Financial Planning & Cost Accounting MCQs

By: Prof. Dr. Fazal Rehman | Last updated: May 21, 2025

1. : Ratio Analysis can be used to study liquidity, turnover, profitability, etc. of a firm. What does Debt-Equity Ratio help to study?
(A) Solvency
(B) Liquidity
(C) both a and b
(D) Turnover

2. : In inventory turnover calculation, what is taken in the numerator?
(A) Sales
(B) Cost of Goods Sold
(C) Opening Stock
(D) Closing Stock

3. : Capital turnover actions the relationship of working capital with:
(A) Fixed Assets
(B) Sales
(C) Purchases
(D) Stock

4. : In Ratio analysis, the term capital employed refers to:
(A) Equity Share Capital
(B) Net worth
(C) Shareholders Funds
(D) None of these

5. : Dividend Payout Ratio is:
(A) PAT Capital
(B) DPS+EPS
(C) Pref. Dividend + PAT
(D) Pref. Dividend + Equity Dividend

6. : DU PONT Examination deals with:
(A) Analysis of Current Assets
(B) Analysis of Profit
(C) Capital Budgeting
(D) Analysis of Fixed Assets

7. : In Net profit Ratio, the denominator is:
(A) Net Purchases
(B) Net Sales
(C) Credit Sales
(D) Cost of goods sold

8. : Inventory Turnover measures relationship of inventory with:
(A) Average Sales
(B) Cost of Goods Sold
(C) Total-Purchases
(D) Total Assets

9. : The term ‘EVA’ is used for:
(A) Extra Value Analysis
(B) Economic Value Added
(C) Expected Value Analysis
(D) Engineering Value Analysis

10. : Return on investment may be improved by:
(A) Increasing Turnover
(B) Reducing Expenses
(C) Increasing Capital Utilization
(D) All of the above

11. : In Current Ratio, Current Assets are:
(A) Current Profit
(B) Current Liabilities
(C) Fixed Assets
(D) Equity Share Capital

12. : ABC Ltd. has a Current Ratio of 1.5:1 and Net Current Assets of Rs. 5,00,000. What are the Current Assets?
(A) Rs. 5,00,000
(B) Rs. 10,00,000
(C) Rs. 15,00,000
(D) None of these

13. : There is deterioration in the management of working capital of XYZ Ltd. What does it refer to?
(A) That the Capital Employed has reduced
(B) That the Profitability has gone up
(C) That debtor’s collection period has increased
(D) That Sales has decreased

14. : Which of the following does not help to increase Current Ratio?
(A) Issue of Debentures to buy Stock
(B) Issue of Debentures to pay Creditors
(C) Sale of Investment to pay Creditors
(D) Avail Bank Overdraft to buy Machine

15. : Debt to Total Assets Proportion can be improved by:
(A) Borrowing More
(B) Issue of Debentures
(C) Issue of Equity Shares
(D) Redemption of Debt

16. : Ratio of Net Income to Number of Equity Parts is known as:
(A) Price Earnings Ratio
(B) Net Profit Ratio
(C) Earnings per Share
(D) Dividend per Share

17. : Trend Analysis helps comparing performance of a firm:
(A) With other firms
(B) Over a period of time
(C) With other industries
(D) None of these

18. : A Current Ratio of Less than One means:
(A) Current Liabilities < Current Assets
(B) Fixed Assets > Current Assets
(C) Current Assets < Current Liabilities
(D) Share Capital > Current Assets

19. : 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%

20. : XYZ Ltd. has earned 8% Return on Total Assets of Rs. 50,000,000 and has a Net Profit Ratio of 5%. Find out the Sales of the firm:
(A) Rs. 4,00,000
(B) Rs. 2,50,000
(C) Rs. 80,00,000
(D) Rs. 83,33,333

21. : Suppliers and Creditors of a firm are interested in:
(A) Profitability position
(B) Liquidity position
(C) Market share position
(D) Debt position

22. : Which of the following is a measure of debt service capacity of a firm?
(A) Current Ratio
(B) Acid Test Ratio
(C) Interest Coverage Ratio
(D) Debtors Turnover

23. : Gross Profit Ratio for a firm remains the same, but the Net Profit Ratio is decreasing. The reason for such behavior could be:
(A) Increase in Costs of Goods Sold
(B) Increase in Expenses
(C) Increase in Dividend
(D) Decrease in Sales

24. : Which of the following statements is correct?
(A) Higher receivable turnover is not desirable
(B) Interest coverage ratio depends upon tax rate
(C) Increase in net profit ratio means increase in sales
(D) Lower debt-equity ratio means lower financial risk

25. : Debt to Total Assets of a firm is 2. The Debt to Equity ratio would be:
(A) 0.80
(B) 0.25
(C) 1.00
(D) 0.75

26. : Which of the following helps analysing return to equity shareholders?
(A) Return on Assets
(B) Earnings Per Share
(C) Net Profit Ratio
(D) Return on Investment

27. : Return on Assets and Return on Investment Ratios belong to:
(A) Liquidity Ratios
(B) Profitability Ratios
(C) Solvency Ratios
(D) Turnover

28. : XYZ Ltd. has a Debt Equity Ratio of 1.5 as compared to the industry average of 1.3. It means that the firm has:
(A) Higher Liquidity
(B) Higher Financial Risk
(C) Higher Profitability
(D) Higher Capital Employed

29. : Accounting Ratios are important tools used by:
(A) Managers
(B) Researchers
(C) Investors
(D) All of the above

30. : Net Profit Ratio signifies:
(A) Operational Profitability
(B) Liquidity Position
(C) Long-term Solvency
(D) Profit for Lenders