CFI FMVA Questions with correct answers
Which of the following items are not included when determining income
from operations? Correct Answer-Taxes
Which ratio would you use to determine the profitability of the goods
sold by a company? Correct Answer-Gross profit margin
When performing a vertical analysis which income statement item do
you use to determine the cost contribution for each expense category?
(What is the denominator?) Correct Answer-Sales
Horizontal analysis allows us to analyze performance over: Correct
Answer-Time
When calculating the quick ratio or "acid test" which current asset or
liability is omitted? Correct Answer-Inventory
For which organization would you expect to see the highest inventory
turnover ratio? Correct Answer-Grocery retailer
What actions could a company take to reduce its working capital funding
gap? Correct Answer-Tighten customer credit terms
The debt to equity ratio indicates: Correct Answer-The proportion of the
company financed by lenders versus owners
,Which of the following items are not included in working capital?
Correct Answer-Short term investments
When calculating turnover of property plant & equipment and
receivables, which item from the income statement do we use? Correct
Answer-Sales
If a company wanted to finance the purchase of equipment without
diluting shareholders equity, which of the following operation could it
consider? Correct Answer-Obtaining a loan from a bank
Working capital movement is included in which section of the cash flow
statement? Correct Answer-Operating activities
The debt to tangible net worth ratio is calculated as follows: Correct
Answer-Interest Bearing Liabilities / (Equity - Intangible Assets)
If the total assets to equity ratio of a company is increasing, it is possible
that: Correct Answer-The company is increasing the use of debt and
getting higher financial leverage
Which ratio is not one of the three ratios that multiply together to
produce the return on equity ratio? Correct Answer-Operating profit
margin
,Which financial leverage ratio is used with two other ratios to
mathematically produce the return on equity ratio? Correct Answer-
Total Assets / Equity
Which of the following is a tertiary ratio that drives profitability?
Correct Answer-SG&A Expense / Sales
Which ratios indicate how efficiently the company generates sales from
its assets? Correct Answer-Working capital turnover
The net profit margin ratio can mathematically be broken down as "Tax
impact x Capital structure impact x..." Correct Answer-EBIT / Sales
Based on the following information from ABC Company's financial
analysis, which one of the following statements is NOT true? Correct
Answer-The company's ability to cover its short-term obligations is
getting higher over the five years.
Which of the following best describes accounting principles in general?
Correct Answer-They outline the fundamental rules and concepts and
establish the framework on which detailed accounting standards are
based.
A sound accounting framework allows for all of the following benefits
except: Correct Answer-Identical items being reported on the financial
statements of different companies
, Conservatism Principle Correct Answer-It provides guidance on how to
record transactions when there is uncertainty.
Historical Cost Principle Correct Answer-It states that assets and
liabilities are recorded on the financial statements at the cost at which
they were acquired or assumed.
Objectivity Principle Correct Answer-It states that financial statements
must be free from bias and based on verifiable evidence.
Economic Entity Principle Correct Answer-It states that transactions
carried out by a business are separated from those conducted by its
owner.
Matching Principle Correct Answer-It states that the expenses of a
business should be recorded in the periods in which the corresponding
revenues are earned.
On March 1st, Mr. Smithe signed up for a fitness program at Fit Co. and
paid $960 for the entire program upfront. The program includes a total
of 12 sessions and two sessions are delivered each month. How much
revenue from Mr. Smithe should Fit Co. recognize at the end of March?
Correct Answer-$160
Which of the following characteristics does not enhance the usefulness
of financial information? Correct Answer-Relevance
Which of the following items are not included when determining income
from operations? Correct Answer-Taxes
Which ratio would you use to determine the profitability of the goods
sold by a company? Correct Answer-Gross profit margin
When performing a vertical analysis which income statement item do
you use to determine the cost contribution for each expense category?
(What is the denominator?) Correct Answer-Sales
Horizontal analysis allows us to analyze performance over: Correct
Answer-Time
When calculating the quick ratio or "acid test" which current asset or
liability is omitted? Correct Answer-Inventory
For which organization would you expect to see the highest inventory
turnover ratio? Correct Answer-Grocery retailer
What actions could a company take to reduce its working capital funding
gap? Correct Answer-Tighten customer credit terms
The debt to equity ratio indicates: Correct Answer-The proportion of the
company financed by lenders versus owners
,Which of the following items are not included in working capital?
Correct Answer-Short term investments
When calculating turnover of property plant & equipment and
receivables, which item from the income statement do we use? Correct
Answer-Sales
If a company wanted to finance the purchase of equipment without
diluting shareholders equity, which of the following operation could it
consider? Correct Answer-Obtaining a loan from a bank
Working capital movement is included in which section of the cash flow
statement? Correct Answer-Operating activities
The debt to tangible net worth ratio is calculated as follows: Correct
Answer-Interest Bearing Liabilities / (Equity - Intangible Assets)
If the total assets to equity ratio of a company is increasing, it is possible
that: Correct Answer-The company is increasing the use of debt and
getting higher financial leverage
Which ratio is not one of the three ratios that multiply together to
produce the return on equity ratio? Correct Answer-Operating profit
margin
,Which financial leverage ratio is used with two other ratios to
mathematically produce the return on equity ratio? Correct Answer-
Total Assets / Equity
Which of the following is a tertiary ratio that drives profitability?
Correct Answer-SG&A Expense / Sales
Which ratios indicate how efficiently the company generates sales from
its assets? Correct Answer-Working capital turnover
The net profit margin ratio can mathematically be broken down as "Tax
impact x Capital structure impact x..." Correct Answer-EBIT / Sales
Based on the following information from ABC Company's financial
analysis, which one of the following statements is NOT true? Correct
Answer-The company's ability to cover its short-term obligations is
getting higher over the five years.
Which of the following best describes accounting principles in general?
Correct Answer-They outline the fundamental rules and concepts and
establish the framework on which detailed accounting standards are
based.
A sound accounting framework allows for all of the following benefits
except: Correct Answer-Identical items being reported on the financial
statements of different companies
, Conservatism Principle Correct Answer-It provides guidance on how to
record transactions when there is uncertainty.
Historical Cost Principle Correct Answer-It states that assets and
liabilities are recorded on the financial statements at the cost at which
they were acquired or assumed.
Objectivity Principle Correct Answer-It states that financial statements
must be free from bias and based on verifiable evidence.
Economic Entity Principle Correct Answer-It states that transactions
carried out by a business are separated from those conducted by its
owner.
Matching Principle Correct Answer-It states that the expenses of a
business should be recorded in the periods in which the corresponding
revenues are earned.
On March 1st, Mr. Smithe signed up for a fitness program at Fit Co. and
paid $960 for the entire program upfront. The program includes a total
of 12 sessions and two sessions are delivered each month. How much
revenue from Mr. Smithe should Fit Co. recognize at the end of March?
Correct Answer-$160
Which of the following characteristics does not enhance the usefulness
of financial information? Correct Answer-Relevance
