CORPORATE FINANCE INSTITUTE (CFI) TERMS-
FINANCIAL ANALYSIS FUNDAMENTALS QUESTIONS WITH
DETAILED VERIFIED AND 100% ACCURATE ANSWERS
ACCOUNTS PAYABLE Correct Answers Amounts owed by an
organization to others for goods or services received. Buying from
suppliers on credit will generate accounts payable.
ACCOUNTS RECEIVABLE Correct Answers Amounts due to an
organization for goods delivered or services rendered. Selling to
customers on credit will generate accounts receivable for a business.
ACCOUNTS PAYABLE DAYS RATIO Correct Answers Accounts
payable / COGS x 365. Average number of days a firm takes to pay for
items purchased.
ACCOUNTS PAYABLE TURNOVER Correct Answers Cost of sales /
Accounts payable (either the ending balance or average balance). This
ratio measures how effective management is in paying its suppliers.
ACCOUNTS RECEIVABLE DAYS RATIO Correct Answers Accounts
receivable / Sales x 365. Average number of days a firm takes to collect
payments on goods sold.
ACCOUNTS RECEIVABLE TURNOVER Correct Answers Sales /
Accounts receivable (either the ending balance, or average balance).
This ratio measures how effective the company's credit policies are.
,ACID TEST Correct Answers See quick ratio.
ADMINISTRATION COST RATIO Correct Answers Administration
costs / Sales. This margin shows the general overhead cost for each
dollar of sales.
AMORTIZATION Correct Answers The gradual reduction of a
financial amount over time.
ASSETS Correct Answers Resources owned and employed by an
organization which confer future economic benefits.
ASSET TURNOVER RATIO Correct Answers Sales / Total assets. This
ratio shows how effective the company is in
AUDIT Correct Answers The process of examination and verification of
a firm's books of account, transaction records, and other relevant
documents including financial models.
AVERAGE BALANCE Correct Answers (Opening balance - Closing
balance) / 2. This balance can be used to calculate efficiency / turnover
ratios instead of using a closing balance.
BALANCE SHEET Correct Answers The balance sheet is a 'snapshot'
of an organization's assets and liabilities on a particular date. The
balance sheet shows the sources of funds provided to an organization
(called the capital employed and normally either equity or debt) and how
, those funds have been used by the organization to invest in fixed assets
(assets the organization intends to keep for more than one year) and
working capital (money tied up in the day to day operations of the
business).
CAPITAL Correct Answers See capital employed.
CAPITAL ASSET Correct Answers Assets such as property, plant and
equipment employed to generate income.
CAPITAL EMPLOYED Correct Answers Synonyms: capital, Capital
employed represents the funds provided to an organization in the form
of equity or debt.
CAPITAL IN EXCESS OF PAR VALUE Correct Answers See
contributed surplus.
CAPITAL STOCK Correct Answers Synonyms: stock, shares, share
capital. There are two types of stock - common stock and preferred
stock. Most shares tend to be common stock and generally carry one
vote each and carry an equal right to a proportionate share of dividends.
Capitalstockisnotaliabilityinthesenseofothersourcesoffunds(e.g. bank
loans) since it is not generally paid back to shareholders unless the
company is wound up.
CASH FLOW STATEMENT Correct Answers The cash flow statement
is a 'summarized bank statement' that shows an organization's sources of
FINANCIAL ANALYSIS FUNDAMENTALS QUESTIONS WITH
DETAILED VERIFIED AND 100% ACCURATE ANSWERS
ACCOUNTS PAYABLE Correct Answers Amounts owed by an
organization to others for goods or services received. Buying from
suppliers on credit will generate accounts payable.
ACCOUNTS RECEIVABLE Correct Answers Amounts due to an
organization for goods delivered or services rendered. Selling to
customers on credit will generate accounts receivable for a business.
ACCOUNTS PAYABLE DAYS RATIO Correct Answers Accounts
payable / COGS x 365. Average number of days a firm takes to pay for
items purchased.
ACCOUNTS PAYABLE TURNOVER Correct Answers Cost of sales /
Accounts payable (either the ending balance or average balance). This
ratio measures how effective management is in paying its suppliers.
ACCOUNTS RECEIVABLE DAYS RATIO Correct Answers Accounts
receivable / Sales x 365. Average number of days a firm takes to collect
payments on goods sold.
ACCOUNTS RECEIVABLE TURNOVER Correct Answers Sales /
Accounts receivable (either the ending balance, or average balance).
This ratio measures how effective the company's credit policies are.
,ACID TEST Correct Answers See quick ratio.
ADMINISTRATION COST RATIO Correct Answers Administration
costs / Sales. This margin shows the general overhead cost for each
dollar of sales.
AMORTIZATION Correct Answers The gradual reduction of a
financial amount over time.
ASSETS Correct Answers Resources owned and employed by an
organization which confer future economic benefits.
ASSET TURNOVER RATIO Correct Answers Sales / Total assets. This
ratio shows how effective the company is in
AUDIT Correct Answers The process of examination and verification of
a firm's books of account, transaction records, and other relevant
documents including financial models.
AVERAGE BALANCE Correct Answers (Opening balance - Closing
balance) / 2. This balance can be used to calculate efficiency / turnover
ratios instead of using a closing balance.
BALANCE SHEET Correct Answers The balance sheet is a 'snapshot'
of an organization's assets and liabilities on a particular date. The
balance sheet shows the sources of funds provided to an organization
(called the capital employed and normally either equity or debt) and how
, those funds have been used by the organization to invest in fixed assets
(assets the organization intends to keep for more than one year) and
working capital (money tied up in the day to day operations of the
business).
CAPITAL Correct Answers See capital employed.
CAPITAL ASSET Correct Answers Assets such as property, plant and
equipment employed to generate income.
CAPITAL EMPLOYED Correct Answers Synonyms: capital, Capital
employed represents the funds provided to an organization in the form
of equity or debt.
CAPITAL IN EXCESS OF PAR VALUE Correct Answers See
contributed surplus.
CAPITAL STOCK Correct Answers Synonyms: stock, shares, share
capital. There are two types of stock - common stock and preferred
stock. Most shares tend to be common stock and generally carry one
vote each and carry an equal right to a proportionate share of dividends.
Capitalstockisnotaliabilityinthesenseofothersourcesoffunds(e.g. bank
loans) since it is not generally paid back to shareholders unless the
company is wound up.
CASH FLOW STATEMENT Correct Answers The cash flow statement
is a 'summarized bank statement' that shows an organization's sources of
