TC

Accounting Quiz Q81–Q90

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Questions

Q81. Profit for the objective of calculating a ratio may be taken as:

Answer: All the above

Solution: Different ratios use different profit measures (e.g., operating ratios use PBIT, return ratios may use PAT or PBT). The appropriate profit definition depends on the ratio being calculated.

Q82. When a fixed asset is bought on hire purchase, interest element is classified under ______ activity and loan element is classified under ______ activity.

Answer: Operating, Financing

Solution: In cash flow classification, interest on hire‑purchase is typically treated as an operating cash flow (interest expense), while the principal/loan element is a financing cash flow (repayment/raising of finance).

Q83. NPV is a tool used for:

Answer: Capital Budgeting

Solution: Net Present Value (NPV) is a primary capital budgeting technique used to evaluate the profitability of long‑term investment projects by discounting future cash flows.

Q84. High Price to Earnings (P/E) ratio shows company:

Answer: High growth prospect

Solution: A high P/E implies investors expect higher future earnings growth; it often signals growth prospects rather than immediate dividend expectations.

Q85. Dividend payout ratio is:

Answer: DPS/EPS

Solution: Dividend payout ratio = Dividend per Share (DPS) ÷ Earnings per Share (EPS); it shows the proportion of earnings distributed as dividends.

Q86. DU PONT analysis deals with:

Answer: Analysis of Profits

Solution: DuPont analysis decomposes return on equity into profit margin, asset turnover and financial leverage — it focuses on profitability drivers and how they combine to produce ROE.

Q87. The term EVA is used for:

Answer: Economic Value Added

Solution: EVA measures the value created above the required return of the company's shareholders — net operating profit after tax minus a charge for the capital employed.

Q88. One of the most important tools of cost planning is:

Answer: Budget

Solution: Budgets are primary planning and control tools in cost management — they set targets, allocate resources and provide benchmarks for performance evaluation.

Q89. Depreciation rates are provided in which schedule of the Companies Act?

Answer: Schedule II

Solution: Under the Indian Companies Act, depreciation useful lives and rates are specified in Schedule II (classification and useful life guidance) for tangible assets.

Q90. Interest on loans given by a financial institution is shown in P & L as:

Answer: Other income

Solution: Interest earned on loans and advances provided by a financial institution is typically classified as other income (non‑operating income) in the Profit & Loss account unless lending is the entity's primary business.

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