#1
Which financial statement shows a company's revenues and expenses over a period?
Income Statement
ExplanationShows company's profitability over a specific time frame.
#2
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Balance Sheet
ExplanationSummarizes assets, liabilities, and equity at a given moment.
#3
Which accounting concept suggests that assets should be recorded at their original cost?
Historical Cost Concept
ExplanationRecords assets at the amount paid, not their current value.
#4
Which financial statement reports a company's cash inflows and outflows from operating, investing, and financing activities?
Statement of Cash Flows
ExplanationDetails cash movements over a specific period.
#5
Which accounting concept suggests that financial statements should be prepared with the assumption that the company will continue to operate indefinitely?
Going Concern Concept
ExplanationAssumes business operations will continue into the future.
#6
What does the Current Ratio measure?
A company's ability to pay its short-term liabilities with its short-term assets
ExplanationEvaluates liquidity and short-term financial health.
#7
Which accounting principle dictates that expenses should be recorded when incurred, regardless of when cash is exchanged?
Accrual Principle
ExplanationRecognizes expenses when they occur, not when cash is exchanged.
#8
Which financial ratio measures a company's ability to pay its short-term liabilities with its most liquid assets?
Quick Ratio
ExplanationAssesses immediate liquidity without considering inventory.
#9
What does the Debt-to-Equity Ratio measure?
A company's leverage
ExplanationAssesses the proportion of debt to equity financing.
#10
Which financial ratio indicates a company's ability to generate profits from its operating activities?
Operating Margin
ExplanationShows efficiency of generating profits from operations.
#11
What is the formula for Return on Equity (ROE)?
Net Income / Shareholder's Equity
ExplanationMeasures profitability relative to shareholder investment.
#12
What is the formula for Gross Profit Margin?
(Revenue - Cost of Goods Sold) / Revenue
ExplanationMeasures profitability after accounting for cost of goods sold.
#13
What is the formula for Earnings Per Share (EPS)?
Net Income / Number of Common Shares Outstanding
ExplanationCalculates profit attributable to each outstanding share.
#14
What is the formula for the Debt-to-Equity Ratio?
Total Liabilities / Shareholder's Equity
ExplanationCompares a company's debt to its shareholder equity.
#15
What is the formula for the Price-to-Earnings (P/E) Ratio?
Market Price per Share / Earnings Per Share (EPS)
ExplanationCompares market price to earnings per share.