Question : Advantages or Uses of Accounting Ratios are
Option 1: Helpful in Analysis of Financial Statements
Option 2: Simplification of Accounting Data
Option 3: Helpful in Locating the Weak Spots of the Business
Option 4: All of the above
Correct Answer: All of the above
Solution : Answer = All of the above.
Accounting ratios aid in analyzing financial statements to assess a company's performance, financial health, and efficiency. Ratios simplify complex accounting data into meaningful metrics that can be easily interpreted and compared, facilitating decision-making processes. Ratios assist in identifying weaknesses or areas of concern within a business by highlighting inefficiencies, financial risks, or operational issues that need attention. Hence, the correct option is 4.
Question : Accounting ratios are an important tool of -
Option 1: Trial Balance
Option 2: Financial statement analysis and trial balance
Option 3: Financial statement analysis
Option 4: None of the above
Question : Which of the following statement is correct with respect of Analysis of Financial Statements?
Option 1: Analysis of Financial Statements is a systematic process of analyzing the financial Information in the financial statements to understand and take economic decisions.
Option 2: Analysis of Financial Statements is a study of relationships among various financial values as set out in the financial statements, i.e., Balance Sheet, Statement of Profit and Loss and Cash Flow Statement.
Option 3: Financial Statement Analysis is largely a study of relationships among the various financial factors in a business,
Question : Which of the following statements is false?
Option 1: False Accounting Data Gives False Ratios
Option 2: Comparison is not possible if different firms adopt different accounting policies
Option 3: Ratio Analysis becomes more effective due to price level changes
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