A high debt-equity ratio implies: MCQ with Answer and Explanation

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A high debt-equity ratio implies:

A. High profitability

B. High financial risk

C. No risk

D. Low financial risk

Answer: Option B

Solution (By JKSSB Mock Tests)

Higher debt means higher fixed interest obligations, increasing financial risk.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

The 'Input Service Distributor' (ISD) under GST distributes:

A. Stock

B. Goods

C. Input tax credit on services received by the head office to branches

D. Cash

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Correct Answer: Option C

Explanation:
ISD is an office that receives invoices for services and distributes credit to various units.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

The 'Materiality Level' in audit is set to:

A. Avoid audit

B. Determine the significance of misstatements that could influence economic decisions

C. Reduce sample size

D. Increase fees

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Correct Answer: Option B

Explanation:
Materiality is a threshold to guide audit procedures and evaluation of misstatements.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #3

When bad debts previously written off are recovered, which account is credited?

A. Suspense Account

B. Bad Debts Account

C. Bad Debts Recovered Account

D. Debtor's Personal Account

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Correct Answer: Option C

Explanation:
Bad debts recovered represent a gain for the business and are credited to a separate nominal account called 'Bad Debts Recovered Account'.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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