ACC221 MIAMI UNIVERSITY EXAM SCRIPT
2026 QUESTIONS WITH ANSWERS
◉ Intercompany Comparison. Answer: Comparing a company to
other companies (e.g., Target vs. Walmart).
◉ Industry Average Comparison. Answer: Comparing a company's
performance to the industry standard.
◉ Horizontal Analysis. Answer: A method that shows percentage
changes over time to identify trends in financial performance.
◉ Vertical Analysis. Answer: Expresses financial statement items as
a percentage of a base amount (income statement uses net sales;
balance sheet uses total assets).
◉ Ratio Analysis. Answer: Uses relationships between financial
numbers to assess profitability, liquidity, solvency, and efficiency.
◉ Inventory Turnover. Answer: Measures how many times inventory
is sold during a period. Formula: COGS ÷ Average Inventory.
,◉ Days in Inventory. Answer: Measures the average number of days
inventory sits before being sold. Formula: 365 ÷ Inventory Turnover.
◉ Accounts Receivable Turnover. Answer: Measures how many
times receivables are collected in a year. Formula: Net Credit Sales ÷
Average AR.
◉ Average Collection Period (ACP). Answer: Measures how many
days customers take to pay on average. Formula: 365 ÷ AR Turnover.
◉ Asset Turnover. Answer: Measures how efficiently assets generate
sales. Formula: Net Sales ÷ Average Total Assets.
◉ Gross Profit Margin. Answer: Percent of sales remaining after
paying for the goods sold. Formula: Gross Profit ÷ Net Sales.
◉ Operating Profit Margin. Answer: Percent of sales remaining after
paying all operating expenses. Formula: Operating Income ÷ Net
Sales.
◉ Net Profit Margin. Answer: Percent of sales converted into net
income. Formula: Net Income ÷ Net Sales.
, ◉ Return on Assets (ROA). Answer: Measures how efficiently assets
generate profit. Formula: Net Income ÷ Average Total Assets.
◉ Drivers of ROA. Answer: ROA = Net Profit Margin × Asset
Turnover.
◉ Return on Equity (ROE). Answer: Measures how much profit is
generated for every dollar of shareholders' equity. Formula: Net
Income ÷ Average Equity.
◉ Earnings Per Share (EPS). Answer: Measures net income earned
per share of common stock. Formula: (Net Income - Preferred
Dividends) ÷ Average Shares.
◉ Dividend Payout Ratio. Answer: Percentage of net income paid out
as dividends. Formula: Dividends ÷ Net Income.
◉ Liquidity Risk. Answer: Risk that the company cannot meet short-
term obligations due within one year.
◉ Current Ratio. Answer: Measures short-term ability to pay bills.
Formula: Current Assets ÷ Current Liabilities.
2026 QUESTIONS WITH ANSWERS
◉ Intercompany Comparison. Answer: Comparing a company to
other companies (e.g., Target vs. Walmart).
◉ Industry Average Comparison. Answer: Comparing a company's
performance to the industry standard.
◉ Horizontal Analysis. Answer: A method that shows percentage
changes over time to identify trends in financial performance.
◉ Vertical Analysis. Answer: Expresses financial statement items as
a percentage of a base amount (income statement uses net sales;
balance sheet uses total assets).
◉ Ratio Analysis. Answer: Uses relationships between financial
numbers to assess profitability, liquidity, solvency, and efficiency.
◉ Inventory Turnover. Answer: Measures how many times inventory
is sold during a period. Formula: COGS ÷ Average Inventory.
,◉ Days in Inventory. Answer: Measures the average number of days
inventory sits before being sold. Formula: 365 ÷ Inventory Turnover.
◉ Accounts Receivable Turnover. Answer: Measures how many
times receivables are collected in a year. Formula: Net Credit Sales ÷
Average AR.
◉ Average Collection Period (ACP). Answer: Measures how many
days customers take to pay on average. Formula: 365 ÷ AR Turnover.
◉ Asset Turnover. Answer: Measures how efficiently assets generate
sales. Formula: Net Sales ÷ Average Total Assets.
◉ Gross Profit Margin. Answer: Percent of sales remaining after
paying for the goods sold. Formula: Gross Profit ÷ Net Sales.
◉ Operating Profit Margin. Answer: Percent of sales remaining after
paying all operating expenses. Formula: Operating Income ÷ Net
Sales.
◉ Net Profit Margin. Answer: Percent of sales converted into net
income. Formula: Net Income ÷ Net Sales.
, ◉ Return on Assets (ROA). Answer: Measures how efficiently assets
generate profit. Formula: Net Income ÷ Average Total Assets.
◉ Drivers of ROA. Answer: ROA = Net Profit Margin × Asset
Turnover.
◉ Return on Equity (ROE). Answer: Measures how much profit is
generated for every dollar of shareholders' equity. Formula: Net
Income ÷ Average Equity.
◉ Earnings Per Share (EPS). Answer: Measures net income earned
per share of common stock. Formula: (Net Income - Preferred
Dividends) ÷ Average Shares.
◉ Dividend Payout Ratio. Answer: Percentage of net income paid out
as dividends. Formula: Dividends ÷ Net Income.
◉ Liquidity Risk. Answer: Risk that the company cannot meet short-
term obligations due within one year.
◉ Current Ratio. Answer: Measures short-term ability to pay bills.
Formula: Current Assets ÷ Current Liabilities.
