BMO Financial Analysis & Risk Evaluation

Question 1

Which financial ratio is commonly used to assess a company's liquidity?

Accepted Answer

Current Ratio

Answer

Debt-to-Equity Ratio

Answer

Return on Investment (ROI)

Answer

Net Profit Margin

Question 2

What is the primary purpose of a risk assessment in financial analysis?

Accepted Answer

To identify potential financial threats

Answer

To maximize profits

Answer

To ensure regulatory compliance

Answer

To increase revenue streams

Question 3

Which financial metric measures profitability relative to shareholders' equity?

Accepted Answer

Return on Equity (ROE)

Answer

Earnings Per Share (EPS)

Answer

Return on Assets (ROA)

Answer

Price-to-Earnings Ratio (P/E)

Question 4

What is the primary function of diversification in risk management?

Accepted Answer

To minimize risk through asset allocation

Answer

To maximize short-term gains

Answer

To concentrate investments in one sector

Answer

To avoid market competition

Question 5

Which financial instrument is commonly used to hedge against market risk?

Accepted Answer

Options

Answer

Bonds

Answer

Mutual Funds

Answer

Certificates of Deposit (CDs)

Question 6

What does a high debt-to-equity ratio indicate about a company?

Accepted Answer

High reliance on debt financing

Answer

Low financial leverage

Answer

Strong cash reserves

Answer

High return on investment