CFM CFM Financial Reporting & Analysis

Question 1

Which financial statement shows a company's revenues, expenses, and net income over a specific period?

Accepted Answer

Income Statement

Answer

The income statement (also called profit and loss statement) summarizes revenues and expenses to show net income or loss over a reporting period.

Question 2

Under US GAAP, which inventory costing method assumes the most recently purchased items are sold first?

Accepted Answer

LIFO

Answer

LIFO (Last-In, First-Out) assumes the most recently acquired inventory is sold first, which is permitted under US GAAP but prohibited under IFRS.

Question 3

What does the current ratio measure?

Accepted Answer

Short-term liquidity by comparing current assets to current liabilities

Answer

The current ratio (current assets ÷ current liabilities) measures a company's ability to meet its short-term obligations with its short-term assets.

Question 4

Which accounting principle requires expenses to be recorded in the same period as the revenues they helped generate?

Accepted Answer

Matching principle

Answer

The matching principle dictates that expenses must be recognized in the same period as the revenues they are associated with, ensuring accurate profit reporting.

Question 5

What is the formula for Return on Assets (ROA)?

Accepted Answer

Net Income / Total Assets

Answer

ROA = Net Income / Total Assets, measuring how efficiently a company uses its assets to generate profit.

CFM - Certified Finance Manager Practice Test

CFM - Certified Finance Manager Practice Test

CFM CFM Financial Reporting & Analysis