Deck 2: Analyzing Financial Statements and Ratios

Question 1

Which of the following is a picture or snapshot of the financial condition of an organization at a specific point in time?

A) Balance sheet
B) Income statement
C) Statement of cash flows
D) Budget
E) None of the above

Answer 1

A

Question 2

Which ratio measures how an organization finances its operation with debt and equity?

A) Current ratio
B) Quick ratio
C) Total asset turnover ratio
D) Inventory turnover ratio
E) Debt ratio

Answer 2

E

Question 3

Which ratio measures how often an organization sells and replaces its inventory over a specified period of time?

A) Current ratio
B) Quick ratio
C) Total asset turnover ratio
D) Inventory turnover ratio
E) Debt ratio

Answer 3

D

Question 4

Which of the following is an estimate of how much money investors will pay for each dollar of the organization's earnings?

A) Interest coverage ratio
B) Net profit margin
C) Return on equity
D) Market value
E) Price-to-earnings ratio

Question 5

Which financial statement tracks cash in and cash out of an organization over a specified period of time?

A) Balance sheet
B) Income statement
C) Statement of cash flows
D) Budget
E) None of the above

Question 6

Which of the following measures the return rate an organization's owners or shareholders are receiving on their investments?

A) Interest coverage ratio
B) Net profit margin
C) Return on equity
D) Market value
E) Price-to-earnings ratio

Question 7

The __________ shows the organization's income over a specified period of time.

A) Balance sheet
B) Income statement
C) Statement of cash flows
D) Budget
E) None of the above

Question 8

An estimation of an organization's worth according to the stock market is __________.

A) Interest coverage ratio
B) Net profit margin
C) Return on equity
D) Market value
E) Price-to-earnings ratio

Question 9

Which of the following is a profitability ratio that measures the percentage of an organization's total sales or revenues that was net profit or income?

A) Interest coverage ratio
B) Net profit margin
C) Return on equity
D) Market value
E) Price-to-earnings ratio

Question 10

Which ratio is an indication of whether an organization can meet its current liabilities―those due within a year―with its current assets?

A) Current ratio
B) Quick ratio
C) Total asset turnover ratio
D) Inventory turnover ratio
E) Debt ratio

Question 11

Most business organizations, including those in the sport industry, do not use double-entry bookkeeping.

Question 12

When using the ledger of T-accounts, credits are entered on the right-hand side and debits are entered on the left-hand side.

Question 13

The balance sheet represents what the organization's financial performance is over a period of time.

Question 14

A common example of a long-term liability is renovation.

Question 15

There is no lag time between when a transaction is made and when payment is exchanged in accrual basis accounting.

Question 16

The balance sheet provides information as to whether the company has sufficient cash on hand to meet its debts and obligations.

Question 17

Current ratio values can be used as a comparative tool.

Question 18

Two of the most common activity ratios are the total asset turnover ratio and the inventory turnover ratio.

Question 19

Total assets is used as the denominator in the calculation of return on assets.

Question 20

How a company chooses to finance its operation with debt versus existing loans is known as leverage.