FMVA (CFI) EXAM QUESTIONS & ANSWERS
UPDATED & RATED 100% CORRECT
1. Gross profit margin shows how much is spent on producing the good or service that is
sold for every dollar of sales revenue. (Profitability ratio)
Gross Profit Margin = Gross Profit/Sales
2. Operating compares the operating income of a company to its net sales. It is an
Profit Margin
indication of the efficiency of the operation
Operating Profit Margin = EBIT/Sales
3. Net profit margin shows how much is earned for every dollar of sales revenue.
Net profit margin = Net income / Sales
4. Tax ratio shows how well management manages tax. (Efficiency ratio)
Tax ratio = Tax expense / Pre-tax income
5. Interest shows how much income is available to service debt costs. (Leverage
Coverage Ratio ratio)
Interest coverage ratio = EBIT(DA) / Interest expenses
6. Current Ratio measures the ability of a company to cover its obligations in the short
term.
(Liquidity ratio)
Current ratio = Current assets / Current liabilities
7. Quick ratio / provides a more prudent measure of short-term liquidity recognizing
acid test ratio
that the inventory cannot always be readily converted into cash.
(Liquidity ratio)
1/
15
, FMVA (CFI) EXAM QUESTIONS & ANSWERS
UPDATED & RATED 100% CORRECT
Quick ratio = (Current assets - Inventory) / Current liabilities
8. Asset turnover ratio s hows how effective the company is in generating sales from its
assets. (Efficiency ratio)
c
2/
15
UPDATED & RATED 100% CORRECT
1. Gross profit margin shows how much is spent on producing the good or service that is
sold for every dollar of sales revenue. (Profitability ratio)
Gross Profit Margin = Gross Profit/Sales
2. Operating compares the operating income of a company to its net sales. It is an
Profit Margin
indication of the efficiency of the operation
Operating Profit Margin = EBIT/Sales
3. Net profit margin shows how much is earned for every dollar of sales revenue.
Net profit margin = Net income / Sales
4. Tax ratio shows how well management manages tax. (Efficiency ratio)
Tax ratio = Tax expense / Pre-tax income
5. Interest shows how much income is available to service debt costs. (Leverage
Coverage Ratio ratio)
Interest coverage ratio = EBIT(DA) / Interest expenses
6. Current Ratio measures the ability of a company to cover its obligations in the short
term.
(Liquidity ratio)
Current ratio = Current assets / Current liabilities
7. Quick ratio / provides a more prudent measure of short-term liquidity recognizing
acid test ratio
that the inventory cannot always be readily converted into cash.
(Liquidity ratio)
1/
15
, FMVA (CFI) EXAM QUESTIONS & ANSWERS
UPDATED & RATED 100% CORRECT
Quick ratio = (Current assets - Inventory) / Current liabilities
8. Asset turnover ratio s hows how effective the company is in generating sales from its
assets. (Efficiency ratio)
c
2/
15
