CPA: FAR: Ratios questions and
answers
Profitability Ratios - AnswerMeasure aspects of a firm's operating (income/loss) results on a relative
basis.
Working Capital Ratio - AnswerCurrent Assets / Current Liabilties
Return on Owners' Equity - AnswerNet Income / Average Stockholders' Equity
Acid Test Ratio - Answer(Cash + Net Receivables + Marketable Securities) / Current Liabilities
Quick Ratio - Answeranother name for Acid Test Ratio
Operating Cycle Length - Answer(Days' Sales in AR + Days' Supply in Inventory) / Days' in Operating
Cycle
Equity/Investment Leverage Ratios - Answerprovides measures of relative sources or equity and
value.
Return on Common Stockholders' Equity - Answer(Net Income - Current Period Preferred Dividend
Obligation) / Average Common Stock Equity
Book Value per Preferred Share - AnswerPreferred Shareholders' Equity (including dividends in
arrears) / Number of Outstanding Preferred Stocks
Times Preferred Dividend - AnswerNet Income / Annual Preferred Dividend Obligation
Operational Activity Ratios - Answermeasures the efficiency with which a firm carries out its
operating activities.
Financial Statement Ratio Analysis - AnswerThe development of quantitative relationships between
various elements of a firm's financial statements
answers
Profitability Ratios - AnswerMeasure aspects of a firm's operating (income/loss) results on a relative
basis.
Working Capital Ratio - AnswerCurrent Assets / Current Liabilties
Return on Owners' Equity - AnswerNet Income / Average Stockholders' Equity
Acid Test Ratio - Answer(Cash + Net Receivables + Marketable Securities) / Current Liabilities
Quick Ratio - Answeranother name for Acid Test Ratio
Operating Cycle Length - Answer(Days' Sales in AR + Days' Supply in Inventory) / Days' in Operating
Cycle
Equity/Investment Leverage Ratios - Answerprovides measures of relative sources or equity and
value.
Return on Common Stockholders' Equity - Answer(Net Income - Current Period Preferred Dividend
Obligation) / Average Common Stock Equity
Book Value per Preferred Share - AnswerPreferred Shareholders' Equity (including dividends in
arrears) / Number of Outstanding Preferred Stocks
Times Preferred Dividend - AnswerNet Income / Annual Preferred Dividend Obligation
Operational Activity Ratios - Answermeasures the efficiency with which a firm carries out its
operating activities.
Financial Statement Ratio Analysis - AnswerThe development of quantitative relationships between
various elements of a firm's financial statements
