HB CORE FINANCIAL ACCOUNTING
EXAM QUESTIONS AND ANSWERS.
VERIFIED 2025/2026.
Which of the following items would NOT be shown on a statement of cash flows created using
the indirect method?
A. Net Income
B. Retained Earnings
C. Cash, beginning of year
D. Cash, end of year - ANS B. Retained Earnings.
Net Income
Net income is shown in the cash flow from Operating Activities section under the indirect
method.
Retained Earnings
This is the correct answer! Retained earnings is never shown on the statement of cash flows.
Cash, beginning of year
Beginning of year cash balance is shown at the top of a statement of cash flows.
Cash, end of year
End of year cash balance is shown at the bottom of a statement of cash flows.
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Return on Equity (ROE) - ANS Net Income/Total Equity
DuPont Framework Equation - ANS Return on Equity = Profit Margin x Asset Turnover x Equity
Multiplier
Profit margin - ANS net income/net sales
Asset Turnover - ANS Revenue/Average Assets
Leverage equation - ANS total assets/owner's equity.
If no debt, the leverage multiplier is 1.
Gross profit margin - ANS Gross Profit/Sales
Inventory Turnover - ANS cost of goods sold/average inventory
Days Inventory - ANS 365/inventory turnover
Accounts Receivable Turnover - ANS Net Sales / Average Accounts Receivable
Average Collection Period - ANS 365/accounts receivable turnover
Accounts Payable Turnover - ANS COGS/Average Accounts Payable, where credit purchases is
not available
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
EXAM QUESTIONS AND ANSWERS.
VERIFIED 2025/2026.
Which of the following items would NOT be shown on a statement of cash flows created using
the indirect method?
A. Net Income
B. Retained Earnings
C. Cash, beginning of year
D. Cash, end of year - ANS B. Retained Earnings.
Net Income
Net income is shown in the cash flow from Operating Activities section under the indirect
method.
Retained Earnings
This is the correct answer! Retained earnings is never shown on the statement of cash flows.
Cash, beginning of year
Beginning of year cash balance is shown at the top of a statement of cash flows.
Cash, end of year
End of year cash balance is shown at the bottom of a statement of cash flows.
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Return on Equity (ROE) - ANS Net Income/Total Equity
DuPont Framework Equation - ANS Return on Equity = Profit Margin x Asset Turnover x Equity
Multiplier
Profit margin - ANS net income/net sales
Asset Turnover - ANS Revenue/Average Assets
Leverage equation - ANS total assets/owner's equity.
If no debt, the leverage multiplier is 1.
Gross profit margin - ANS Gross Profit/Sales
Inventory Turnover - ANS cost of goods sold/average inventory
Days Inventory - ANS 365/inventory turnover
Accounts Receivable Turnover - ANS Net Sales / Average Accounts Receivable
Average Collection Period - ANS 365/accounts receivable turnover
Accounts Payable Turnover - ANS COGS/Average Accounts Payable, where credit purchases is
not available
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
