Finance for Non-Finance Managers Basic Finance 2

Question 1

A company has current assets of $500,000 and current liabilities of $250,000. What is its current ratio?

Accepted Answer

2.0

Answer

Current ratio = Current Assets / Current Liabilities = $500,000 / $250,000 = 2.0.

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 & Loss statement) reports revenues, expenses, and net income over a period.

Question 3

What does 'accounts payable' represent on a balance sheet?

Accepted Answer

Money the company owes to suppliers

Answer

Accounts payable is a current liability representing amounts owed to suppliers for goods or services received but not yet paid.

Question 4

A manager wants to know how efficiently a company turns inventory into sales. Which ratio is most relevant?

Accepted Answer

Inventory turnover ratio

Answer

Inventory turnover ratio = Cost of Goods Sold / Average Inventory, measuring how quickly inventory is sold.

Question 5

Fixed costs are best described as costs that:

Accepted Answer

Remain constant regardless of production volume

Answer

Fixed costs remain constant within a relevant range regardless of changes in production or sales volume.

Finance for Non-Finance Managers Practice Test