Financial Management Quiz

What is the purpose of the Statement of Changes in Owner's Equity?

• To show changes in owner's capital due to activities

• To show changes in employee salaries and benefits

• To show changes in total assets and liabilities

• To show changes in net income and expenses

What is the formula for calculating the Current Ratio?

• Total Assets / Total Liabilities

• Current Assets / Current Liabilities

• Cost of Goods Sold / Average Inventory

• Net Sales / Average Trade Receivable

What does the Acid Test Ratio measure?

• Short-term liquidity of the company

• Ability of the business to pay its short-term obligations using its most liquid assets

• Number of times a company's inventory is sold and replaced in a year

• Company's efficiency in collecting the amount due from its customers

What is the purpose of Horizontal Analysis?

• To compare a company's current financial position and performance with those of past years

• To analyze components of assets, liabilities, and capital compared to its whole

• To summarize the cash receipts and cash disbursements for the accounting period

• To compare the company to another company in a different industry

What does the Debt Ratio measure?

• Extent of total assets financed by liabilities

• Extent of assets financed by the owner

• Measures the business' ability to pay the interest coming from its liabilities

• Compares the financing provided by the creditor against those provided by the owner

What is the purpose of the Statement of Cash Flow?

• To compare a company's current financial position and performance with those of past years

• To summarize the cash receipts and cash disbursements for the accounting period

• To show changes in owner's capital due to activities

• To analyze components of assets, liabilities, and capital compared to its whole

What is the formula for calculating the Quick Ratio?

• Total Liabilities / Total Assets

• Cash + Short Term Investments + Trade Receivables / Current Liabilities

• Net Sales / Average Trade Receivable

• Current Assets / Current Liabilities

What does the Equity Ratio measure?

• Extent of assets financed by the owner

• Compares the financing provided by the creditor against those provided by the owner

• Extent of total assets financed by liabilities

• Measures the business' ability to pay the interest coming from its liabilities

What is the purpose of Vertical Analysis?

• To compare a company's current financial position and performance with those of past years

• To analyze components of assets, liabilities, and capital compared to its whole

• To summarize the cash receipts and cash disbursements for the accounting period

• To compare the company to another company in a different industry

What is the formula for calculating the Debt to Equity Ratio?

• Total Liabilities / Total Assets

• Total Equity / Total Assets

• Total Liabilities / Total Equity

• Operating Income / Interest Expense