Introduction to Financial Statement Analysis: Topic 6 Focused Exam- Question and Answers [100% Correct] 2025/2026 |Updated Version|
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Course
CFA - Chartered Financial Analyst
Institution
CFA - Chartered Financial Analyst
Introduction to Financial Statement
Analysis: Topic 6 Focused Exam-
Question and Answers [100% Correct]
2025/2026 |Updated Version|
The current ratio is typically used to measure:
A) Long-term profitability
B) The company’s ability to pay short-term obligations
C) Operational effici...
Introduction to Financial Statement
Analysis: Topic 6 Focused Exam-
Question and Answers [100% Correct]
2025/2026 |Updated Version|
The current ratio is typically used to measure:
A) Long-term profitability
B) The company’s ability to pay short-term obligations
C) Operational efficiency
D) Market share growth
Which of the following does NOT appear on the income statement?
A) Depreciation
B) Gross profit
C) Dividends
D) Revenue
A decrease in a company’s return on assets (ROA) is usually an indication of:
A) Improved profitability
B) Declining asset efficiency
C) Increased leverage
D) Stronger liquidity
If a company has a higher quick ratio than its current ratio, this suggests:
A) The company has a significant amount of inventory and receivables
B) The company has a large amount of inventory
C) The company is less liquid than it appears
D) The company has few liquid assets compared to total liabilities
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,Which of the following is a common reason why a company might have a high price-to-earnings (P/E)
ratio?
A) The company is undervalued in the market
B) The company has strong future earnings growth expectations
C) The company has high operating costs
D) The company has a large dividend payout ratio
When a company’s net income is negative, it can still report a positive cash flow from operations due to:
A) A reduction in liabilities
B) Increased inventory purchases
C) Depreciation and non-cash expenses
D) A rise in interest payments
A company’s debt-to-equity ratio does NOT indicate:
A) The level of financial leverage
B) The company's ability to meet long-term obligations
C) The proportion of debt used to finance the business
D) The company’s profitability
The quick ratio is a more conservative measure of liquidity than the current ratio because it:
A) Excludes inventory and other non-liquid assets
B) Focuses on long-term liabilities
C) Only considers accounts payable
D) Ignores receivables
Which of the following financial ratios is least affected by changes in a company’s asset structure?
A) Return on Assets (ROA)
B) Price-to-Earnings (P/E) ratio
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, C) Quick ratio
D) Earnings Before Interest and Taxes (EBIT) ratio
A decrease in accounts receivable turnover could suggest that a company is:
A) More efficient in its collections
B) Increasing its sales volume
C) Having trouble converting sales to cash
D) Reducing its inventory levels
A company that is operating with a high inventory turnover ratio is likely:
A) Selling its products at a lower margin
B) Managing its stock efficiently
C) Experiencing lower customer demand
D) Investing in long-term assets
If a company’s operating income is higher than its net income, it generally means:
A) The company has high debt interest payments
B) The company is not paying any taxes
C) The company has a very low gross profit margin
D) The company is losing money on its operations
An increase in a company’s retained earnings does NOT necessarily indicate:
A) That the company is reinvesting its profits
B) Higher dividend payouts
C) That the company has been profitable in the past
D) A reduction in the company’s liabilities
When assessing the financial health of a company, a higher debt-to-equity ratio is a sign that the
company:
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