#1
Which financial statement provides an overview of a company's financial position at a specific point in time?
Balance sheet
ExplanationShows assets, liabilities, and equity.
#2
Which of the following is an example of an operating activity in a cash flow statement?
Paying salaries to employees
ExplanationReflects day-to-day business activities.
#3
Which of the following is NOT a primary financial statement used by businesses?
Statement of expenses
ExplanationNot a standard financial statement.
#4
What is the purpose of a trial balance in accounting?
To identify errors in the recording process
ExplanationVerifies accuracy before financial reporting.
#5
Which financial statement reports a company's revenues and expenses over a specific period?
Income statement
ExplanationShows profitability over time.
#6
What does the term 'accounts receivable' represent in financial transactions?
Money owed by customers to the company
ExplanationOutstanding payments awaiting receipt.
#7
Which of the following is NOT considered a method for calculating depreciation?
Profit and loss method
ExplanationNot a recognized depreciation approach.
#8
Which financial ratio measures a company's ability to pay off its short-term liabilities with its short-term assets?
Current ratio
ExplanationIndicates liquidity and financial health.
#9
What does the term 'liquidity' refer to in finance?
The ease of converting assets into cash without affecting their market price
ExplanationAbility to meet short-term obligations.
#10
Which accounting principle requires that assets and liabilities should be recorded at their original purchase price?
Historical cost principle
ExplanationRecords transactions at initial cost.
#11
What is the purpose of the 'matching principle' in accounting?
To match revenues with expenses in the period they are incurred
ExplanationEnsures accurate financial reporting.
#12
Which of the following is a component of the DuPont analysis of return on equity?
Operating margin
ExplanationMeasures operational efficiency.
#13
In finance, what does the term 'net present value' (NPV) represent?
The difference between the present value of cash inflows and outflows
ExplanationAssesses project profitability.
#14
What is the primary purpose of financial leverage?
To increase the return on equity
ExplanationBoosts potential returns.
#15
Which financial ratio measures a company's ability to generate profit from its operating activities?
Operating profit margin
ExplanationIndicates profitability from operations.