15th October 2025 - Day 2 FSA - Part 1

What is the primary purpose of financial statements?

• • To follow industry trends.

• • To provide a clear picture of a company's financial health.

• • To impress potential investors.

• • To track employee hours.

The debt ratio is calculated as

• Total assets / Total liabilities

• Current assets / Current liabilities

• Total liabilities / Total assets

• Current liabilities / Current assets

Ava is reviewing her company's financial statements and needs to identify the different types of accounts. She comes across several items and wants to know which of the following is an example of a liability.

• Notes Payable

• Inventories

• Salaries

• Cash

David is reviewing his monthly financial reports and needs to determine where his business expenses are documented. He wonders, expenses are recorded on which financial statement?

• Balance Sheet

• Notes to the Account

• Income Statement

• Cash Flow Statement

What is the main function of the income statement?

• • To provide a snapshot of financial position.

• • To list all assets and liabilities.

• • To summarize revenues and expenses over a period.

• • To show the company's cash flow.

Which of the following is considered a current asset?

• Notes Payable

• Long-term Investments

• Accounts Receivable

• Land

What does the cash flow statement primarily report?

• Net income

• Cash inflows and outflows

• Financial position at a specific date

• Changes in equity

What is the purpose of the statement of changes in equity?

• To list all liabilities and assets.

• To provide a snapshot of financial position at a specific date.

• To summarize the changes in equity from transactions and other events.

• To show the company's cash flow over a period.

Which financial statement is used to assess a company's profitability over a specific period?

• Statement of Financial Position

• Income Statement

• Statement of Cash Flow

• Statement of Changes in Equity

What does the term 'liquidity' refer to in financial statements?

• The total amount of assets owned by a company.

• The profitability of a company over time.

• The ratio of liabilities to equity.

• The ability to meet short-term obligations.