Page | 1
D076 PRE-ASSESSMENT 2026
QUESTIONS AND ANSWERS | A+
GRADED | WITH EXPERT SOLUTIONS
Which principle of ratio analysis means that ratios are open for
analyst interpretation, are not governed by rules, and allow
creativity to work according to a particular company or asset? -
correct answer -Flexibility
Comparing a firm's ratios across time. - correct answer -Trend
Analysis
Comparing a firm's financial ratios to other firms' ratios or industry
averages. - correct answer -Cross-sectional Analysis
As an active investor, Maria is analyzing her portfolio to decide if
there are any stocks she should remove from her pool of financial
securities. A company she has invested in, Quiet Flag Industries,
just released its annual report.
Which kind of method should Maria use to see if the company has
improved? - correct answer -Trend analysis
, Page | 2
An investment analyst is concerned about a construction
company's ability to sell its inventory to meet current obligations,
because much of the inventory (commercial buildings) it builds
and sells takes longer than a year to construct.
Which ratio should this analyst use to consider the effect of the
firm's inventory on the firm's ability to meet current obligations? -
correct answer -Quick ratio
Why are ratios considered flexible? - correct answer -Because
they are not regulated and can be changed or invented according
to a firm's needs
Which statement below is an example of how ratios are used in
the field of finance? - correct answer -A firm's ratios are compared
with those of a benchmark peer group to determine the firm's
relative strength and performance.
How might calculating financial ratios help shareholders? - correct
answer -Ratios can be used to determine whether a firm is
maximizing shareholder wealth.
D076 PRE-ASSESSMENT 2026
QUESTIONS AND ANSWERS | A+
GRADED | WITH EXPERT SOLUTIONS
Which principle of ratio analysis means that ratios are open for
analyst interpretation, are not governed by rules, and allow
creativity to work according to a particular company or asset? -
correct answer -Flexibility
Comparing a firm's ratios across time. - correct answer -Trend
Analysis
Comparing a firm's financial ratios to other firms' ratios or industry
averages. - correct answer -Cross-sectional Analysis
As an active investor, Maria is analyzing her portfolio to decide if
there are any stocks she should remove from her pool of financial
securities. A company she has invested in, Quiet Flag Industries,
just released its annual report.
Which kind of method should Maria use to see if the company has
improved? - correct answer -Trend analysis
, Page | 2
An investment analyst is concerned about a construction
company's ability to sell its inventory to meet current obligations,
because much of the inventory (commercial buildings) it builds
and sells takes longer than a year to construct.
Which ratio should this analyst use to consider the effect of the
firm's inventory on the firm's ability to meet current obligations? -
correct answer -Quick ratio
Why are ratios considered flexible? - correct answer -Because
they are not regulated and can be changed or invented according
to a firm's needs
Which statement below is an example of how ratios are used in
the field of finance? - correct answer -A firm's ratios are compared
with those of a benchmark peer group to determine the firm's
relative strength and performance.
How might calculating financial ratios help shareholders? - correct
answer -Ratios can be used to determine whether a firm is
maximizing shareholder wealth.
