FREE Accounting Financial Ratios Questions and Answers 



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A current asset account is not which of the following?

Correct! Wrong!

Explanation:
Fixtures are NOT considered a current asset. Fixtures are included in property, plant, and equipment, which is a category of long-term assets for a business.

Which of the following balance sheets is most likely to contain reported amounts that are the closest to their actual values?

Correct! Wrong!

Explanation:
The current value is relatively similar to the recorded and reported amounts because current assets typically "turn over" within a year. Additionally, the current values of current obligations would be similar to the stated amounts.

Which of the following accounts is NOT included in the quick ratio?

Correct! Wrong!

Explanation:
Inventory is NOT regarded as a fast asset. The assets that can be quickly converted into cash are Cash, Short-Term Investments, and Accounts Receivable.

The current asset value divided by the current liability value is.

Correct! Wrong!

Explanation:
A liquidity ratio called the current ratio assesses a company's capacity to settle short-term debts or those that are due within a year. It explains to investors and analysts how a business can use its present assets to the fullest extent possible to pay down its current liabilities and other payables.

When a manufacturer's net income exceeds the cash flow from what activities, the quality of its earnings is questioned.

Correct! Wrong!

Explanation:
Cash flow from operational activities (CFOA) is a measure of, in part, the cash coming in and going out during a firm's daily operations. Net income is the profit a company has achieved for a period. The starting point for calculating cash flow from operating operations is net income.

The current asset MINUS the current liabilities is.

Correct! Wrong!

Explanation:
The difference between a company's current assets—such as cash, accounts receivable/unpaid invoices from customers, and inventories of raw materials and completed goods—and its current liabilities—such as debts and accounts payable—is known as working capital, sometimes known as net working capital (NWC). It's a frequently employed metric to assess an organization's immediate health.

True or false: Free cash flow is the difference between the cash used for financing activities and the cash provided by operating activities.

Correct! Wrong!

Explanation:
Free Operating Cash Flow (FOCF) is a non-GAAP financial metric that the company defines as cash provided by operations, which is the GAAP financial measure that is most directly comparable, fewer capital expenditures and proceeds from the sale of fixed assets.

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