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Introduction to Financial Statement Analysis: Topic 6 Focused Exam- Question and Answers [100% Correct] 2025/2026 |Updated Version| $9.69
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Introduction to Financial Statement Analysis: Topic 6 Focused Exam- Question and Answers [100% Correct] 2025/2026 |Updated Version|

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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...

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  • November 28, 2024
  • 16
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • introduction to financial statement analysis top

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  • CFA - Chartered Financial Analyst
  • CFA - Chartered Financial Analyst

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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

1

,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

2

, 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:

3

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