Financial Analysis MCQs
Financial Analysis MCQs
These Financial Analysis multiple-choice questions and their answers will help you strengthen your grip on the subject of financial Analysis. You can prepare for an upcoming exam or job interview with these 100+ Financial Analysis MCQs.
So scroll down and start answering.
1: Assets that that can be converted into cash quickly are considered:
A. Tangible and fixed
B. Lucid
C. Liquid
D. Illiquid
2: The minimum rate of return that capital investment projects have to meet, usually based on the cost of capital, is known as the:
A. Debt ceiling
B. Debt to asset ratio
C. Sale rate
D. Cutoff rate
3: What does a Bear Market mean?
A. A market characterized by falling prices for securities.
B. Volatile market.
C. A market characterized by rising prices for securities.
4: What does the Beta Coefficient of a stock indicate?
A. A stock’s volatility in relation to the overall market
B. Stock's dividend
C. Company's growth factor
D. Stock's growth factor
5: Fiduciary duty effectively requires all financial organizations and people to act in the best interests of their client
A. FALSE
B. True
6: What is Arbitrage?
A. Buying something of value and the selling it for a higher price at another Exchange
B. Buying stock options.
7: What is the difference between APR and EAR?
A. APR is annual rate and EAR is effective rate after compounding
B. APR and EAR are same
C. EAR is the rate typically mentioned on loan
D. APR is greater than EAR
8: Which technique is used to find volume of sales at which a company just covers the total cost?
A. Profit-Sensitivity analysis
B. Target-Profit analysis
C. Breakeven-point analysis
D. Activity based cost analysis
9: True or False: Projections and Simulators (Monte Carlo etc) are only as good as their assumptions
A. FALSE
B. True
10: True or False The purpose of auditing financial statements is to form a view that the information presented is an accurate general view of the financial situation of a company at a given date.
A. FALSE
B. True
11: What is capital?
A. Dividend.
B. Paper money.
C. Any assets ready to be used in the production of new assets .
12: What is a Buy Back?
A. Buying back of stocks or bonds by the issuing company.
B. Issuing new company shares
C. Initial Public Offering
13: What do you call the discount rate that equates the cash inflows and cash outflows of an investment project, resulting in a net present value of zero?
A. Internal Rate of Return
B. Investment value
C. Going-concern rate
D. Historical rate principle
14: __________ of the cash flow generated by the firm's operations, investments and financial activities.
A. The income statement is a report
B. The statement of cash flows is a report
C. the auditor's statement of financial condition
D. None of the above is a report
E. The balance sheet is a report
15: Which of the following is an example of fixed income security?
A. Mutual Funds
B. Bonds
C. Equity
16: Basic principle for Financial Analysis
A. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in.Continue or discontinue its main operation or part of its business
B. Its is a key factor to determine their suitability for investment.
C. The process of evaluating businesses, projects, budgets and other finance-related entities
D. Make decisions regarding investing or lending capital by the board of directors
E. The process of evaluating businesses, projects, budgets and other finance-related entities to determine their suitability for investment. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough t
17: Ratio Interpretation : High EPS , high book value & high Dividend pay out per share represents
A. Its not a BLUECHIP company
B. Companies growth in worst poth
C. company share / stock price will not good investment
D. Good company grows in better both - eligible Investment & Investor friendly
E. Its a conservative company & not advisable for investments
18: What are the three financial statements that are used for business analysis?
A. Income statement
B. Balance sheets
C. Cash flow statements
D. All of these
19: What is a bond?
A. Paper money.
B. A certificate of debt.
C. A security for a loan.
20: __________ of the profitability of the firm over a period of time such as a year
A. None of the above is a summary
B. The balance sheet is a summary
C. That statement of cash flows is a summary
D. The audit report is a summary
E. The income statement is a summary
21: In the US most companies follow which accounting standard?
A. APA
B. IFAS
C. IFRS
D. GAAP
22: True or False? Depreciation is not affected by how an asset purchase is financed.
A. False
B. True
23: The process of testing the impact on the results of an analysis from changes of one or more of the input variables is called:
A. A sequential analysis
B. A blanket analysis
C. A sensitivity analysis
D. An A/B analysis
24: The interest on government bonds (treasuries, t-bills etc) are typically considered:
A. Cost of capital for large corporations
B. Overnight lending rate for large banks.
C. Risk free lending rate
D. Cost of doing business with the government
25: The recorded value of the shareholders equity on the balance sheet reflects:
A. Gross profit
B. Operational cash flow
C. Net profit
D. Net worth
26: The accounting term for a company to continue functioning into the foreseeable future is
A. Liveliness
B. Going Concern
C. Comparability
D. Durability
27: True or False? At the half-way time of mortgage period, the remaining balance is half of the original loan amount.
