Finance Exam Questions and Answers
(Latest 2026)
A balance sheet reflects a firm's ____ value on a particular date. - Correct
Answers ✅accounting
True or False: Stockholders' equity appears on the left-hand side of the
balance sheet - Correct Answers ✅False
Balance Sheet Equation - Correct Answers ✅Assets = Liabilities +
Stockholders' Equity
On which side of the balance sheet do liabilities appear? - Correct Answers
✅Right Side
What does stockholders' equity represent? - Correct Answers ✅A residual
claim against the firm's assets
Which of these questions can be answered by reviewing a firm's balance
sheet? - Correct Answers ✅total amount of assets the firm owns,
total amount of debt used for financing
How are assets on a balance sheet listed? - Correct Answers ✅In order of
time taken by an ongoing firm to convert them to cash.
Last claimants to be paid by a firm are the: - Correct Answers
✅stockholders
Writeoff - Correct Answers ✅refers to a decline in the value of a
company's assets
What does EPS stands for? - Correct Answers ✅Earnings Per Share
,Finance Exam Questions and Answers
(Latest 2026)
The short run for a firm is the period of time during which ________. - Correct
Answers ✅Some costs are fixed and output can vary
____ refers to the quickness and ease with which assets can be converted to
____ - Correct Answers ✅liquidity
cash
R - Correct Answers ✅1
Which of the following are included in a firm's inventory? - Correct Answers
✅-Working in progress
-Raw Materials
-Finished Goods
Operating cash flow reflects which one of these? - Correct Answers ✅Tax
payments
W - Correct Answers ✅
How is sustainable growth calculated when equity used in the calculation of
ROE is the beginning value? - Correct Answers ✅ROE x Beginning Value
The enterprise value multiple allows for comparing the value of firms with
different ___ structures. - Correct Answers ✅capital
A times interest earned ratio means ___ - Correct Answers ✅earnings
before interest and taxes
,Finance Exam Questions and Answers
(Latest 2026)
If mgt has been unsuccessful at creating value for the company's
stockholders, the market-to-book ratio will be___ - Correct Answers ✅less
than 1
The ____ identity can help to explain why 2 firms with the same ROE may not
be operating in the same way - Correct Answers ✅DuPont Identity
A ____ PE ratio may indicate that investors believe a company has better
prospects for future growth in earnings. - Correct Answers ✅higher
The reason the quick ratio of Walmart is diff from its current ratio is due to
____ - Correct Answers ✅inventory
If a company's common-size income statement shows a larger percentage
for cost of goods sold this period compared to last period, the company may
be controlling its costs well or it has ____ - Correct Answers ✅raised its
prices relative to costs
Which of these computes days' sales in receivables? - Correct Answers
✅365 / Receivables turnover
What does a current ratio of 1.2 mean? - Correct Answers ✅the firm has
$1.20 in current assets for every $1 in current liabilities
as long as sales requests are being met, a ___ inventory turnover ratio is
better - Correct Answers ✅higher
the sustainable growth rate can be used to ____ - Correct Answers
✅assess planned growth
, Finance Exam Questions and Answers
(Latest 2026)
What does it mean if a company's capital intensity ratio is 2.4? - Correct
Answers ✅Firm requires $2.40 in assets to generate $1 in sales.
What does an inventory turnover ratio of 5 mean? - Correct Answers
✅Entire inventory was sold and replaced 5 times during the year.
Profitability measures such as ROA and ROE are ___ rates of return. - Correct
Answers ✅accounting
Financial planning is a ___ process - Correct Answers ✅iterative
Some financial ratios measure a firm's ___, which shows the ability to meet
short-term obligations without undue stress, while others measure a firm's
financial ___, which demonstrates the ability to meet LT obligations. -
Correct Answers ✅liquidity; leverage
Standardized statements used for the purpose of comparing the financial
statements of diff companies are called ____ - Correct Answers ✅common-
size statements
What is the main difference between the cash coverage ratio and the times
interest earned ratio? - Correct Answers ✅Non-cash expenses
In a financial plan, how is the amount of borrowing determined? - Correct
Answers ✅By mgt's D/E decision
Given an internal growth rate of 3%, a firm can ____ - Correct Answers
✅grow by 3% or less without any additional external financing.
