FINANCIAL RATIOS EXAM PRACTICE PAPER 1 –
ACCOUNTING & FINANCE | RATIO ANALYSIS
(FOUNDATION LEVEL) | 40 FULLY WORKED QUESTIONS
WITH ANSWERS, STEP-BY-STEP CALCULATIONS &
DETAILED RATIONALE | REVISION & EXAM PREPARATION
RESOURCE
COURSE NAME
Accounting and Finance – Financial Statement Analysis (Ratio Analysis Focus)
LEVEL
College / First-Year University (Foundation Level)
SHORT INTRODUCTION
This Financial Ratios exam paper is designed to help Accounting and Finance
students understand and apply basic ratio analysis concepts. It covers liquidity,
profitability, and efficiency ratios using structured questions with fully worked
solutions and detailed explanations.
Ideal for revision, practice tests, and exam preparation.
INSTRUCTIONS
• Answer ALL questions
• Show all working for calculations
• Use correct ratio formulas
• Time allowed: 2 hours
• All questions carry equal marks unless stated
, PAPER 1 – FINANCIAL RATIOS (FOUNDATION LEVEL)
40 QUESTIONS WITH ANSWERS AND DETAILED RATIONALE
SECTION A: CONCEPT QUESTIONS (1–25)
1. Financial ratios are mainly used to:
A. Record transactions
B. Analyze financial performance
C. Prepare invoices
D. Calculate tax only
Answer: B
Rationale: Ratios help evaluate financial performance and business health.
2. Liquidity ratios measure:
A. Profitability
B. Ability to pay short-term debts
C. Asset value
D. Long-term investments
Answer: B
Rationale: They assess whether a business can meet short-term obligations.
3. Profitability ratios measure:
A. Cash flow
B. Profit generation ability
C. Inventory levels
D. Loan amounts
Answer: B
Rationale: They show how efficiently a business generates profit.
4. Current ratio formula is:
A. Current assets ÷ Current liabilities
B. Sales ÷ Profit
ACCOUNTING & FINANCE | RATIO ANALYSIS
(FOUNDATION LEVEL) | 40 FULLY WORKED QUESTIONS
WITH ANSWERS, STEP-BY-STEP CALCULATIONS &
DETAILED RATIONALE | REVISION & EXAM PREPARATION
RESOURCE
COURSE NAME
Accounting and Finance – Financial Statement Analysis (Ratio Analysis Focus)
LEVEL
College / First-Year University (Foundation Level)
SHORT INTRODUCTION
This Financial Ratios exam paper is designed to help Accounting and Finance
students understand and apply basic ratio analysis concepts. It covers liquidity,
profitability, and efficiency ratios using structured questions with fully worked
solutions and detailed explanations.
Ideal for revision, practice tests, and exam preparation.
INSTRUCTIONS
• Answer ALL questions
• Show all working for calculations
• Use correct ratio formulas
• Time allowed: 2 hours
• All questions carry equal marks unless stated
, PAPER 1 – FINANCIAL RATIOS (FOUNDATION LEVEL)
40 QUESTIONS WITH ANSWERS AND DETAILED RATIONALE
SECTION A: CONCEPT QUESTIONS (1–25)
1. Financial ratios are mainly used to:
A. Record transactions
B. Analyze financial performance
C. Prepare invoices
D. Calculate tax only
Answer: B
Rationale: Ratios help evaluate financial performance and business health.
2. Liquidity ratios measure:
A. Profitability
B. Ability to pay short-term debts
C. Asset value
D. Long-term investments
Answer: B
Rationale: They assess whether a business can meet short-term obligations.
3. Profitability ratios measure:
A. Cash flow
B. Profit generation ability
C. Inventory levels
D. Loan amounts
Answer: B
Rationale: They show how efficiently a business generates profit.
4. Current ratio formula is:
A. Current assets ÷ Current liabilities
B. Sales ÷ Profit
