FINANCIAL STATEMENT ANALYSIS EXAMINATION QUESTIONS AND CORRECT ANSWER WITH EXPLANATION GRADED A+ STUDY GUIDE

FINANCIAL STATEMENT ANALYSIS EXAMINATION
QUESTIONS AND CORRECT ANSWER WITH
EXPLANATION GRADED A+ STUDY GUIDE SOUTHERN
NEW HAMPSHIRE UNIVERSITY
1. Financial statement analysis involves:
A. Evaluating a company’s financial performance
B. Manufacturing products
C. Setting taxes
D. Hiring employees
Answer: A
Rationale: It assesses financial health using statements.

2. The main financial statements include:
A. Income statement, balance sheet, cash flow statement
B. Budget only
C. Payroll report only
D. Marketing report only
Answer: A
Rationale: These are core financial reports.

3. The income statement shows:
A. Profit or loss over a period
B. Assets only
C. Liabilities only
D. Cash only
Answer: A
Rationale: It shows performance.

4. The balance sheet shows:
A. Financial position at a point in time
B. Profit over time
C. Sales only
D. Expenses only
Answer: A
Rationale: Snapshot of assets and liabilities.

,5. The cash flow statement shows:
A. Cash inflows and outflows
B. Profit only
C. Taxes only
D. Equity only
Answer: A
Rationale: Tracks cash movement.

6. Assets are:
A. Resources owned by a company
B. Company debts
C. Expenses
D. Taxes
Answer: A
Rationale: Economic resources.

7. Liabilities are:
A. Obligations owed
B. Income
C. Assets
D. Revenue
Answer: A
Rationale: What the company owes.

8. Equity is:
A. Owners’ residual interest
B. Company debt
C. Expenses
D. Revenue
Answer: A
Rationale: Owner’s claim.

9. Accounting equation is:
A. Assets = Liabilities + Equity
B. Assets = Revenue – Expenses
C. Equity = Assets – Revenue
D. Liabilities = Assets – Equity
Answer: A
Rationale: Fundamental accounting identity.

, 10. Revenue is:
A. Income from operations
B. Loan amount
C. Expense
D. Liability
Answer: A
Rationale: Earnings from sales.

11. Expenses are:
A. Costs incurred in earning revenue
B. Assets
C. Equity
D. Loans
Answer: A
Rationale: Costs of operation.

12. Gross profit is:
A. Revenue minus cost of goods sold
B. Net income
C. Total assets
D. Equity
Answer: A
Rationale: Basic profitability measure.

13. Net profit is:
A. Revenue minus all expenses
B. Revenue only
C. Assets only
D. Equity only
Answer: A
Rationale: Final profit.

14. Cost of goods sold (COGS) is:
A. Direct production costs
B. Administrative costs
C. Marketing costs
D. Taxes
Answer: A
Rationale: Direct costs of goods.