CFM CFM Financial Reporting & Analysis 2

Question 1

Which ratio measures the percentage of earnings paid out as dividends to shareholders?

Accepted Answer

Payout Ratio

Answer

The payout ratio (dividends paid ÷ net income) shows what percentage of profits are distributed to shareholders as dividends.

Question 2

What does a Days Sales Outstanding (DSO) ratio indicate?

Accepted Answer

The average number of days to collect payment after a sale

Answer

DSO measures the average number of days a company takes to collect payment from customers after a credit sale, indicating accounts receivable efficiency.

Question 3

Under the indirect method of the cash flow statement, net income is adjusted for which of the following?

Accepted Answer

Non-cash items and changes in working capital

Answer

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.

Question 4

Which of the following would be classified as a financing activity on the cash flow statement?

Accepted Answer

Issuance of common stock

Answer

Issuance of common stock is a financing activity because it involves raising capital from shareholders, which changes the company's equity structure.

Question 5

A company has total assets of $500,000 and total liabilities of $200,000. What is the debt-to-equity ratio?

Accepted Answer

0.67

Answer

Total equity = $500,000 - $200,000 = $300,000; Debt-to-Equity = $200,000 / $300,000 = 0.67.

CFM - Certified Finance Manager Practice Test

CFM - Certified Finance Manager Practice Test

CFM CFM Financial Reporting & Analysis 2