FREE CA Financial Reporting & Analysis Questions and Answers
Which ratio measures a company’s ability to meet its short-term obligations?
The current ratio, calculated as current assets divided by current liabilities, assesses a company’s short-term financial health.
What does the debt-to-equity ratio measure?
The debt-to-equity ratio measures financial leverage by comparing a company’s total liabilities to its shareholder equity.
Which financial statement provides a snapshot of a company’s financial position at a specific point in time?
The balance sheet shows a company’s assets, liabilities, and equity at a specific date, giving insight into financial stability.
What is the purpose of a cash flow statement?
The cash flow statement shows how cash moves in and out of a business, categorized into operating, investing, and financing activities.
Which accounting principle requires companies to record revenue when earned, regardless of when cash is received?
The accrual accounting principle states that revenue should be recognized when earned, aligning income with the related expenses.
What is the primary purpose of an income statement?
The income statement reports a company’s financial performance over a period, including revenues, expenses, and net profit or loss.