MCQs

1) Horizontal Analysis is also known as:

a) Dynamic Analysis
b) Structural Analysis
c) Static Analysis
d) None of these

2) Vertical Analysis is also known as:

a) Static Analysis
b) Dynamic Analysis
c) Structural Analysis
d) None of these
3) calculate the value of deposit made today 2000, 3 years hence if interset rate is 10%
a) 2662
b) 2563
c) 2435
d) None of the above

Solution:-A=p(1+t)^n
A=2000(1+10/100)^3
A=2000(1.1)^3
A=2000(1.331)
A=2662
4) how much deposit of 10000 will grow in 2 years, if nominal rate of interest is 12% and
compounded quarterly
a) 12667.80
b) 12335.50
c) 12456.80
d) None of the above

A=p(1+t)^n
A=10000(1+0.12/4)^8
A=10000(1.03)^8
A=10000(1.26677)
A=126677

5) Certain key financial parameters like Earnings Per Share (EPS), P/E ratio, current size of
equity etc. for arriving at the estimated future price will be considered as _________.
a) Industry Analysis
b) Corporate Analysis
c) Financial Analysis
d) Technical Analysis
6) Current Ratio Measures ___________.
a) Liquidity
b) Solvency
c) Profitability
d) Debt-Equity
7) Long term financial strength or soundness of a firm is measured in terms of its ability to pay
interest regularly or repay principal on due dates or at the time of maturity is known as _______
a) Current Account Structure
b) Profitability Ratio
c) Leverage/Capital Structure
d) Earnings Per Share
8) _________measures the profit available to the equity shareholders per share, that is, the
amount that they can get on every share held.
a) Leverage/Capital Structure
b) Earnings Per Share
c) Current Account Structure
d) Profitability Ratio

Q2) Calculate the following ratios

Problem: 1
Following is the Income Statement of Urja Auto. Ltd. For the year ended 31st Dec 2019. You
are required to calculate: 1) Gross Profit Ratio; 2) Operating Ratio; 3) Net operating Profit
Ratio and 4) Net Profit Ratio.
 Particulars Rs.

Sales 20,00,000

Less: Cost of goods Sold 12,00,000

Gross Profit 8,00,000

Less: Operating Expenses 4,80,000

Operating Profit 3,20,000

Add: Non –operating income 48,000

3,68,000

Less: Non –operating Expenses 16,000

Profit before Tax 3,52,000

Less: Tax @ 30% 1,05,600

Net Profit After Tax 2,46,400

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
Gross Profit Ratio = 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
X100

8,00,000
Gross Profit Ratio = 20,00,0000 X100=40%

𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡+𝑐𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑

Operating Ratio =
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
X100

Operating ratio = 12,00,000 + 4,80,000 X 100 = 84%

20,00,000

𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡
Net Operating Profit Ratio = 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
X100

3,20,000
Net Operating Profit Ratio = 20,00,000 X100=16%

𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥

Net Profit Ratio = 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
𝑋100
 2,46,4000
Net Profit Ratio = 20,00,000 𝑋100=12.3%

Q3) Kristen wants to have Rs.2,000,000 for retirement in 45 years. She invests in a mutual
fund and pays 8.5% each year, compounded quarterly. How much should she deposit
into the mutual fund initially?

Solution:-
In this problem we want to calculate the present value
Future value is giving i.e 200000
Here interest will be 8.5/4 =2.125 (Because interest is calculated quarterly)

And n=4x45=180
2.125 180
A= P [1+ 100
]
2,00,000= P [1.02125]180

2,00,000/44.03241620=P
Principal =4542.108

Q4) Distinguish between authorised capital and paid up capital

Aspect Authorised Capital Paid-Up Capital

Definition The maximum share capital a The actual amount of share capital that the
company is legally allowed to issue. company has issued and received payment
for.

Legal Specified in the company's Reflected in the company's financial

Documents constitutional documents. statements.

Purpose Indicates the potential for raising Represents the actual capital raised and
capital. available for use in business operations.
Changes Can be altered by amending the Changes when new shares are issued and
company's charter and with fully paid for by shareholders.
shareholder approval.

Impact on Represents the growth potential and Indicates the extent of shareholder
Business capacity to raise funds in the future. investment and capital available for
immediate use.

Example A company with an authorised capital If the company has issued and received
of ₹10 crores can issue shares up to payment for shares worth ₹5 crores, that is
that value. its paid-up capital.