CAA CAA Financial Management & Ethics

Question 1

Which financial ratio measures a company's ability to meet short-term obligations using its most liquid assets?

Accepted Answer

Quick ratio

Answer

The quick ratio (acid-test ratio) excludes inventory from current assets, providing a stricter liquidity measure than the current ratio.

Question 2

Under the AICPA Code of Professional Conduct, which principle requires a CPA to be straightforward and honest in professional relationships?

Accepted Answer

Integrity

Answer

The integrity principle requires CPAs to be honest, candid, and free from deception in all professional and business relationships.

Question 3

The weighted average cost of capital (WACC) is best described as:

Accepted Answer

The average return required by all of a company's capital providers, weighted by their proportions

Answer

WACC blends the cost of equity and cost of debt (after tax) weighted by their respective proportions in the capital structure.

Question 4

Which capital budgeting method calculates the discount rate at which the net present value of a project equals zero?

Accepted Answer

Internal rate of return (IRR)

Answer

IRR is the discount rate that makes the NPV of all cash flows from a project equal to zero.

Question 5

A certified accounting analyst discovers a material misstatement in financial statements that management refuses to correct. What is the most appropriate next step?

Accepted Answer

Escalate to those charged with governance (e.g., audit committee)

Answer

Professional standards require escalating unresolved material misstatements to those charged with governance before considering resignation.

(CAA) Certified Accounting Analyst Practice Test

(CAA) Certified Accounting Analyst Practice Test

CAA CAA Financial Management & Ethics