DECA Finance Fundamentals 2

Question 1

A company has current assets of $120,000 and current liabilities of $80,000. What is its current ratio?

Accepted Answer

1.5

Answer

Current ratio = current assets ÷ current liabilities = $120,000 ÷ $80,000 = 1.5.

Question 2

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

Accepted Answer

Income statement

Answer

The income statement (also called profit and loss statement) reports revenues, expenses, and net income over a period.

Question 3

What does the term 'liquidity' refer to in finance?

Accepted Answer

The ease of converting assets to cash

Answer

Liquidity measures how quickly and easily assets can be converted into cash without significant loss in value.

Question 4

If a bond has a face value of $1,000 and pays 6% annual interest, what is the annual coupon payment?

Accepted Answer

$60

Answer

Annual coupon = face value × coupon rate = $1,000 × 0.06 = $60.

Question 5

Which of the following best describes 'gross profit'?

Accepted Answer

Revenue minus cost of goods sold

Answer

Gross profit equals revenue minus the cost of goods sold, before deducting operating expenses.

(DECA) Distributive Education Clubs of America Practice Test