FA Financial Reporting and Analysis 3

Question 1

What is the formula for Return on Equity (ROE)?

Accepted Answer

Net Income ÷ Shareholders' Equity

Answer

Net Income ÷ Total Assets

Answer

Operating Income ÷ Revenue

Answer

Net Income ÷ Total Liabilities

Question 2

Which of the following would increase a company's quick ratio?

Accepted Answer

Collecting outstanding accounts receivable

Answer

Purchasing additional inventory on credit

Answer

Paying dividends from cash

Answer

Buying equipment with cash

Question 3

What is goodwill on a balance sheet?

Accepted Answer

The excess of purchase price over fair value of net assets acquired

Answer

A tangible fixed asset

Answer

Accumulated depreciation on intangibles

Answer

Cash paid in advance for services

Question 4

Which financial metric best measures a company's ability to service its debt from operations?

Accepted Answer

Interest Coverage Ratio

Answer

Price-to-Earnings Ratio

Answer

Book Value Per Share

Answer

Dividend Yield

Question 5

Under the indirect method of cash flow preparation, net income is adjusted for:

Accepted Answer

Non-cash items and changes in working capital

Answer

Only cash transactions

Answer

Only depreciation charges

Answer

Capital expenditures only

Question 6

Which ratio compares market value to book value of a company's stock?

Accepted Answer

Price-to-Book Ratio

Answer

P/E Ratio

Answer

EV/EBITDA

Answer

Dividend Payout Ratio