#1
Which of the following financial statements shows a company's revenues and expenses over a specific period?
Income Statement
ExplanationReports company's financial performance by showing revenues and expenses.
#2
What does ROI stand for in financial analysis?
Return on Investment
ExplanationMeasures profitability of an investment relative to its cost.
#3
Which of the following is considered a long-term liability on a balance sheet?
Bonds Payable
ExplanationDebts that are due beyond one year.
#4
What does FIFO stand for in inventory accounting?
First In, First Out
ExplanationInventory costing method where oldest inventory items are recorded as sold first.
#5
Which financial statement reports a company's financial position at a specific point in time?
Balance Sheet
ExplanationSummarizes a company's assets, liabilities, and equity at a given time.
#6
Which accounting principle requires that assets be recorded at their original cost?
Cost Principle
ExplanationAssets should be recorded at their initial purchase price.
#7
What does the term 'EBITDA' stand for in financial analysis?
Earnings Before Interest, Taxes, Depreciation, and Amortization
ExplanationIndicator of a company's operating performance.
#8
Which accounting principle states that revenue should be recognized when it is earned, regardless of when payment is received?
Revenue Recognition Principle
ExplanationRevenue should be recorded when it's earned, not when cash is received.
#9
What is the formula to calculate Return on Equity (ROE)?
Net Income / Total Equity
ExplanationIndicates how well a company uses investments to generate earnings growth.
#10
What is the purpose of the cash flow statement in financial reporting?
To show the amount of cash generated from operations
ExplanationDisplays cash inflows and outflows from operating, investing, and financing activities.
#11
Which financial ratio measures a company's ability to pay its short-term obligations with its most liquid assets?
Current Ratio
ExplanationIndicates company's liquidity and ability to cover short-term liabilities.
#12
Which financial ratio measures a company's ability to cover its interest expenses with its earnings before interest and taxes?
Interest Coverage Ratio
ExplanationIndicates company's ability to pay interest on outstanding debt.