(Latest 2026)
A balance sheet reflects a firm's ____ value on a particular date. - Correct
Answers ✅accounting
True or False: Stockholders' equity appears on the left-hand side of the
balance sheet - Correct Answers ✅False
Balance Sheet Equation - Correct Answers ✅Assets = Liabilities +
Stockholders' Equity
On which side of the balance sheet do liabilities appear? - Correct Answers
✅Right Side
What does stockholders' equity represent? - Correct Answers ✅A residual
claim against the firm's assets
Which of these questions can be answered by reviewing a firm's balance
sheet? - Correct Answers ✅total amount of assets the firm owns,
total amount of debt used for financing
How are assets on a balance sheet listed? - Correct Answers ✅In order of
time taken by an ongoing firm to convert them to cash.
Last claimants to be paid by a firm are the: - Correct Answers
✅stockholders
Writeoff - Correct Answers ✅refers to a decline in the value of a
company's assets
What does EPS stands for? - Correct Answers ✅Earnings Per Share
,Finance Exam Questions and Answers
(Latest 2026)
The short run for a firm is the period of time during which ________. - Correct
Answers ✅Some costs are fixed and output can vary
____ refers to the quickness and ease with which assets can be converted to
____ - Correct Answers ✅liquidity
cash
R - Correct Answers ✅1
Which of the following are included in a firm's inventory? - Correct Answers
✅-Working in progress
-Raw Materials
-Finished Goods
Operating cash flow reflects which one of these? - Correct Answers ✅Tax
payments
W - Correct Answers ✅
How is sustainable growth calculated when equity used in the calculation of
ROE is the beginning value? - Correct Answers ✅ROE x Beginning Value
The enterprise value multiple allows for comparing the value of firms with
different ___ structures. - Correct Answers ✅capital
A times interest earned ratio means ___ - Correct Answers ✅earnings
before interest and taxes
,Finance Exam Questions and Answers
(Latest 2026)
If mgt has been unsuccessful at creating value for the company's
stockholders, the market-to-book ratio will be___ - Correct Answers ✅less
than 1
The ____ identity can help to explain why 2 firms with the same ROE may not
be operating in the same way - Correct Answers ✅DuPont Identity
A ____ PE ratio may indicate that investors believe a company has better
prospects for future growth in earnings. - Correct Answers ✅higher
The reason the quick ratio of Walmart is diff from its current ratio is due to
____ - Correct Answers ✅inventory
If a company's common-size income statement shows a larger percentage
for cost of goods sold this period compared to last period, the company may
be controlling its costs well or it has ____ - Correct Answers ✅raised its
prices relative to costs
Which of these computes days' sales in receivables? - Correct Answers
✅365 / Receivables turnover
What does a current ratio of 1.2 mean? - Correct Answers ✅the firm has
$1.20 in current assets for every $1 in current liabilities
as long as sales requests are being met, a ___ inventory turnover ratio is
better - Correct Answers ✅higher
the sustainable growth rate can be used to ____ - Correct Answers
✅assess planned growth
, Finance Exam Questions and Answers
(Latest 2026)
What does it mean if a company's capital intensity ratio is 2.4? - Correct
Answers ✅Firm requires $2.40 in assets to generate $1 in sales.
What does an inventory turnover ratio of 5 mean? - Correct Answers
✅Entire inventory was sold and replaced 5 times during the year.
Profitability measures such as ROA and ROE are ___ rates of return. - Correct
Answers ✅accounting
Financial planning is a ___ process - Correct Answers ✅iterative
Some financial ratios measure a firm's ___, which shows the ability to meet
short-term obligations without undue stress, while others measure a firm's
financial ___, which demonstrates the ability to meet LT obligations. -
Correct Answers ✅liquidity; leverage
Standardized statements used for the purpose of comparing the financial
statements of diff companies are called ____ - Correct Answers ✅common-
size statements
What is the main difference between the cash coverage ratio and the times
interest earned ratio? - Correct Answers ✅Non-cash expenses
In a financial plan, how is the amount of borrowing determined? - Correct
Answers ✅By mgt's D/E decision
Given an internal growth rate of 3%, a firm can ____ - Correct Answers
✅grow by 3% or less without any additional external financing.
