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 6 of 10

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Q51.
What does RSM-2 represent in the context of Solvency Analysis for a non-life insurance company?

a.

Required Solvency Margin based on net premiums

b.

Required Solvency Margin based on net incurred claims

c.

Required Solvency Margin based on gross premiums

d.

Required Solvency Margin based on gross incurred claims

Discuss
Answer: (b).Required Solvency Margin based on net incurred claims Explanation:RSM-2 represents Required Solvency Margin based on net incurred claims in the context of Solvency Analysis for a non-life insurance company.
Q52.
How is RSM-2 calculated?

a.

RSM-2 = 30% of (Higher of Gross Net Incurred Claims * Factor B and Net Incurred Claims)

b.

RSM-2 = 20% of (Higher of Gross Net Incurred Claims * Factor B and Net Incurred Claims)

c.

RSM-2 = 30% of (Gross Net Incurred Claims * Factor B )

d.

RSM-2 = 20% of (Gross Net Incurred Claims * Factor B )

Discuss
Answer: (a).RSM-2 = 30% of (Higher of Gross Net Incurred Claims * Factor B and Net Incurred Claims) Explanation:RSM-2 is calculated as 30% of the higher of (Gross Net Incurred Claims * Factor B and Net Incurred Claims).
Q53.
What is the purpose of Market Test Ratios in financial analysis?

a.

To determine solvency of a company

b.

To analyze the effect of various factors on the market value of shares

c.

To calculate the earning per share

d.

To assess the liquidity position of a company

Discuss
Answer: (b).To analyze the effect of various factors on the market value of shares Explanation:The purpose of Market Test Ratios in financial analysis is to analyze the effect of various factors on the market value of shares.
Q54.
Which accounting ratio is specifically required for a life insurance company to analyze the growth in life funds during the current financial year compared to the previous year?

a.

Return on Investment Ratio

b.

Current Ratio

c.

Debt-Equity Ratio

d.

Growth in life funds ratio

Discuss
Answer: (d).Growth in life funds ratio Explanation:The accounting ratio specifically required for a life insurance company to analyze the growth in life funds during the current financial year compared to the previous year is the Growth in life funds ratio.
Q55.
What does the ratio of First Insurance to the Total Business completed during the year measure for a life insurance company?

a.

Profitability of the company

b.

Market share analysis

c.

Efficiency in policy issuance

d.

Ratio of new policies to total policies

Discuss
Answer: (d).Ratio of new policies to total policies Explanation:The ratio of First Insurance to the Total Business completed during the year measures the ratio of new policies to total policies for a life insurance company.
Q56.
What is the purpose of Income Analysis for a life insurance company?

a.

To analyze liquidity position

b.

To assess solvency

c.

To analyze the growth and contribution of various income sources

d.

To calculate return on investment

Discuss
Answer: (c).To analyze the growth and contribution of various income sources Explanation:The purpose of Income Analysis for a life insurance company is to analyze the growth and contribution of various income sources.
Q57.
Which ratio is specifically required for a non-life insurance company to assess its solvency?

a.

Expense Ratio

b.

Combined Ratio

c.

Loss Ratio

d.

Liquidity Ratio

Discuss
Answer: (b).Combined Ratio Explanation:The Combined Ratio is specifically required for a non-life insurance company to assess its solvency.
Q58.
What does the Policy Payments Break-up ratio for a life insurance company analyze?

a.

Market share analysis

b.

Distribution-channel wise contribution

c.

Breakdown of policy payments for death claims, maturity claims, annuities, surrenders

d.

Growth in diversified activities

Discuss
Answer: (c).Breakdown of policy payments for death claims, maturity claims, annuities, surrenders Explanation:The Policy Payments Break-up ratio for a life insurance company analyzes the breakdown of policy payments for death claims, maturity claims, annuities, surrenders.
Q59.
Which ratio is specifically used to analyze the management expenses breakdown for salaries, commissions, and other expenses for a life insurance company?

a.

Distribution-channel wise contribution

b.

Management Expenses Break-up ratio

c.

Policy Payments Break-up ratio

d.

Income Analysis ratio

Discuss
Answer: (b).Management Expenses Break-up ratio Explanation:The Management Expenses Break-up ratio is specifically used to analyze the breakdown of management expenses for salaries, commissions, and other expenses for a life insurance company.
Q60.
What does the ratio of Expenses of Management to total Premium Income measure for a life insurance company?

a.

Profitability of the company

b.

Efficiency in policy issuance

c.

Solvency analysis

d.

Percentage of expenses to total premium income

Discuss
Answer: (d).Percentage of expenses to total premium income Explanation:The ratio of Expenses of Management to total Premium Income measures the percentage of expenses to total premium income for a life insurance company.
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