FREE Credit Risk Management MCQ Questions and Answers
Which statement presents a hypothetical situation?
Explanation:
A Pro-forma Statement is a financial statement that presents projected or hypothetical financial information based on certain assumptions or changes to the current financial situation. It is used to assess the potential impact of specific events, decisions, or changes in the business environment on a company's financial performance.
Which financial statement demonstrates the source and use of funds?
Explanation:
The Cash Flow Statement provides information about the cash inflows (sources) and outflows (applications) of a company during a specific period. It is structured into three main sections: operating activities, investing activities, and financing activities.
What is a true statement about ratios?
Explanation:
The statement "Ratios are more useful when compared with previous years" is generally valid and reflects common practice in financial analysis.
Ratios are financial metrics calculated by comparing different elements of a company's financial statements, such as the income statement and balance sheet. They provide insights into the company's financial performance, profitability, efficiency, liquidity, and other aspects of its operations.
Comparing ratios with previous years allows for trend analysis and helps in evaluating the company's performance over time. By comparing ratios from different periods, such as year-to-year or quarter-to-quarter, analysts can identify patterns, changes, and trends in the company's financial health and performance.
This includes a summary of the company's operations, often provided by the chairman
Explanation:
The Annual Statement is a document produced by a company at the end of its fiscal year, which provides an overview of the company's performance and operations during that year. It is often accompanied by the company's financial statements, including the balance sheet, income statement, and cash flow statement.
The term "operational statement" refers to which of the following statements?
Explanation:
The statement "P & L statement" is also known as the operating statement.
The P & L statement, which stands for Profit and Loss statement, is an important financial statement that summarizes the revenues, expenses, and resulting profits or losses of a company during a specific period of time, typically a month, quarter, or year.
It is commonly referred to as the operating statement because it focuses on the operating activities of the business, including revenue generation and the associated costs and expenses directly related to the company's core operations. The P & L statement provides insights into the company's ability to generate profits and assesses its overall financial performance.
Which of the following is an unqualified assessment of the company's financial statements?
Explanation:
A statement to the effect that the accounts as presented by the company directors provide a 'true and fair' view in the opinion of the accounts represents an unqualified opinion on a company's accounts.
In financial auditing, an unqualified opinion is the highest level of assurance an auditor can provide on a company's financial statements. It indicates that the financial statements are presented fairly and in accordance with the applicable accounting standards and regulations.
Which of the aforementioned claims is true?
Explanation:
‥ The balance sheet, also known as the statement of financial position, presents the financial position of a business at a particular point in time, typically the end of a reporting period, such as a month, quarter, or year. It lists the assets, liabilities, and equity of the business as of that specific date. The balance sheet does not reflect the growth of sales over a year; it primarily focuses on the financial position rather than the income or expenses.