MCQs WITH ANSWER of Comparative Income/Balance Sheet and Common Size Income/Balance sheet
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Here are (MCQs) related to Common Size Income Statement, Common Size Balance Sheet, Comparative Income Statement, and Comparative Balance Sheet concepts in accounting, along with their answers:
1)Common Size Income Statement:
What does a Common Size Income Statement express in percentage terms?
a) Net income
b) Expenses
c) Each item as a percentage of total revenue
d) Each item as a percentage of total expenses
Answer: c
2)In a Common Size Income Statement, what is the base value used for calculating percentages?
a) Total revenue
b) Net income
c) Gross profit
d) Total expenses
Answer: a
3)Which financial statement helps in analyzing the relative proportion of expenses to total revenue?
a) Balance Sheet
b) Income Statement
c) Common Size Income Statement
d) Comparative Income Statement
Answer: c
4)Common Size Income Statements are useful for:
a) Comparing financial statements of different companies
b) Evaluating changes in expenses over time
c) Identifying the relationship between assets and liabilities
d) Calculating net income
Answer: b
5)In a Common Size Income Statement, if the percentage of cost of goods sold (COGS) increases, what might this indicate?
a) Higher profitability
b) Decreased efficiency
c) Lower revenue
d) Reduced expenses
Answer: b
,6)Common Size Balance Sheet:
A Common Size Balance Sheet expresses each item as a percentage of:
a) Total liabilities
b) Total assets
c) Total equity
d) Total revenue
Answer: b
7)What is the primary purpose of a Common Size Balance Sheet?
a) To compare companies' net income
b) To analyze changes in equity over time
c) To evaluate the proportion of assets and liabilities
d) To assess liquidity ratios
Answer: c
8)In a Common Size Balance Sheet, if the percentage of total liabilities increases, what could this imply?
a) Improved liquidity
b) Reduced debt
c) Higher financial risk
d) Increased profitability
Answer: c
9)Which statement helps identify the relative proportions of different asset and liability items?
a) Cash Flow Statement
b) Income Statement
c) Common Size Balance Sheet
d) Comparative Balance Sheet
Answer: c
10)Common Size Balance Sheets are particularly useful for:
a) Analyzing changes in owner's equity
b) Comparing financial statements of different industries
c) Assessing the growth of total assets
d) Evaluating the composition of assets and liabilities
Answer: d
11)Comparative Income Statement:
11. What does a Comparative Income Statement compare over multiple periods?
a) Total expenses
b) Total liabilities
c) Total revenue
d) Changes in income and expenses
Answer: d
12)In a Comparative Income Statement, what is typically presented side by side for analysis?
a) Income and expenses of different companies
b) Current year and prior year financial data
c) Budgeted and actual figures
d) Common size percentages
Answer: b
13)Comparative Income Statements help in:
a) Identifying the percentage of expenses to revenue
b) Assessing the liquidity of a company
c) Analyzing trends in income and expenses
d) Calculating net profit margin
Answer: c
14)If a company's net income has decreased in the current year compared to the previous year, what might be a possible explanation?
a) Higher revenue
b) Reduced expenses
c) Lower cost of goods sold
d) Increased operating costs
Answer: d
15)What is the main benefit of using a Comparative Income Statement?
a) It provides common size percentages
b) It helps in calculating return on investment
c) It reveals trends and changes in financial performance
d) It presents data as a percentage of total revenue
Answer: c
16)Comparative Balance Sheet:
16. A Comparative Balance Sheet compares the financial position of a company:
a) Across different industries
b) Over different periods
c) Against industry averages
d) With its competitors
Answer: b
17)What does a Comparative Balance Sheet primarily present side by side for analysis?
a) Changes in equity
b) Total assets and total liabilities
c) Budgeted and actual figures
d) Common size percentages
Answer: b
18)The main purpose of a Comparative Balance Sheet is to:
a) Assess changes in profitability
b) Evaluate changes in the equity section
c) Analyze trends in asset and liability items
d) Calculate liquidity ratios
Answer: c
19)If a company's long-term debt has increased compared to the previous year, what might this indicate?
a) Improved financial stability
b) Reduced interest expenses
c) Higher liquidity
d) Increased financial leverage
Answer: d
20)Comparative Balance Sheets help in:
a) Identifying the composition of expenses
b) Analyzing the efficiency of operations
c) Understanding changes in financial position
d) Calculating gross profit margin
Answer: c
21)In a Common Size Income Statement, which of the following is expressed as a percentage of total revenue?
a) Net income
b) Gross profit
c) Operating expenses
d) Dividends
Answer: c
22)Which financial statement shows the relative proportion of each asset and liability item in a Common Size Balance Sheet?
a) Income Statement
b) Statement of Retained Earnings
c) Cash Flow Statement
d) Common Size Balance Sheet
Answer: d
23)What is the main purpose of a Comparative Income Statement?
a) To compare net income of different companies
b) To calculate the debt-to-equity ratio
c) To analyze changes in income and expenses over time
d) To evaluate changes in the ownership structure
Answer: c
24)In a Comparative Balance Sheet, which of the following is most likely to appear side by side for comparison?
a) Total revenue and total expenses
b) Current assets and current liabilities
c) Beginning inventory and ending inventory
d) Gross profit and net profit
Answer: b
25)A company's Common Size Income Statement shows 30% for cost of goods sold and its Common Size Balance Sheet indicates a current ratio of 2.5. What conclusion can be drawn?
a) The company's net income is increasing.
b) The company's inventory turnover is improving.
c) The company has a strong liquidity position.
d) The company's net profit margin is declining.
Answer: c
