CCA Financial Statement Analysis 2

Question 1

A borrower has current assets of $500,000, inventory of $150,000, and current liabilities of $250,000. What is its quick ratio?

Accepted Answer

1.4

Answer

Quick ratio = (500,000 - 150,000) / 250,000 = 1.4.

Question 2

Which ratio best measures a borrower's ability to cover both interest and scheduled principal payments from operating cash flow?

Accepted Answer

Debt service coverage ratio

Answer

DSCR compares cash flow available for debt service to total interest plus principal due.

Question 3

A company has accounts receivable of $120,000 and annual credit sales of $1,460,000. What is its days sales outstanding (365-day year)?

Accepted Answer

30 days

Answer

DSO = 120,000 / 1,460,000 x 365 = 30 days.

Question 4

Days inventory on hand rises from 45 to 80 while sales stay flat. What is the most likely credit concern?

Accepted Answer

Slow-moving or obsolete inventory

Answer

Inventory building without sales growth often signals obsolescence or weak demand, risking write-downs.

Question 5

When calculating tangible net worth, which item is deducted from stockholders' equity?

Accepted Answer

Goodwill and other intangible assets

Answer

Tangible net worth removes intangibles such as goodwill because they offer little liquidation value to creditors.

CCA - Certified Credit Analyst Practice Test