Financial Statements Analysis and Ratio Analysis MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Financial Statements Analysis and Ratio Analysis, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Financial Statements Analysis and Ratio Analysis MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Financial Statements Analysis and Ratio Analysis mcq questions that explore various aspects of Financial Statements Analysis and Ratio Analysis problems. Each MCQ is crafted to challenge your understanding of Financial Statements Analysis and Ratio Analysis principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Financial Statements Analysis and Ratio Analysis MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

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Financial Statements Analysis and Ratio Analysis MCQs | Page 3 of 10

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Q21.
What is the relationship between Operating or Expense Ratios and profitability ratios in financial management?

a.

Directly related

b.

Inversely related

c.

No relationship

d.

Causation relationship

Discuss
Answer: (b).Inversely related Explanation:Operating or Expense Ratios are inversely related to profitability ratios in financial management.
Q22.
What does a greater Expense Ratio indicate in financial management?

a.

Greater profitability ratios

b.

Lesser profitability ratios

c.

No impact on profitability ratios

d.

Increase in overall expenses

Discuss
Answer: (b).Lesser profitability ratios Explanation:A greater Expense Ratio indicates lesser profitability ratios in financial management.
Q23.
What expenses are generally included in the term 'Expenses' in financial management?

a.

Only Administrative Expenses

b.

Only Cost of Goods Sold

c.

Administrative Expenses, Selling and Distribution Expenses, and Financial Expenses

d.

Only Claim Expenses

Discuss
Answer: (c).Administrative Expenses, Selling and Distribution Expenses, and Financial Expenses Explanation:In financial management, the term 'Expenses' generally includes Cost of Goods Sold, Administrative Expenses, Selling and Distribution Expenses, and Financial Expenses.
Q24.
In insurance companies, what expenses are generally included in the term 'Expenses'?

a.

Only Claim Expenses

b.

Only Acquisition Cost or Commission Expense

c.

Only Management or Administrative Expense

d.

Claim Expenses, Acquisition Cost or Commission Expense, and Management or Administrative Expense

Discuss
Answer: (d).Claim Expenses, Acquisition Cost or Commission Expense, and Management or Administrative Expense Explanation:In insurance companies, the term 'Expenses' generally includes Claim Expenses, Acquisition Cost or Commission Expense, and Management or Administrative Expense.
Q25.
How does a low expense ratio impact financial management?

a.

Indicates operational inefficiency

b.

Indicates high profitability

c.

Has no impact on budget preparation

d.

Increases overall expenses

Discuss
Answer: (b).Indicates high profitability Explanation:A low expense ratio in financial management is a measure of operational efficiency, indicating high profitability.
Q26.
What does Section 40 (C) of the Insurance Act, 1938 provide for in relation to expenses of management in general insurance business?

a.

There are no limits on expenses of management

b.

It prohibits any expenses of management

c.

It imposes limits on expenses of management, taking into account the size and age of the insurer

d.

It allows unlimited expenses of management without any regulation

Discuss
Answer: (c).It imposes limits on expenses of management, taking into account the size and age of the insurer Explanation:Section 40 (C) of the Insurance Act, 1938 imposes limits on expenses of management in general insurance business, considering the size and age of the insurer.
Q27.
What happens if an insurer exceeds the permissible amount of expenses of management under Section 40 (C)?

a.

The insurer is exempt from any consequences

b.

The insurer is deemed to have contravened the statutory provisions

c.

The insurer is required to pay a fine

d.

The insurer is granted additional benefits

Discuss
Answer: (b).The insurer is deemed to have contravened the statutory provisions Explanation:If an insurer exceeds the permissible amount of expenses of management under Section 40 (C), the insurer is deemed to have contravened the statutory provisions.
Q28.
Who is required to provide a certificate regarding the full debiting of expenses of management in the Revenue Account, as per Section 40 (C)?

a.

Only the chairman

b.

Only the auditor

c.

The chairman, two directors, and the principal officer of the insurer, along with the auditor

d.

Only the principal officer of the insurer

Discuss
Answer: (c).The chairman, two directors, and the principal officer of the insurer, along with the auditor Explanation:According to Section 40 (C), the chairman, two directors, and the principal officer of the insurer, along with the auditor, are required to provide a certificate regarding the full debiting of expenses of management in the Revenue Account.
Q29.
How are various expenses ratios in non-life insurance companies computed?

a.

As a percentage of total expenses

b.

As a percentage of premium earned

c.

As a percentage of total revenue

d.

As a fixed amount

Discuss
Answer: (b).As a percentage of premium earned Explanation:In non-life insurance companies, expense ratios are computed as a percentage of earned premium.
Q30.
How is the Incurred Claim Ratio calculated in non-life insurance companies?

a.

Claims Paid Direct / Net Premium

b.

(Claims Paid Direct + Claims on Reinsurance Accepted) / Net Premium

c.

(Claims Paid Direct - Claims on Reinsurance Ceded) / Net Premium

d.

(Claims Paid Direct - OS Claims at the end of the year) / (OS claims at the beginning of the year)

Discuss
Answer: (c).(Claims Paid Direct - Claims on Reinsurance Ceded) / Net Premium Explanation:The Incurred Claim Ratio is calculated as (Claims Paid Direct - Claims on Reinsurance Ceded) / Net Premium.
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