FINANCIAL STATEMENT ANALYSIS EXAM 2026 | STEP-BYSTEP SOLUTIONS A+ 150 VERIFIED QUESTIONS & DETAILED RATIONALES FOR TOP PERFORMANCE

FINANCIAL STATEMENT ANALYSIS EXAM 2026 | STEP-BY-
STEP SOLUTIONS A+ 150 VERIFIED QUESTIONS &
DETAILED RATIONALES FOR TOP PERFORMANCE
1. What is the primary purpose of financial statement analysis?
A. To prepare tax returns
B. To evaluate a company’s financial performance
C. To record daily transactions
D. To audit internal controls
B
Financial statement analysis helps users assess profitability, liquidity, and overall
financial health.
2. Which statement shows a company’s financial position at a specific date?
A. Income Statement
B. Cash Flow Statement
C. Balance Sheet
D. Statement of Retained Earnings
C
The balance sheet presents assets, liabilities, and equity at a point in time.
3. The current ratio measures:
A. Profitability
B. Liquidity
C. Solvency
D. Market value
B
It measures ability to cover short-term liabilities with short-term assets.
4. Current Ratio formula is:
A. Current Assets / Current Liabilities
B. Net Income / Revenue
C. Total Assets / Equity
D. EBIT / Interest
A
It compares liquid assets to short-term obligations.
5. Gross profit is calculated as:
A. Revenue - Operating Expenses
B. Revenue - Cost of Goods Sold
C. Net Income - Taxes
D. Assets - Liabilities
B
Gross profit measures profitability after direct production costs.
6. Net profit margin equals:
A. Net Income / Revenue
B. Gross Profit / Revenue
C. Revenue / Assets
D. EBIT / Assets

, A
It shows how much profit is generated per unit of revenue.
7. The cash flow statement is divided into:
A. Assets, Liabilities, Equity
B. Operating, Investing, Financing
C. Revenue, Cost, Profit
D. Current, Non-current, Equity
B
These sections track cash inflows and outflows.
8. Which ratio measures efficiency in using assets?
A. Current Ratio
B. Asset Turnover Ratio
C. Debt Ratio
D. Quick Ratio
B
It shows how effectively assets generate revenue.
9. Quick ratio excludes:
A. Cash
B. Inventory
C. Receivables
D. Marketable securities
B
Inventory is less liquid and excluded.
10. Debt-to-equity ratio indicates:
A. Profitability
B. Liquidity
C. Financial leverage
D. Efficiency
C
It measures reliance on debt financing.
11. Debt-to-equity ratio formula is:
A. Total Debt / Equity
B. Equity / Debt
C. Revenue / Debt
D. Assets / Equity
A
It compares borrowed funds to owner’s capital.
12. Return on Assets (ROA) measures:
A. Profit per asset
B. Debt coverage
C. Cash flow efficiency
D. Market value
A
It shows how efficiently assets generate profit.
13. ROA formula is:
A. Net Income / Total Assets

, B. EBIT / Revenue
C. Assets / Equity
D. Revenue / Net Income
A
It measures asset profitability.
14. Return on Equity (ROE) measures:
A. Profit per liability
B. Profit per shareholder investment
C. Revenue growth
D. Asset efficiency
B
It shows returns to equity investors.
15. ROE formula is:
A. Net Income / Equity
B. Revenue / Equity
C. Assets / Equity
D. EBIT / Assets
A
It evaluates shareholder returns.
16. Earnings per Share (EPS) is:
A. Net Income / Shares Outstanding
B. Revenue / Shares
C. Assets / Shares
D. Equity / Shares
A
It shows profit allocated per share.
17. Price-to-earnings ratio compares:
A. Price and book value
B. Price and earnings
C. Assets and liabilities
D. Cash and debt
B
It measures market expectations of earnings.
18. P/E ratio formula:
A. Market Price per Share / EPS
B. EPS / Price
C. Revenue / EPS
D. Assets / EPS
A
It shows how much investors pay per unit of earnings.
19. Working capital is:
A. Assets - Equity
B. Current Assets - Current Liabilities
C. Revenue - Expenses
D. Cash - Debt