CFA Level 1 Financial Ratios questions and correct answers GRADED A+

CFA LEVEL 1 FINANCIAL
RATIOS QUESTIONS AND
CORRECT ANSWERS
GRADED A+ 2025-2026
Activity Ratios - ANS-Measure how efficiently a company performs day-to-day tasks
such as the collection of receivables and management of inventory


Days of Inventory on hand - ANS-days in accounting period/inventory turnover


Inventory turnover - ANS-cost of goods sold/average inventory


Receivables turnover - ANS-revenue (or revenue from credit sales) / average receivables


Days Sales Outstanding - ANS-Number of days in period / Receivables turnover


Payable Turnover - ANS-purchases / average payables


Number of days payables - ANS-Number of days in period / Payables turnover


Working Capital turnover - ANS-revenue / average working capital


Fixed Assets turnover - ANS-revenue/ average fixed assets


total assets turnover - ANS-revenue / average total assets

, Liquidity Ratios - ANS-Measures of the short-term ability of the company to pay its
maturing obligations and to meet unexpected needs for cash.


Current Ratio - ANS-current assets / current liabilities


Quick Ratio - ANS-(Current Assets - Inventory) / Current Liabilities


Cash Ratio - ANS-cash + marketable securities / current liabilities


Defensive Interval Ratio - ANS-(Cash + Short-term marketable investments +
Receivables) / Daily cash expenditures


Cash Conversion Cycle - ANS-DOH+DSO -number of days payables


Solvency Ratios - ANS-measures a businesses ability to service long term obligations i.
(AKA leverage or LT Debt ratios)


Debt-to-assets - ANS-Total Debt/Total Assets


Debt-to-capital - ANS-Total Debt/(Total Debt + Total
Shareholders Equity)


Debt to Equity Ratio - ANS-Total Debt/Total shareholder's Equity


financial leverage - ANS-average total assets / average total equity


Interest Coverage - ANS-EBIT / interest payments


Fixed charge Coverage - ANS-(EBIT + Lease Payments)/(Interest Payments + Lease
Payments)