Financial Statements MCQs (Chapterwise Multiple Choice Questions)

The ________________ generally includes cash, marketable securities, and accounts receivable in its numerator.

Quick Ratio

Debt Equity

Asset Turnover

Accounts Receivable Turnover

Answer & Explanation

Correct Answer: Quick Ratio

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EBITDA is Operating Profit:

After Deprecition and Amortization

Before Gross Profit

Before Depreciation and Amortization

Before Cost of Goods Sold

Answer & Explanation

Correct Answer: Before Depreciation and Amortization

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A company lost a building with a book value of $65,000 and fair value of $80,000 to a flood. $20,000 was paid for removal and clean-up. What is the loss on this involuntary conversion?

$80,000

$100,000

$65,000

$85,000

Answer & Explanation

Correct Answer: $85,000

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What's the difference between a Capital lease and an Operational lease?

Capital leases are traditionally used for short-term leases while Operational leases are for long-term leases.

Capital leases are variable while Operational leases are fixed.

Capital leases are fixed while Operational leases are variable.

Capital leases are traditionally used for long-term leases while Operational leases are for short-term leases.

Answer & Explanation

Correct Answer: Capital leases are traditionally used for long-term leases while Operational leases are for short-term leases.

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What is the first statement to calculate before moving on to the statement of retained earnings?

The statement of cash flows.

Income statement.

The balance sheet.

Statement of dividends.

Answer & Explanation

Correct Answer: Income statement.

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How do you calculate the Quick Ratio?

Total Liabilities / Total Assets

Gross Profit / Net Revenue

Total Current Assets / Total Current Liabilities

(Current assets – Inventories) / Current Liabilities

Answer & Explanation

Correct Answer: (Current assets – Inventories) / Current Liabilities

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XYZ Company reports total assets and total liabilities of $425,000 and $200,000, respectively, at the conclusion of its first year of business. The company earned $95,000 during the first year and distributed $50,000 in dividends. What was the firm

$225,000

$180,000

$130,000

$65,000

Answer & Explanation

Correct Answer: $180,000

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True or False? All expenses required to be paid in the same accounting period.

False

True

Answer & Explanation

Correct Answer: False

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What do the footnotes to financial statements typically provide?

All of these

A review of stock compensation plans

A discussion of contingencies potentially affecting earnings

an overview of significant accounting policies

Answer & Explanation

Correct Answer: All of these

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Which of the following does NOT describe an expense?

Dividends paid to shareholders

Cost of merchandise sold

Salaries earned by employees but not yet paid

Depreciation of the firm's building for the particular period

Answer & Explanation

Correct Answer: Dividends paid to shareholders

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Financial Statements Quick Quiz

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