F7 (FR) – Chapter 20 – PART C – CBE MCQs – ACCA

These are ACCA F7 (FR) Financial Reporting MCQs for Part-C of the Syllabus “Analysing and interpreting the financial statements of single entities and groups”.

These multiple-choice questions (MCQs) are designed to help ACCA F7 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

  • Students should not attempt these MCQs until they have finished the entire chapter.
  • All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F7 (FR) exam.


Course:ACCA – Association of Chartered Certified Accountants
Fundamental Level:Applied Skills
Subject:Financial Reporting
Paper:F7 – FR
Chapter and Topic20 – Limitations of financial statements and interpretation techniques
Syllabus Area:C – “Analysing and interpreting the financial statements of single entities and groups”
Questions Type:CBE MCQs
Exam Section:Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part-C of the Syllabus; “Analysing and interpreting the financial statements of single entities and groups” of ACCA F7 (FR) Financial Reporting Module.


These MCQs are not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate


Students will get their F7 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

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F7 (FR) - Chapter 20- Part C - MCQs - Limitations of financial statements and interpretation techniques

Course: ACCA - Association of Chartered Certified Accountants
F7 (FR) - Financial Reporting
Syllabus Area: C - Analysing and interpreting the financial statements of single entities and groups
Chapter: 20 - Limitations of financial statements and interpretation techniques
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit


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1 / 8

Which of the following is a possible reason why a company's inventory holding period increases from one year to the next?

2 / 8

Creative accounting measures are often aimed at reducing gearing.

Identify whether the following measures will increase, reduce or have no effect on gearing

  1. Renegotiating a loan to secure a lower interest rate
  2. Treating a lease as a short-term rental agreement
  3. Repaying a loan just before the year end and taking it out again at the beginning of the next year.
  4. 'Selling' an asset under a sale and leaseback agreement

3 / 8

Use of historical cost accounting means asset values can be reliably verified but it has a number of shortcomings which need to be considered when analysing financial statements.

Which of these is a possible result of the use of historical cost accounting during a period of inflation?

4 / 8

Fritwel Co has an asset turnover of 2.0 and an operating profit margin of 10%. It is launching a new product which is expected to generate additional sales of $1.6 million and additional profit of $120,000. It will require additional assets of $500,000.

Assuming there are no other changes to current operations, how will the new product affect these ratios?

Select the impact on the ratios below using the picklist below.

5 / 8

Trent uses the formula: (trade receivables at year end/revenue for the year) × 365 to calculate how long on average (in days) its customers take to pay.

Which of the following would NOT affect the correctness of the above calculation of the average number of days a customer takes to pay?

6 / 8

If a company wished to maintain the carrying amount in the financial statements of its non-current assets, which of the following would it be unlikely to do?

7 / 8

Magenta Ltd has a current ratio of 1.5, a quick ratio of 0.4 and a positive cash balance. If it purchases inventory on credit, what is the effect on these ratios?

8 / 8

Cyan Co carries its property at revalued amount. Property values have fallen during the current period and an impairment loss has been recognised on the property, however its carrying amount is still higher than its depreciated historical cost.

Complete the statement using the picklist below, showing the effect of the impairment on the ROCE and gearing ratios of Cyan Co.

The effect of this impairment will _____________ the ROCE ratio of Cyan Co, and _____________its gearing ratio.

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