Which financial statement provides information about a company’s assets, liabilities, and shareholders’ equity at a specific point in time?
a) Income statement
b) Cash flow statement
c) Balance sheet
d) Statement of retained earnings
Answer: c) Balance sheet
The income statement shows:
a) Cash flows from operating activities
b) Changes in retained earnings
c) Revenues and expenses over a period of time
d) Changes in the company’s capital structure
Answer: c) Revenues and expenses over a period of time
Which financial statement shows the cash inflows and outflows from operating, investing, and financing activities?
a) Balance sheet
b) Cash flow statement
c) Income statement
d) Statement of changes in equity
Answer: b) Cash flow statement
The debt-to-equity ratio is calculated by dividing:
a) Total liabilities by total equity
b) Total assets by total equity
c) Net income by total equity
d) Total liabilities by total assets
Answer: a) Total liabilities by total equity
Which financial ratio measures a company’s ability to pay its short-term obligations?
a) Current ratio
b) Return on investment (ROI)
c) Debt-to-equity ratio
d) Gross profit margin
Answer: a) Current ratio
A high accounts receivable turnover ratio indicates:
a) Efficient management of inventory
b) Effective collection of receivables
c) A low level of credit sales
d) Poor liquidity position
Answer: b) Effective collection of receivables
Which financial ratio measures the profitability of a company in relation to its total assets?
a) Return on equity (ROE)
b) Gross profit margin
c) Return on assets (ROA)
d) Debt ratio
Answer: c) Return on assets (ROA)
The price-to-earnings (P/E) ratio is calculated by dividing:
a) Market price per share by earnings per share
b) Dividends per share by market price per share
c) Earnings before interest and taxes (EBIT) by market value
d) Total equity by net income
Answer: a) Market price per share by earnings per share
The cash conversion cycle measures the time it takes for a company to:
a) Collect its accounts receivable
b) Pay its accounts payable
c) Convert inventory into cash
d) All of the above
Answer: d) All of the above
Which financial ratio measures a company’s ability to generate profit from its sales?
a) Gross profit margin
b) Return on investment (ROI)
c) Quick ratio
d) Debt-to-equity ratio
Answer: a) Gross profit margin
Which financial ratio measures a company’s ability to meet its short-term obligations without relying on inventory sales?
a) Current ratio
b) Quick ratio
c) Debt-to-equity ratio
d) Return on equity (ROE)
Answer: b) Quick ratio
The operating margin is calculated by dividing:
a) Operating income by net sales
b) Net income by total assets
c) Gross profit by net sales
d) Total liabilities by total equity
Answer: a) Operating income by net sales
Which financial ratio measures the efficiency of a company’s use of its assets to generate sales?
a) Return on investment (ROI)
b) Current ratio
c) Asset turnover ratio
d) Gross profit margin
Answer: c) Asset turnover ratio
The debt ratio is calculated by dividing:
a) Total liabilities by total equity
b) Total assets by total equity
c) Net income by total equity
d) Total liabilities by total assets
Answer: d) Total liabilities by total assets
Which financial statement shows the changes in a company’s retained earnings over a period of time?
a) Income statement
b) Cash flow statement
c) Balance sheet
d) Statement of retained earnings
Answer: d) Statement of retained earnings
A high inventory turnover ratio indicates:
a) Efficient management of inventory
b) Effective collection of receivables
c) Low liquidity position
d) Poor credit sales performance
Answer: a) Efficient management of inventory
Which financial ratio measures the percentage of each sales dollar that is retained as net income?
a) Return on assets (ROA)
b) Return on investment (ROI)
c) Profit margin
d) Debt-to-equity ratio
Answer: c) Profit margin
The earnings per share (EPS) is calculated by dividing:
a) Net income by total assets
b) Market price per share by earnings per share
c) Dividends per share by market price per share
d) Total equity by net income
Answer: b) Market price per share by earnings per share
The cash flow from operating activities includes:
a) Cash received from issuing stocks
b) Cash paid for interest expenses
c) Cash received from selling fixed assets
d) Cash paid to suppliers for inventory
Answer: d) Cash paid to suppliers for inventory
Which financial ratio measures the long-term debt-paying ability of a company?
a) Current ratio
b) Debt ratio
c) Return on equity (ROE)
d) Times interest earned (TIE) ratio
Answer: d) Times interest earned (TIE) ratio