# ICAR NET (UG/PG): Commerce MCQs (Practice_Test 68 of 99)

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1. Consider the following ratios
1. Acid test ratio
2. Capital turnover ratio
3. Bad debts to sales ratio
4. Inventory turnover ratio

Which of these ratios are more appropriate for testing the liquidity of a concern?

1. 1 and 3
2. 1 and 4
3. 2 and 4
4. 2 and 3
2. Consider the given data, Proprietary ratio = 0.75, Current ratio = 2: 1, Proprietary fund = ₹ 60,000 & Fixed assets = ₹ 50,000 The working capital will be computed as
1. ₹ 10,000
2. ₹ 15,000
3. ₹ 20,000
4. ₹ 25,000
3. Consider the following Balance Sheet of ABC Company Limited as on March 31,1999:
• Liabilities ₹ Assets ₹
• Equity share capital 20,00, 000 Fixed assets 60,00, 000
• Preference share capital 10,00, 000 Less depreciation 20,00, 000
• General reserve 5, 00, 000 40, 00,000 10 % debentures 11,00, 000 Debtors 10,00, 000
• Creditors 7,00, 000 Stock 6,00, 000
• Outstanding expenses 3,00, 000 Cash 1,00, 000
• Profit & Loss A/c 1,05, 000 Formation expenses 5, 000 57, 05, 000 57,05, 000

The current ratio of ABC Company Limited is

1. 2.00
2. 1.90
3. 1.85
4. 1.70
4. Based on the following Balance Sheet of Messrs A Limited as on 31st December, 1998
• Liabilities ₹ (in lacks) . Assets ₹ (in lacks) .
• Owned funds 25.00 Fixed assets 27.00
• Long term debt 5.00 Current assets 6.10
• Current liabilities 1.50 Other assets 0.40
• Unclaimed dividends 0.20
• Provisions 1.80 i.e.. . 33.50 33.50

Study the Balance Sheet carefully and attempt the following, Owned funds ′ would be

1. ₹ 25 lakhs
2. ₹ 8.50 lakhs
3. ₹ 25.20 lakhs
4. ₹ 27 lakhs
5. Based on the following Balance Sheet of Messrs A Limited as on 31st December, 1998
• Liabilities ₹ (in lacks) . Assets ₹ (in lacks) .
• Owned funds 25.00 Fixed assets 27.00
• Long term debt 5.00 Current assets 6.10
• Current liabilities 1.50 Other assets 0.40
• Unclaimed dividends 0.20
• Provisions 1.80,33.50 33.50

Study the Balance Sheet carefully and attempt the following The ‘margin of safety’ i.e. … the cushion of protection for creditors is

1. 4.06: 1
2. ₹ 4.60 lakhs
3. 0.20: 1
4. ₹ 22 lakhs
6. Match List I with List II and select the correct answer
 List-I List-II Current assetsFixed assetsDebtEarnings after interest and taxes Performance of equity capital Current liabilitiesShort-term solvency Long-term fundsCapital structure EquityOverall performance Number of shares issuedLong-term solvency
• A
• B
• C
• D
• 2
• 5
• 3
• 4
• 1
• 2
• 3
• 4
• 2
• 5
• 4
• 3
• 1
• 2
• 4
• 3
7. Based on the following Balance Sheet of Messrs A Limited as on 31st December, 1998
• Liabilities ₹ (in lacks) . Assets ₹ (in lacks) .
• Owned funds 25.00 Fixed assets 27.00
• Long term debt 5.00 Current assets 6.10
• Current liabilities 1.50 Other assets 0.40
• Unclaimed dividends 0.20
• Provisions 1.80
• 33.50 33.50

Study the Balance Sheet carefully and attempt the following, if the management of A Limited want to evaluate the general efficiency, which one of the following additional information is required?

1. Sales and earnings after income tax and interest
2. Break-up of owned funds into share capital, reserves and surpluses, etc.
3. Earnings before income tax and interest
4. Operating expenses and sales
8. Financial indicators of four companies are as follows
• Company Current ratio Debt-equity ratio Rate of return on investment Fixed assets turnover
• A 2.0: 1 2.5: 1 10 % 5
• B 2.5: 1 3.0: 1 25 % 4
• C 1.5: 1 4.0: 1 20 % 3
• D 1.0: 1 3.5: 1 15 % 2

In general, which of the above companies would fall in the highest risk class?

1. A and B
2. B and C
3. C and D
4. A and D
9. Consider the particulars given below Sales = ₹ 60,000 Variable cost = ₹ 25,000 & Fixed cost = ₹ 30,000 Based on these data, the operating leverage shall be
1. 5
2. 7
3. 8
4. 9
10. The main purpose of depreciation accounting is to
1. charge the cost of asset
2. allocate the cost of the asset over its estimated useful life
3. provide for replacement of the asset on the expiry of its useful life
4. value the assets on the closing date of the year
11. Which one of the following pairs is not correctly matched?
• Increase in working capital
• Application of fund
• Increase in current liability
• Source of fund
• Issue of shares
• Source of fund
• Issue of bonus shares
• Source of fund
12. Consider the following statements
1. Operational loss is a source of funds
2. Decrease in working capital is a source of funds
3. Additions to fixed assets are an application of funds
4. Fresh introduction of capital is an application of funds

Which of the above statements are applicable while preparing the funds flow statements?

1. 1 and 2
2. 1 and 3
3. 2 and 3
4. 1,3 and 4
13. A company՚s reported current profit is ₹ 70,000 after incorporating the following: Loss on sale of investments ₹ 10,000; Premium on redemption of debentures ₹ 1,500; Depreciation on machinery and plant ₹ 20,000; Goodwill and preliminary expenses written off ₹ 30,000; Gain from sale of non-current assets ₹ 40,000 The net inflow of funds from the operation would be
1. ₹ 91,500
2. ₹ 80,000
3. ₹ 70,000
4. ₹ 59,500
14. For the purpose of analysing changes in financial position, enterprises prepare
1. Balance Sheet and Profit & Loss A/c
2. Cash flow statements and Funds flow statement
3. Statement of cash from operations and Balance Sheet
4. Statement of changes in working capital and Statement of cash from operations
15. Consider the following actions taken by an auditor
1. Carrying on vouching
2. Preparing the audit report
3. Checking the valuation of assets
4. Decision to qualify the report

The correct sequence of these actions is

1. 1,3, 4,2
2. 4,1, 3,2
3. 3,4, 2,1
4. 1,2, 4,3

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