Certified Valuation Analyst CVA Financial Statement Analysis 5

Question 1

Which leverage ratio compares total liabilities to total shareholders' equity?

Accepted Answer

Debt-to-equity ratio

Answer

Current ratio

Answer

Gross margin

Answer

Asset turnover

Question 2

In normalizing earnings, gains from the sale of a fixed asset should be treated how?

Accepted Answer

Removed as a non-operating, non-recurring gain

Answer

Added to recurring revenue

Answer

Capitalized as goodwill

Answer

Treated as cost of goods sold

Question 3

What does a current ratio below 1.0 most directly suggest?

Accepted Answer

Current liabilities exceed current assets, signaling liquidity risk

Answer

The company is highly profitable

Answer

Equity exceeds assets

Answer

Inventory is overvalued

Question 4

Why might an analyst add back non-cash stock-based compensation when estimating cash earnings?

Accepted Answer

It reduces accounting earnings but uses no cash in the period

Answer

It increases tax liability

Answer

It is a recurring cash payment

Answer

It is part of capex

Question 5

Which financial statement reconciles beginning and ending retained earnings?

Accepted Answer

Statement of changes in equity

Answer

Balance sheet only

Answer

Cash flow statement

Answer

Notes to inventory

Question 6

A sharp one-year jump in 'other income' with no operational driver should prompt the analyst to do what?

Accepted Answer

Investigate and likely normalize it out

Answer

Project it as recurring

Answer

Add it to revenue permanently

Answer

Capitalize it as an asset

Question 7

Which margin measures profitability after all operating expenses but before interest and taxes?

Accepted Answer

Operating margin (EBIT margin)

Answer

Net margin

Answer

Gross margin

Answer

Contribution margin