This article will provide you with Class 10 IFM Unit 10: Ratio Analysis Most Important MCQ .

30 MCQs – Unit 10: Ratio Analysis (with Answers)

1. Debt–Equity Ratio is a measure of:

a) Liquidity
b) Leverage
c) Profitability
d) Efficiency
Answer: b

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2. Debt–Equity Ratio compares:

a) Current Assets with Current Liabilities
b) Debt with Total Assets
c) Debt with Shareholder’s Equity
d) Net Profit with Sales
Answer: c

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3. A high Debt–Equity Ratio indicates:

a) Low risk
b) High dependence on borrowed funds
c) Strong liquidity
d) High profitability
Answer: b

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4. Debt–Total Asset Ratio measures:

a) Proportion of expenses
b) Proportion of debt in total assets
c) Shareholder equity
d) Sales turnover
Answer: b

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5. Interest Coverage Ratio indicates the company’s ability to:

a) Pay dividends
b) Repay principal
c) Pay interest from profits
d) Raise capital
Answer: c

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6. Interest Coverage Ratio formula is:

a) EBIT ÷ Interest
b) Net Profit ÷ Interest
c) EBIT ÷ Sales
d) Interest ÷ EBIT
Answer: a

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7. Higher Interest Coverage Ratio means:

a) Low ability to pay interest
b) High financial strength
c) High taxes
d) Poor performance
Answer: b

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8. Gross Profit Ratio is calculated on the basis of:

a) Sales
b) EBIT
c) Total Assets
d) Operating profit
Answer: a

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9. Formula of Gross Profit Ratio is:

a) (Gross Profit ÷ Sales) × 100
b) (Net Profit ÷ Sales) × 100
c) (Sales ÷ Gross Profit) × 100
d) (Gross Profit ÷ Expenses) × 100
Answer: a

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10. A high Gross Profit Ratio indicates:

a) Inefficient production
b) Strong profit from core operations
c) Loss in business
d) High borrowing
Answer: b

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11. Net Profit Ratio shows:

a) Direct profit
b) Profit after all expenses
c) Operating profit
d) Cash profit
Answer: b

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12. Net Profit Ratio formula:

a) Net Profit ÷ Gross Profit
b) Net Profit ÷ Sales
c) Sales ÷ Net Profit
d) Net Profit ÷ Assets
Answer: b

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13. ROA (Return on Total Assets) measures:

a) Liquidity
b) Profitability from assets
c) Turnover
d) Leverage
Answer: b

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14. ROA formula is:

a) Net Profit ÷ Sales
b) Net Profit ÷ Total Assets
c) Total Assets ÷ Net Profit
d) Sales ÷ Assets
Answer: b

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15. A higher ROA means:

a) Poor asset utilization
b) Better use of company assets
c) Higher debt level
d) Low efficiency
Answer: b

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16. ROCE stands for:

a) Return on Current Equity
b) Revenue on Capital Employed
c) Return on Capital Employed
d) Ratio of Capital Expense
Answer: c

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17. ROCE measures:

a) Company’s liquidity
b) Efficiency of capital usage
c) Debt levels
d) Dividend payout
Answer: b

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18. Capital Employed generally means:

a) Fixed Assets – Liabilities
b) Equity + Long-term debt
c) Only equity
d) Only reserves
Answer: b

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19. High ROCE indicates:

a) Inefficient capital usage
b) Effective and profitable use of capital
c) High debt burden
d) Poor performance
Answer: b

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20. Return on Shareholders’ Equity shows:

a) Return earned on owner’s investment
b) Return on assets
c) Return on sales
d) Return on debt
Answer: a

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21. Profitability Ratios include:

a) Current Ratio
b) Debt–Equity Ratio
c) Gross & Net Profit Ratios
d) Turnover Ratios
Answer: c

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22. Leverage Ratios show:

a) Inventory movement
b) Long-term solvency
c) Operating efficiency
d) Credit sales
Answer: b

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23. Another name for Leverage Ratios is:

a) Solvency ratios
b) Activity ratios
c) Liquidity ratios
d) Profitability ratios
Answer: a

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24. If a company has more equity than debt, Debt–Equity Ratio will be:

a) High
b) More than 1
c) Less than 1
d) Zero always
Answer: c

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25. If Interest Coverage Ratio is below 1, it means:

a) Company has no profit
b) Company cannot fully cover interest expense
c) Company is highly profitable
d) Interest is zero
Answer: b

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26. Net Profit Ratio decreases when:

a) Expenses increase
b) Sales increase
c) Cost decreases
d) Tax rate decreases
Answer: a

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27. ROA depends mainly on:

a) Total assets & net profit
b) Only equity
c) Only debts
d) Only cash sales
Answer: a

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28. Gross Profit includes:

a) Only interest
b) Only tax
c) Sales – Cost of goods sold
d) Sales – All expenses
Answer: c

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29. Profitability Ratios highlight:

a) Selling ability
b) Overall earning performance
c) Debtor collection
d) Asset liquidity
Answer: b

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30. Ratio Analysis is used to:

a) Compare companies
b) Prepare invoices
c) Avoid taxes
d) Pay salaries
Answer: a

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