CFI FMVA FLASHCARDS 200
QUESTIONS AND CORRECT
ANSWERS 2025/2026 EXAM GRADED
A+
Which of the following items are not included when determining income
from operations? - ANSWER- Taxes
Which ratio would you use to determine the profitability of the goods
sold by a company? - ANSWER- Gross profit margin
When performing a vertical analysis which income statement item do
you use to determine the cost contribution for each expense category?
(What is the denominator?) - ANSWER- Sales
Horizontal analysis allows us to analyze performance over: - ANSWER-
Time
,When calculating the quick ratio or "acid test" which current asset or
liability is omitted? - ANSWER- Inventory
For which organization would you expect to see the highest inventory
turnover ratio? - ANSWER- Grocery retailer
What actions could a company take to reduce its working capital funding
gap? - ANSWER- Tighten customer credit terms
The debt to equity ratio indicates: - ANSWER- The proportion of the
company financed by lenders versus owners
Which of the following items are not included in working capital? -
ANSWER- Short term investments
When calculating turnover of property plant & equipment and
receivables, which item from the income statement do we use? -
ANSWER- Sales
If a company wanted to finance the purchase of equipment without
diluting shareholders equity, which of the following operation could it
consider? - ANSWER- Obtaining a loan from a bank
Working capital movement is included in which section of the cash flow
statement? - ANSWER- Operating activities
,The debt to tangible net worth ratio is calculated as follows: -
ANSWER- Interest Bearing Liabilities / (Equity - Intangible Assets)
If the total assets to equity ratio of a company is increasing, it is possible
that: - ANSWER- The company is increasing the use of debt and
getting higher financial leverage
Which ratio is not one of the three ratios that multiply together to
produce the return on equity ratio? - ANSWER- Operating profit
margin
Which financial leverage ratio is used with two other ratios to
mathematically produce the return on equity ratio? - ANSWER- Total
Assets / Equity
Which of the following is a tertiary ratio that drives profitability? -
ANSWER- SG&A Expense / Sales
Which ratios indicate how efficiently the company generates sales from
its assets? - ANSWER- Working capital turnover
The net profit margin ratio can mathematically be broken down as "Tax
impact x Capital structure impact x..." - ANSWER- EBIT / Sales
Based on the following information from ABC Company's financial
analysis, which one of the following statements is NOT true? -
, ANSWER- The company's ability to cover its short-term obligations
is getting higher over the five years.
Which of the following best describes accounting principles in general?
- ANSWER- They outline the fundamental rules and concepts and
establish the framework on which detailed accounting standards are
based.
A sound accounting framework allows for all of the following benefits
except: - ANSWER- Identical items being reported on the financial
statements of different companies
Conservatism Principle - ANSWER- It provides guidance on how to
record transactions when there is uncertainty.
Historical Cost Principle - ANSWER- It states that assets and
liabilities are recorded on the financial statements at the cost at
which they were acquired or assumed.
Objectivity Principle - ANSWER- It states that financial statements
must be free from bias and based on verifiable evidence.
Economic Entity Principle - ANSWER- It states that transactions
carried out by a business are separated from those conducted by its
owner.
QUESTIONS AND CORRECT
ANSWERS 2025/2026 EXAM GRADED
A+
Which of the following items are not included when determining income
from operations? - ANSWER- Taxes
Which ratio would you use to determine the profitability of the goods
sold by a company? - ANSWER- Gross profit margin
When performing a vertical analysis which income statement item do
you use to determine the cost contribution for each expense category?
(What is the denominator?) - ANSWER- Sales
Horizontal analysis allows us to analyze performance over: - ANSWER-
Time
,When calculating the quick ratio or "acid test" which current asset or
liability is omitted? - ANSWER- Inventory
For which organization would you expect to see the highest inventory
turnover ratio? - ANSWER- Grocery retailer
What actions could a company take to reduce its working capital funding
gap? - ANSWER- Tighten customer credit terms
The debt to equity ratio indicates: - ANSWER- The proportion of the
company financed by lenders versus owners
Which of the following items are not included in working capital? -
ANSWER- Short term investments
When calculating turnover of property plant & equipment and
receivables, which item from the income statement do we use? -
ANSWER- Sales
If a company wanted to finance the purchase of equipment without
diluting shareholders equity, which of the following operation could it
consider? - ANSWER- Obtaining a loan from a bank
Working capital movement is included in which section of the cash flow
statement? - ANSWER- Operating activities
,The debt to tangible net worth ratio is calculated as follows: -
ANSWER- Interest Bearing Liabilities / (Equity - Intangible Assets)
If the total assets to equity ratio of a company is increasing, it is possible
that: - ANSWER- The company is increasing the use of debt and
getting higher financial leverage
Which ratio is not one of the three ratios that multiply together to
produce the return on equity ratio? - ANSWER- Operating profit
margin
Which financial leverage ratio is used with two other ratios to
mathematically produce the return on equity ratio? - ANSWER- Total
Assets / Equity
Which of the following is a tertiary ratio that drives profitability? -
ANSWER- SG&A Expense / Sales
Which ratios indicate how efficiently the company generates sales from
its assets? - ANSWER- Working capital turnover
The net profit margin ratio can mathematically be broken down as "Tax
impact x Capital structure impact x..." - ANSWER- EBIT / Sales
Based on the following information from ABC Company's financial
analysis, which one of the following statements is NOT true? -
, ANSWER- The company's ability to cover its short-term obligations
is getting higher over the five years.
Which of the following best describes accounting principles in general?
- ANSWER- They outline the fundamental rules and concepts and
establish the framework on which detailed accounting standards are
based.
A sound accounting framework allows for all of the following benefits
except: - ANSWER- Identical items being reported on the financial
statements of different companies
Conservatism Principle - ANSWER- It provides guidance on how to
record transactions when there is uncertainty.
Historical Cost Principle - ANSWER- It states that assets and
liabilities are recorded on the financial statements at the cost at
which they were acquired or assumed.
Objectivity Principle - ANSWER- It states that financial statements
must be free from bias and based on verifiable evidence.
Economic Entity Principle - ANSWER- It states that transactions
carried out by a business are separated from those conducted by its
owner.
