#1
Which of the following is a fundamental accounting equation?
Assets = Liabilities + Equity
ExplanationDescribes the relationship between a company's assets, liabilities, and equity.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationMeasures the profitability of an investment.
#3
What is the primary purpose of financial accounting?
To report financial information to external parties
ExplanationFocuses on communicating financial information to external stakeholders.
#4
Which of the following is considered a long-term liability?
Notes Payable
ExplanationRepresents obligations with longer repayment timelines.
#5
What is the formula to calculate earnings per share (EPS)?
Net Income / Average Number of Shares Outstanding
ExplanationMeasures the company's profit allocated to each outstanding share.
#6
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 specific date.
#7
What does the term 'EBITDA' stand for in finance?
Earnings Before Income and Taxes Depreciation and Amortization
ExplanationMeasures operating performance by excluding certain expenses.
#8
Which financial statement reports a company's revenues and expenses over a specific period?
Income Statement
ExplanationProvides a summary of a company's financial performance.
#9
What is the formula for calculating the net profit margin?
(Net Income / Revenue) * 100%
ExplanationShows the percentage of profit relative to revenue.
#10
What is the time value of money principle?
A dollar today is worth more than a dollar in the future
ExplanationAcknowledges the impact of time on the value of money.
#11
Which of the following is a measure of a company's profitability?
Gross Profit Margin
ExplanationShows the percentage of profit relative to cost of goods sold.
#12
What is the formula for calculating the debt-to-equity ratio?
Total Debt / Total Equity
ExplanationEvaluates the company's debt relative to equity.
#13
Which of the following is a measure of a company's efficiency in using its assets to generate revenue?
Inventory Turnover Ratio
ExplanationIndicates how quickly a company sells and replaces its inventory.
#14
What is the formula for calculating the quick ratio?
(Current Assets - Inventory) / Current Liabilities
ExplanationAssesses a company's ability to cover short-term liabilities with liquid assets.
#15
Which of the following financial ratios measures a company's ability to pay off its short-term liabilities with its current assets?
Current Ratio
ExplanationIndicates short-term liquidity and solvency.
#16
What is the purpose of financial leverage?
To increase the company's return on equity
ExplanationInvolves using debt to amplify returns for shareholders.
#17
What is the purpose of the cash flow statement?
To show how changes in balance sheet accounts and income affect cash and cash equivalents
ExplanationDetails the sources and uses of a company's cash.
#18
What does the term 'WACC' stand for in finance?
Weighted Average Cost of Capital
ExplanationRepresents the average cost of financing for a company.
#19
Which of the following financial ratios measures a company's ability to generate profit from its sales?
Operating Profit Margin
ExplanationShows the percentage of profit relative to total revenue.