Financial Analysis Primer

Sales made in foreign currencies must be converted into American dollars before an American company can present those sales in its financial statements.

• True

• False

A business is not required to have a financial system, but most do.

• True

• False

Gross profit margin helps show a company’s efficiency.

• True

• False

Exchange rates are usually not important unless a business sells its product or service in another country or buys goods/raw materials in another country.

• True

• False

A paper-based financial system can be backed up easily.

• True

• False

Record-keeping is important to a business because of the number of transactions and the large amount of money involved.

• True

• False

EBITDA is a financial analysis tool that stands for “earnings before interest, taxes, depreciation, and amortization.”

• True

• False

The balance sheet, income statement, and cash flow statement model the financial operations of the business.

• True

• False

A balance sheet presents the sources and uses of funds for a business during a period of time.

• True

• False

All other things being equal, the higher a company’s profit margin compared with those of other companies, the better.

• True

• False