FMVA EXAM QUESTIONS AND
ANSWERS. VERIFIED 2025/2026.
Which of the following is NOT true about vertical analysis? - ANS Vertical analysis looks at
only a single year on a income statement and calcuates the contribution to each expense makes
as a porpotyion of revenue
Which of the following changes would NOT cause gross profit margin to decline? -
ANS Increase in tax rate
Which of the following are profitability ratios? - ANS 1. Gross profit margin
2. Operating profit margin
2. Net Income Margin
Which of the following is TRUE about horizontal analysis? - ANS 1. Horizontal analysis is also
known as trend analysis
2. It is ideal to perform horizontal analysis over a period of at least 5 years to see an overall
trend
A high asset turnover ratio may indicate: - ANS efficient source to generate sales
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,The period of time between when cash goes out from a company and when the cash comes into
a company is known as the _______________ - ANS Working capital gap
Which of the following strategies can help the company reduce the time of the working capital
funding gap? Select ALL that apply - ANS 1. incentivize customers to make payments faster
2. order inventory as needed
When the PP&E turnover ratio is low relative to companies in a similar industry, it might indicate
that the company's sales are _______, or __________ has been invested in property, plant, and
equipment - ANS low, too much
Which of the following items are not included when determining income from operations? -
ANS Taxes
Which ratio would you use to determine the profitability of the goods sold by a company ? -
ANS Gross profit margin
When performing vertical analysis which income statement item do you use to determine the
cost contribution for each expense category (what is the denominator ?) - ANS Sales
Horizontal analysis allows us to analyze performance over : - ANS Time
When calculating the quick ratio or "acid test" which current asset or liability if omitted ? -
ANS Inventory
For which organization would you expect to see the highest inventory turnover ratio? -
ANS Grocery retailer
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What actions can a company take to reduce working capital funding gap? - ANS Tighten
customer credit terms
The debt to equity ratio indicates - ANS The proportion of the company financed by lenders
vs owners
Which of the following items are not included in working capital? - ANS Short-term
investments
When calculating PPE turnover and receivable, which item from the income statement do we
use ? - ANS Sales
If a company wanted to finance the purchase of equipment without diluting shareholders equity
, which of the following operations would it consider ? - ANS Obtaining a loan from the bank
Working capital movement is included in which section of the cash flow statement ? -
ANS Operating activities
The debt to tangible net worth ratio is calculated as follows: - ANS Interest bearing liabilities
(Equity - Intangible Assets)
If the total assets to equity ratio of a company is increasing , it is possible that: - ANS The
company is increasing the use of debt and getting higher financial leverage
What ratio is not one of the three ratios hat multiply together to produce the return on equity
ratio? - ANS Operating profit margin
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
ANSWERS. VERIFIED 2025/2026.
Which of the following is NOT true about vertical analysis? - ANS Vertical analysis looks at
only a single year on a income statement and calcuates the contribution to each expense makes
as a porpotyion of revenue
Which of the following changes would NOT cause gross profit margin to decline? -
ANS Increase in tax rate
Which of the following are profitability ratios? - ANS 1. Gross profit margin
2. Operating profit margin
2. Net Income Margin
Which of the following is TRUE about horizontal analysis? - ANS 1. Horizontal analysis is also
known as trend analysis
2. It is ideal to perform horizontal analysis over a period of at least 5 years to see an overall
trend
A high asset turnover ratio may indicate: - ANS efficient source to generate sales
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,The period of time between when cash goes out from a company and when the cash comes into
a company is known as the _______________ - ANS Working capital gap
Which of the following strategies can help the company reduce the time of the working capital
funding gap? Select ALL that apply - ANS 1. incentivize customers to make payments faster
2. order inventory as needed
When the PP&E turnover ratio is low relative to companies in a similar industry, it might indicate
that the company's sales are _______, or __________ has been invested in property, plant, and
equipment - ANS low, too much
Which of the following items are not included when determining income from operations? -
ANS Taxes
Which ratio would you use to determine the profitability of the goods sold by a company ? -
ANS Gross profit margin
When performing vertical analysis which income statement item do you use to determine the
cost contribution for each expense category (what is the denominator ?) - ANS Sales
Horizontal analysis allows us to analyze performance over : - ANS Time
When calculating the quick ratio or "acid test" which current asset or liability if omitted ? -
ANS Inventory
For which organization would you expect to see the highest inventory turnover ratio? -
ANS Grocery retailer
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What actions can a company take to reduce working capital funding gap? - ANS Tighten
customer credit terms
The debt to equity ratio indicates - ANS The proportion of the company financed by lenders
vs owners
Which of the following items are not included in working capital? - ANS Short-term
investments
When calculating PPE turnover and receivable, which item from the income statement do we
use ? - ANS Sales
If a company wanted to finance the purchase of equipment without diluting shareholders equity
, which of the following operations would it consider ? - ANS Obtaining a loan from the bank
Working capital movement is included in which section of the cash flow statement ? -
ANS Operating activities
The debt to tangible net worth ratio is calculated as follows: - ANS Interest bearing liabilities
(Equity - Intangible Assets)
If the total assets to equity ratio of a company is increasing , it is possible that: - ANS The
company is increasing the use of debt and getting higher financial leverage
What ratio is not one of the three ratios hat multiply together to produce the return on equity
ratio? - ANS Operating profit margin
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
