CPFM Financial Statement Analysis 2

Question 1

The current ratio is calculated as which of the following?

Accepted Answer

Current assets divided by current liabilities

Answer

The current ratio equals current assets divided by current liabilities.

Question 2

The quick ratio differs from the current ratio because it excludes which asset?

Accepted Answer

Inventory

Answer

The quick ratio removes inventory because it is the least liquid current asset.

Question 3

A company's gross profit margin is best calculated as which formula?

Accepted Answer

Gross profit divided by revenue

Answer

Gross profit margin equals gross profit divided by revenue.

Question 4

Which financial statement reports a company's revenues and expenses over a period?

Accepted Answer

Income statement

Answer

The income statement summarizes revenues and expenses over a reporting period.

Question 5

Return on equity (ROE) measures profitability relative to which item?

Accepted Answer

Shareholders' equity

Answer

ROE equals net income divided by shareholders' equity.

CPFM Practice Test