MR Financial Analysis and Reporting 2

Question 1

Which financial ratio measures a company's ability to pay short-term obligations with its most liquid assets, excluding inventory?

Accepted Answer

Quick ratio

Answer

The quick ratio (acid-test ratio) measures liquidity using only cash, marketable securities, and receivables, excluding inventory.

Question 2

In a cash flow statement, which section reports proceeds from issuing stock or bonds?

Accepted Answer

Financing activities

Answer

Financing activities include transactions with owners and creditors, such as issuing stock, paying dividends, and borrowing or repaying debt.

Question 3

A management representative reviewing a budget variance report notices actual expenses are 15% above budget. This is best described as a:

Accepted Answer

Unfavorable variance

Answer

When actual expenses exceed budgeted amounts, the variance is unfavorable because it negatively impacts profitability.

Question 4

Which method of inventory valuation assumes the most recently purchased items are sold first?

Accepted Answer

LIFO

Answer

LIFO (Last-In, First-Out) assumes the most recently acquired inventory is sold first, which can affect cost of goods sold and tax liability.

Question 5

A management representative needs to evaluate whether a new project will generate sufficient returns. Which metric compares the project's present value of inflows to its initial cost?

Accepted Answer

Net present value

Answer

Net present value (NPV) discounts future cash inflows to present value and subtracts the initial investment; a positive NPV indicates the project adds value.

(MR) Management Representative Certification Practice Test

(MR) Management Representative Certification Practice Test

MR Financial Analysis and Reporting 2