Practice Test Geeks(CFE) Certified Financial Examiner Practice Test
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Financial Analysis & Reporting Flashcards

7 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Analysis & Reporting flashcards as text

  1. A company reports a current ratio of 0.8. What does this most directly indicate about its short-term financial position?

    Answer: Current liabilities exceed current assets

    A current ratio below 1.0 means current liabilities exceed current assets, signaling potential liquidity risk.

  2. Under ASC 842, operating leases are reflected on the lessee's balance sheet as:

    Answer: A right-of-use asset and a corresponding lease liability

    ASC 842 requires lessees to recognize a right-of-use asset and lease liability for virtually all operating leases.

  3. Which financial metric best measures how efficiently a company converts its invested capital into profit?

    Answer: Return on invested capital (ROIC)

    ROIC measures net operating profit after tax divided by invested capital, directly gauging capital efficiency.

  4. A financial examiner notices that a company's days sales outstanding (DSO) increased from 32 to 67 days year-over-year. The most likely concern is:

    Answer: Deteriorating accounts receivable collectability or aggressive revenue recognition

    A sharp DSO increase suggests customers are paying more slowly or revenue was recognized prematurely, raising fraud and credit risk flags.

  5. In a common-size income statement, all line items are expressed as a percentage of:

    Answer: Net revenues or net sales

    Common-size income statements normalize each line item to net revenues, enabling cross-period and cross-company comparisons.

  6. Which of the following best describes the difference between FIFO and LIFO inventory accounting during a period of rising prices?

    Answer: FIFO produces higher net income and higher ending inventory than LIFO

    During inflation, FIFO assigns older, lower costs to COGS, resulting in higher net income and a higher balance sheet inventory value than LIFO.

  7. The indirect method of presenting the statement of cash flows starts with:

    Answer: Net income, then adjusts for non-cash items and working capital changes

    The indirect method reconciles net income to net cash from operations by adding back non-cash charges and adjusting for working capital movements.