Financial Accounting - Financial Statements Analysis
MCQS
A. Income Statement
B. Cash Flow Statement
C. Balance Sheet
D. Statement of Retained Earnings
The Balance Sheet presents the financial position at a specific point in time.
A. Current Ratio
B. Quick Ratio
C. Debt-to-Equity Ratio
D. Return on Assets
The Current Ratio assesses short-term liquidity using current assets.
A. Return on Equity
B. Return on Efficiency
C. Return on Investment
D. Return on Assets
ROE measures the profitability of a company in relation to shareholders' equity.
A. Balance Sheet
B. Cash Flow Statement
C. Income Statement
D. Statement of Retained Earnings
The Cash Flow Statement details cash inflows and outflows.
A. Inventory
B. Accounts Receivable
C. Cash
D. Prepaid Expenses
Quick Ratio excludes inventory from current assets.
A. Profitability
B. Efficiency
C. Liquidity
D. Solvency
DuPont Analysis breaks down ROE into its component parts to assess profitability.
A. Gross Margin
B. Net Margin
C. Operating Margin
D. Return on Investment
Net Margin calculates the percentage of profit from each sales dollar.
A. Profitability
B. Liquidity
C. Solvency
D. Efficiency
Debt-to-Equity Ratio assesses the proportion of debt to equity in a company's capital structure.
A. Income Statement
B. Balance Sheet
C. Cash Flow Statement
D. Statement of Retained Earnings
The Statement of Retained Earnings reflects changes in retained earnings.
A. Individual line items
B. Total liabilities
C. Net income
D. Operating expenses
Vertical Analysis expresses line items as a percentage of total revenue.
A. Inventory Turnover
B. Receivables Turnover
C. Return on Assets
D. Current Ratio
Return on Assets assesses efficiency in asset utilization for sales generation.
A. Cash
B. Marketable Securities
C. Inventory
D. Accounts Receivable
Quick Ratio excludes inventory from current assets.
A. Income Statement
B. Balance Sheet
C. Cash Flow Statement
D. Statement of Retained Earnings
The Income Statement is also called the Profit and Loss Statement.
A. (Revenue - Cost of Goods Sold) / Revenue
B. Net Income / Revenue
C. Operating Income / Revenue
D. Total Expenses / Net Income
Gross Margin is (Revenue - Cost of Goods Sold) / Revenue.
A. Quick Ratio
B. Debt Ratio
C. Interest Coverage Ratio
D. Return on Investment
Quick Ratio assesses short-term liquidity using highly liquid assets.
A. Proportion of equity to debt
B. Proportion of debt to total assets
C. Proportion of assets to liabilities
D. Proportion of net income to equity
Debt Ratio indicates the proportion of debt to total assets.
A. Return on Assets
B. Return on Equity
C. Return on Efficiency
D. Return on Investment
ROA measures a company's ability to generate profit from its assets.
A. Revenue - Cost of Goods Sold
B. Net Income / Revenue
C. Gross Margin - Operating Expenses
D. Total Expenses - Net Income
Operating Income is Gross Margin - Operating Expenses.
A. Different industries
B. Different time periods
C. Different market segments
D. Different geographical regions
Horizontal Analysis compares data across different time periods.
A. Quick Ratio
B. Inventory Turnover
C. Current Ratio
D. Receivables Turnover
Quick Ratio assesses short-term liquidity without relying on inventory sales.
A. Efficiency in managing inventory
B. Efficiency in managing receivables
C. Efficiency in managing assets
D. Efficiency in managing liabilities
Receivables Turnover Ratio assesses efficiency in managing receivables.
A. Total Expenses
B. Net Income
C. Total Revenue
D. Operating Income
Common-Size Income Statement expresses each item as a percentage of total revenue.
A. (Revenue - Cost of Goods Sold) / Revenue
B. Net Income / Revenue
C. Operating Income / Revenue
D. Total Expenses / Net Income
Net Margin is Net Income / Revenue.
A. Income Statement
B. Cash Flow Statement
C. Statement of Retained Earnings
D. Balance Sheet
The Balance Sheet provides a snapshot of financial position at a specific point.
A. Efficiency in managing working capital
B. Liquidity of current assets
C. Solvency of the company
D. Profitability of investments
Cash Conversion Cycle measures efficiency in managing working capital.
A. Gross Margin
B. Net Margin
C. Operating Margin
D. Return on Equity
Net Margin is a measure of overall profitability.
A. Earnings Before Income and Taxes
B. Earnings Before Interest and Taxes
C. Earnings Before Interest and Assets
D. Earnings Before Investment and Taxes
EBIT stands for Earnings Before Interest and Taxes.
A. Acid-Test Ratio
B. Current Ratio
C. Debt Ratio
D. Inventory Turnover
Quick Ratio is also known as the Acid-Test Ratio.
A. Balance Sheet
B. Income Statement
C. Statement of Retained Earnings
D. Cash Flow Statement
The Statement of Retained Earnings shows changes in retained earnings.
A. Proportion of equity to debt
B. Proportion of debt to total assets
C. Proportion of assets to liabilities
D. Proportion of net income to equity
Debt-to-Equity Ratio indicates the proportion of debt to total assets.
A. Operating Income / Revenue
B. Net Income / Revenue
C. Gross Margin / Operating Expenses
D. Total Expenses / Net Income
Operating Margin is Operating Income / Revenue.
A. Total Expenses
B. Net Income
C. Total Revenue
D. Operating Income
Vertical Analysis expresses each item as a percentage of total revenue.
A. Proportion of equity to debt
B. Proportion of debt to total assets
C. Proportion of assets to liabilities
D. Proportion of net income to equity
Debt Ratio measures the proportion of debt to total assets.
