CFM Financial Reporting & Analysis Flashcards
6 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CFM Financial Reporting & Analysis flashcards as text
Which ratio measures the percentage of earnings paid out as dividends to shareholders?
Answer: Payout Ratio
The payout ratio (dividends paid ÷ net income) shows what percentage of profits are distributed to shareholders as dividends.
What does a Days Sales Outstanding (DSO) ratio indicate?
Answer: The average number of days to collect payment after a sale
DSO measures the average number of days a company takes to collect payment from customers after a credit sale, indicating accounts receivable efficiency.
Under the indirect method of the cash flow statement, net income is adjusted for which of the following?
Answer: Non-cash items and changes in working capital
The indirect method starts with net income and adjusts for non-cash items (e.g., depreciation) and changes in working capital accounts to arrive at operating cash flow.
Which of the following would be classified as a financing activity on the cash flow statement?
Answer: Issuance of common stock
Issuance of common stock is a financing activity because it involves raising capital from shareholders, which changes the company's equity structure.
A company has total assets of $500,000 and total liabilities of $200,000. What is the debt-to-equity ratio?
Answer: 0.67
Total equity = $500,000 - $200,000 = $300,000; Debt-to-Equity = $200,000 / $300,000 = 0.67.
Which financial analysis technique compares each line item on the income statement as a percentage of net sales?
Answer: Vertical analysis
Vertical analysis expresses each line item as a percentage of a base figure (typically net sales for the income statement), enabling easy comparison across periods or companies.