CBP CBP Business Finance and Accounting

Question 1

Which financial statement shows a company's revenues and expenses over a specific period?

Accepted Answer

Income Statement

Answer

The income statement (profit and loss statement) summarizes revenues and expenses over a reporting period to show net profit or loss.

Question 2

What does the term 'accounts payable' refer to in business accounting?

Accepted Answer

Money the company owes to suppliers or vendors

Answer

Accounts payable represents short-term liabilities — amounts a company owes to its suppliers and vendors for goods or services received.

Question 3

What is the formula for calculating gross profit?

Accepted Answer

Revenue minus cost of goods sold

Answer

Gross profit equals revenue minus the cost of goods sold (COGS), showing profitability before operating expenses are deducted.

Question 4

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

Accepted Answer

Quick ratio

Answer

The quick ratio (acid-test ratio) measures short-term liquidity by comparing cash, marketable securities, and receivables to current liabilities, excluding inventory.

Question 5

What is 'depreciation' in the context of business accounting?

Accepted Answer

The allocation of an asset's cost over its useful life

Answer

Depreciation systematically allocates the cost of a tangible asset over its useful life, reducing taxable income and reflecting the asset's decreasing value.

(CBP) Certified Business Professional Practice Test

(CBP) Certified Business Professional Practice Test

CBP CBP Business Finance and Accounting