A. Profitability
B. Liquidity
C. Solvency
D. Efficiency
The Cash Flow Statement provides insights into liquidity.
A. Evaluate profitability
B. Assess liquidity
C. Examine solvency
D. Analyze the relative size of each asset and liability
Common-Size Balance Sheet analyzes the relative size of each asset and liability.
A. Interest Coverage Ratio
B. Debt Ratio
C. Quick Ratio
D. Return on Assets
Interest Coverage Ratio assesses the ability to cover interest payments with operating income.
A. Net Income / Total Assets
B. Net Income / Average Equity
C. Gross Margin / Operating Expenses
D. Operating Income / Revenue
ROE is calculated as Net Income / Average Equity.
A. Profitability of the company
B. Liquidity of current assets
C. Solvency of the company
D. Profit attributable to each outstanding share
EPS measures profit attributable to each outstanding share.
A. Different industries
B. Different time periods
C. Different market segments
D. Different geographical regions
Horizontal Analysis compares data across different time periods.
A. (Revenue - Cost of Goods Sold) / Revenue
B. Net Income / Revenue
C. Gross Profit / Operating Expenses
D. Total Expenses / Net Income
Gross Margin is (Revenue - Cost of Goods Sold) / Revenue.
A. Efficiency in managing receivables
B. Liquidity of current assets
C. Solvency of the company
D. Profitability of investments
Current Ratio measures the liquidity of current assets.
A. Net Sales / Average Receivables
B. Cost of Goods Sold / Average Receivables
C. Net Income / Average Receivables
D. Operating Income / Average Receivables
Receivables Turnover Ratio is Net Sales / Average Receivables.
A. Ability to cover short-term obligations without inventory sales
B. Ability to cover long-term debt
C. Ability to generate profit from assets
D. Ability to meet current liabilities
Quick Ratio measures the ability to cover short-term obligations without relying on inventory sales.
A. Total Debt / Total Equity
B. Total Assets / Total Equity
C. Total Liabilities / Total Equity
D. Total Income / Total Equity
Debt-to-Equity Ratio is Total Liabilities / Total Equity.
A. Proportion of equity to debt
B. Measure of financial leverage
C. Measure of liquidity
D. Proportion of debt to total assets
Equity Multiplier in DuPont Analysis represents the measure of financial leverage.
A. Earnings Before Income Tax Depreciation and Amortization
B. Earnings Before Interest Tax and Depreciation
C. Earnings Before Interest Taxes Depreciation and Assets
D. Earnings Before Interest Taxes Dividends and Amortization
EBITDA stands for Earnings Before Income Tax Depreciation and Amortization.
A. Operating, Financing, and Investing
B. Revenue, Expense, and Profit
C. Assets, Liabilities, and Equity
D. Cash Inflows, Outflows, and Balances
The Cash Flow Statement is divided into Operating, Financing, and Investing sections.
A. Efficiency in managing inventory
B. Liquidity of current assets
C. Solvency of the company
D. Profitability of investments
Inventory Turnover Ratio assesses efficiency in managing inventory.
A. Current Assets / Current Liabilities
B. Total Assets / Total Liabilities
C. Total Equity / Total Assets
D. Total Liabilities / Total Equity
Current Ratio is calculated as Current Assets / Current Liabilities.
A. Gross Margin Ratio
B. Operating Margin Ratio
C. Contribution Margin Ratio
D. Net Profit Margin Ratio
Contribution Margin Ratio measures the percentage remaining after covering variable costs.
A. Profitability
B. Liquidity
C. Solvency
D. Efficiency
Debt-to-Equity Ratio is an indicator of solvency.
A. Inventory
B. Accounts Receivable
C. Cash
D. Prepaid Expenses
Acid-Test Ratio excludes inventory from current assets.
A. Quick Ratio includes inventory, while Current Ratio does not.
B. Quick Ratio excludes accounts payable, while Current Ratio includes it.
C. Quick Ratio excludes inventory, while Current Ratio includes it.
D. Quick Ratio is not a liquidity ratio.
Quick Ratio excludes inventory, while Current Ratio includes it.
A. Ability to cover interest payments with operating income
B. Ability to cover long-term debt with short-term assets
C. Ability to generate profit from assets
D. Ability to meet current liabilities
Interest Coverage Ratio indicates the ability to cover interest payments with operating income.
A. Efficiency in managing inventory
B. Efficiency in managing receivables
C. Efficiency in managing assets to generate sales
D. Efficiency in managing liabilities
Total Asset Turnover Ratio measures efficiency in managing assets to generate sales.
A. (Revenue - Cost of Goods Sold) / Revenue
B. Net Income / Revenue
C. Operating Income / Revenue
D. Total Expenses / Net Income
Net Margin is calculated as Net Income / Revenue.
A. Proportion of equity to debt
B. Measure of financial leverage
C. Measure of liquidity
D. Efficiency in generating sales from assets
Asset Turnover in DuPont Analysis represents efficiency in generating sales from assets.
A. Balance Sheet
B. Income Statement
C. Cash Flow Statement
D. Statement of Retained Earnings
The Income Statement provides a summary of revenues and expenses.
A. Liquidity of current assets
B. Profitability of the company
C. Ability to cover interest payments with operating income
D. Solvency of the company
Times Interest Earned Ratio assesses the ability to cover interest payments with operating income.
A. Total Debt / Total Assets
B. Total Assets / Total Liabilities
C. Total Equity / Total Assets
D. Total Liabilities / Total Equity
Debt Ratio is calculated as Total Debt / Total Assets.