A. True
B. False
28: Among other responsibilities The Federal Reserve is the lender of last resort
A. FALSE
B. True
29: Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry average of 1.4. This means that the company
A. will not experience any difficulty with its creditors.
B. has greater than average financial risk when compared to other firms in its industry.
C. has less liquidity than other firms in the industry.
D. will be viewed as having high creditworthiness.
30: What is net working capital?
A. Cash - debt
B. Total assets - total liabilities
C. Total assets - current assets
D. Current assets - current liabilities
31: True or False? Retained earnings are largely the same as paid-in capital
A. False
B. True
32: Company A is incorporated in the US and operates in the US only. Calculate the corporate tax on EBT of $57,000 for 2012, assuming no tax reduction practices and 40% tax rate.
A. $11,400
B. $22,800
C. $14,250
D. $8,550
33: The cash conversion cycle (CCC) measures
A. how long a firm will be deprived of cash if it increases its investment in resources in order to expand customer sales. It is thus a measure of the liquidity risk entailed by growth
B. how long a firm will be deprived of cash if it decreases its investment in resources in order to expand customer sales. It is thus a measure of the liquidity risk entailed by growth
34: An "acid test" measures the ability of a company to use its ______ to extinguish or retire its current liabilities immediately.
A. near cash
B. net sales
C. credit
D. bonds
35: How does Capital Asset Pricing Model (CAPM) help?
A. It exactly shows stock price for a later date
B. It attempts to explain company's profit margin
C. It attempts to explain company's revenue
D. It attempts to explain how stock prices are set in the market
36: __________ a snapshot of the financial condition of the firm at a particular time.
A. None of the above provides
B. The balance sheet provides
C. The income statement provides
D. All of the above provide
E. The statement of cash flows provides
37: If a company faces a 15% increase in production while production costs increase 35% it is most likely experiencing:
A. Returns to Market
B. Diseconomies of Scale
C. Economies of Scope
D. Economies of Scale
38: What is a leveraged buyout?
A. An acquisition of a business in which the purchasing company becomes a subsidiary of the purchased company
B. The acquisition of a business by investors using a high percentage of debt carried by the business itself
C. Two companies combine their operations and gains strength in terms of improved performance, increased capital, and enhanced profits
39: Which costing method allocates overhead cost to a product using activities required to produce the product?
A. Activity based costing
B. Volume based costing
C. Unit level costing
D. Product costing
40: In the case of conflict, why is the NPV method preferred over IRR?
A. IRR is not always a reliable method especially with a mixture of positive and negative cash flows.
B. NPV has a more simple assumption for the discount rate
C. NPV has more probability of indicating to undertake a project
D. NPV is the robust formula for capital budgeting
41: Banks relative to most other types of companies are more likely to have more
A. Shareholders
B. Taxes
C. Fixed Assets
D. Current Assets
42: Which of the following is not a quality of accounting information?
A. None of the Above
B. Reliability
C. Consistency
D. Relevance
43: A creditor whose claim is specifically designed as ranking below the claims of other creditors in the company is called a:
A. Stock creditor
B. Safe creditor
C. Lower creditor
D. Subordinate creditor
44: Regarding dividend payments: common stock and preferred stock differ in which way most importantly?
A. Size of dividends
B. Timing of dividends
C. Seniority of dividends
D. Quantity of dividends
45: The term "fund" as in Mutual Fund suggests
A. An investment vehicle only for stocks
B. A large company responsible for investing for the 'Mutual' benefit of investors
C. Intermingling of multiple investors money in a single vehicle
D. An investment vehicle primarily for investing outside of the investor's domestic country
46: A bond covenant is a:
A. Contract outlining rights and responsibilities of the involved parties
B. Another term for coupon
C. Person responsible for administering the bonds coupons and principle payment
D. Term describing asymmetric risks/returns of bonds
47: Which process shows an internal detailed plan of the use of financial and operating resources over a specific period of time?
A. Budgeting
B. Planning
C. Financial statements
D. Profit & Loss statements
48: What is the other name for Earnings before interest and taxes?
A. Operating Profit
B. Net Income
C. Gross Earnings
D. Revenue
49: The standard model for valuing a company based on it's dividends is called?
A. Dividend Valuation Technique
B. Dividend NPV
C. Dividend Discount Model
D. Stakeholder Dividend Model
50: What is a corporation's taxable income?
A. Revenue
B. EBTDA
C. EAT
D. EBT
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