MCQOPTIONS

Explore topic-wise MCQs in Accounting And Auditing.

This section includes 13 Mcqs, each offering curated multiple-choice questions to sharpen your Accounting And Auditing knowledge and support exam preparation. Choose a topic below to get started.

1.	If Activity Ratio of a firm is 80% and capacity ratio is 120%, find out its efficiency ratio.
A.	150%
B.	100%
C.	80%
D.	66.67%
Answer» E.

2.	According to the accounting profession, which of the following would be considered a cash-flow item from an "investing" activity?
A.	Cash inflow from interest income
B.	Cash inflow from dividend income
C.	Cash outflow to acquire fixed assets
D.	All of the above
Answer» D. All of the above

3.	If the cost of goods sold is Rs. 1 Lakh and the opening and closing stocks are Rs. 20,000 and Rs. 30,000 respectively, what will be the stock turnover ratio ?
A.	3.33 times
B.	4 times
C.	5 times
D.	6 times
Answer» C. 5 times

4.	Match the following:List IList IIA. Test of activityI. Acid test ratioB. Test of liquidityII. Debt equity ratioC. Test of profitabilityIII. Debtor’s turnover ratioD. Test of solvencyIV. ROI
A.	A - I, B - II, C - III, D - IV
B.	A - II, B - I, C - IV, D - III
C.	A - IV, B - III, C - II, D - I
D.	A - III, B - I, C - IV, D - II
Answer» E.

5.	Assertion (A) : A high operating ratio indicates a favourable position.Reasoning (R) : A high operating ratio leaves a high margin to meet non operating expenses.
A.	(A) and (R) both are correct and (R) correctly explains (A).
B.	Both (A) and (R) are correct but (R) does not explain (A).
C.	Both (A) and (R) are incorrect.
D.	(A) is correct but (R) is incorrect.
Answer» D. (A) is correct but (R) is incorrect.

6.	Low asset turnover may indicate
A.	low assets
B.	high cost of maintenance
C.	idle assets
D.	all of the above
Answer» D. all of the above

7.	Match the items of List I with those of List II and choose the correct code of combinationList IList IIa.Inability to pay interesti)Current ratiob.Liquidity crisisii)Debtor turnover ratioc.Inefficient collection of receivableiii) Interest coverage ratiod. Return of shareholder’s fund being much higher than the overall return on investmentiv)Debts – Equity ratio
A.	a-iii, b-i, c-ii, d-iv
B.	a-iii, b-ii, c-i, d-iv
C.	a-ii, b-iii, c-i, d-iv
D.	a-i, b-ii, c-iii, d-iv
Answer» B. a-iii, b-ii, c-i, d-iv

8.	A firm has inventory turnover of 3 and cost goods sold is Rs. 2,70,000. With better inventory management, the inventory turnover is increased to 5. This would result in
A.	Increase in inventory by Rs. 54,000
B.	Decrease in inventory by Rs. 36,000
C.	Increase in cost of goods sold by Rs. 20,000
D.	Decrease in inventory by Rs. 90,000
Answer» C. Increase in cost of goods sold by Rs. 20,000

9.	A statement of change in financial position typically would NOT disclose the effect of
A.	share capital issued to acquire productive facilities
B.	dividends on share declared
C.	cash dividend declared but not yet paid
D.	purchase and retirement of treasury stock
Answer» C. cash dividend declared but not yet paid

10.	Cash flow statement is prepared as per accounting standard
A.	As-5
B.	As-4
C.	As-3
D.	As-2
Answer» D. As-2

11.	In which of the following situations, the payback period method is advised for evaluation of investment opportunities?(A) Overleveraged businesses(B) Cash rich businesses(C) Uncertain market conditions(D) Stable market conditionsChoose the most appropriate answer from the options given below:
A.	(A) and (B) only
B.	(A) and (C) only
C.	(B) and (C) only
D.	(C) and (D) only
Answer» C. (B) and (C) only

12.	Profitability Index of a Project is the ratio of present value of cash inflows to :
A.	Total cash inflows
B.	Total cash outflows
C.	Present value of cash outflows
D.	Initial cost minus Depreciation
Answer» D. Initial cost minus Depreciation

13.	Combined leverage can be used to measure the relationship between
A.	EBIT and EPS
B.	Sales and EPS
C.	Sales and EBIT
D.	PAT and EPS
Answer» C. Sales and EBIT