

Asset structure = _________+__________.

A. current asset+fixed asset
B. tangible asset+fixed asset
C. fixed asset+current asset
D. intangible asset+current asset
Answer» C. fixed asset+current asset
75.

In finance, "working capital" means the same thing as __________.

A. total assets.
B. fixed assets.
C. current assets.
D. current assets minus current liabilities.
Answer» C. current assets.
76.

In deciding the appropriate level of current assets for the firm, management is confronted
with
_____________.

A. a trade-off between profitability and risk.
B. a trade-off between liquidity and marketability.
C. a trade-off between equity and debt.
D. a trade-off between current assets and profitability.
Answer» A. a trade-off between profitability and risk.
77.

Permanent working capital ___________.

A. varies with seasonal needs.
B. includes fixed assets.
C. is the amount of current assets required to meet a firm\s long-term minimum needs.
D. includes accounts payable.
Answer» C. is the amount of current assets required to meet a firm\s long-term minimum needs.
78.

Net working capital refers to ___________.

A. total assets minus fixed assets.
B. current assets minus current liabilities.
C. current assets minus inventories.
D. current assets.
Answer» B. current assets minus current liabilities.
79.

To financial analysts, "gross working capital" means the same thing as ________.

A. fixed assets.
B. current assets.
C. working capital.
D. cost of capital.
Answer» B. current assets.
80.

An example of fixed asset is________.

A. live stock.
B. value stock.
C. income stock.
D. all of the above.
Answer» A. live stock.
81.

Which one of the following is not the determinant of the working capital?

A. size of the firm
B. operating cycle
C. terms of credit
D. competitors
Answer» D. competitors
82.

Permanent working capital ___

A. will vary at all times
B. will vary with volumes
C. fixed at all times
D. fluctuates according to the season
Answer» C. fixed at all times
83.

Which one of the following is not a method to find working capital requirement?

A. percent of sales method
B. working capital components method
C. operating cycle method
D. physical method
Answer» D. physical method
84.

The Capital used for meeting routine and repetitive expenses of day to day business operations is called____.

A. reserve capital
B. working capital
C. fixed capital
D. regular capital
Answer» B. working capital
85.

Gross working capital represents __________.

A. total current liabilities
B. the excess of current assets over current liabilities
C. total current assets
D. total liquid assets
Answer» C. total current assets
86.

Net working capital is the excess of current assets over ________.

A. current liabilities
B. long term liabilities
C. contingent liabilities
D. fixed liabilities
Answer» A. current liabilities
87.

A positive (net) working capital will arise when current assets exceed _________.

A. fixed liabilities
B. contingent liabilities
C. long term liabilities
D. current liabilities
Answer» D. current liabilities
88.

The net working capital, being the difference between current assets and current liabilities is a _______.

A. misleading concept
B. quantitative concept
C. qualitative concept
D. none of the above
Answer» C. qualitative concept
89.

The Funds required by way of permanent working capital should be provided by __________.

A. indigenous banks
B. commercial banks
C. rbi
D. proprietors
Answer» D. proprietors
90.

Service and Financial concerns may have _____.

A. longest operating cycle
B. shortest operating cycle
C. manufacturing phase
D. none of these
Answer» B. shortest operating cycle
91.

_____ is that minimum amount which should always be present in the business to carry out the activities without a break.

A. net working capital
B. gross working capital
C. permanent working capital
D. temporary working capital
Answer» C. permanent working capital
92.

Working capital over and above the fixed working capital would be termed as _______.

A. temporary working capital
B. permanent working capital
C. net working capital
D. gross working capital
Answer» A. temporary working capital
93.

__________ denotes a situation of too much or excessive working capital.

A. gross working capital
B. redundant working capital
C. permanent working capital
D. temporary working capital
Answer» B. redundant working capital
94.

_________ being the life blood of a business requires to be maintained in reasonably adequate quantity to run business successfully.

A. working capital
B. proper documents
C. assets
D. petty cash
Answer» A. working capital
95.

According to ________ working capital refers to the company’s total investment in current assets.

A. net concept
B. gross concept
C. equal concept
D. accounting concept
Answer» B. gross concept
96.

According to ________ working capital refers to the difference between current assets and current liabilities.

A. equal concept
B. accounting concept
C. net concept
D. gross concept
Answer» C. net concept
97.

The funds required for running an organisation are generally called as ____________.

A. overdraft
B. cash credit
C. working capital
D. operating profit
Answer» C. working capital
98.

The __________ is required to ensure circulation of operating cycle.

A. regular working capital
B. fixed working capital
C. reserve working capital
D. variable working capital
Answer» A. regular working capital
99.

________ is the excess amount over the requirement for regular working capital.

A. variable working capital
B. fixed working capital
C. reserve working capital
D. regular working capital
Answer» C. reserve working capital
100.

The working capital required to meet the seasonal need of the business is called _______.

A. fixed working capital
B. variable working capital
C. special working capital
D. seasonal working capital
Answer» D. seasonal working capital
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