Fundamentals of Accounting – Multiple Choice Questions (MCQ) with Answers (Page3)

23-A current ratio of ______ and above indicates that the availability of sufficient net working capital and the ability of the firm to meet current liabilities.

(A) 1.33:1

(B) 1.44:1

(C) 1.55:1

(D) 1.66:1

(Ans: A)

24-Liquid or Quick assets =

(A) Current assets – (stock + work in progress)

(B) Current assets + stock + work in progress

(C) (Current assets + stock) + work in progress

(D) (Current assets + work in progress) – stock

(Ans: A)

25-The following is also known as External Internal Equity ratio

(A) Current ratio

(B) Acid test ratio

(C) Debt Equity ratio

(D) Debt service coverage ratio

(Ans: C)

26-Lower the Debt Equity ratio

(A) Lower the protection to creditors

(B) Higher the protection to creditors

(C) It does not affect creditors

(D) None of the above

(Ans: B)

27-A higher inventory ratio indicates

(A) Better inventory management

(B) Quicker turnover

(C) Both ‘A’ and ‘B’

(D) None of the above

(Ans: C)

28-Return on Investment Ratio (ROI) =

(A) (Gross profit / Net sales) x 100

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(B) (Gross profit x Sales / Fixed assets) x 100

(C) (Net profit / Sales) x 100

(D) (Net profit / Total assets) x 100

(Ans: D)

29-A Low Return on Investment Ratio (ROI) indicates

(A) Improper utilization of resources

(B) Over investment in assets

(C) Both ‘A’ and ‘B’

(D) None of the above

(Ans: C)

30-Following is (are) the characteristic(s) of a budget

(A) It outlines projected activities

(B) Expressions are made in quantitative terms

(C) It is for a fixed period

(D) All of the above

(Ans: D)

31-Sales expenditure budget is prepared by estimating the expense(s) of

(A) Advertisement

(B) Market analysis

(C) Salesman’s salary

(D) All of the above

(Ans: D)

32-Budgeting is difficult to apply in the following cases

(A) Products subjected to rapid changes

(B) Job order manufacturing

(C) Uncertain market conditions

(D) All of the above

(Ans: D)

33-A Master Budget consists of

(A) Sales budget

(B) Production budget

(C) Material budget

(D) All of the above

(Ans: D)