Financial Analysis and Reporting

What are the three main financial statements used in financial analysis?

• audit report, financial plan, stock market analysis

• income statement, balance sheet, and cash flow statement

• tax return, investment portfolio, credit score

• budget report, expense summary, profit forecast

What is the purpose of ratio analysis in financial reporting?

• To calculate the average temperature in the office

• To evaluate the financial performance and health of a company.

• To decide on the menu for the company picnic

• To determine the color of the company logo

How is the cash flow statement different from the income statement and balance sheet?

• The balance sheet only includes assets and liabilities, while the cash flow statement and income statement include all financial transactions.

• The income statement only includes revenue and expenses, while the cash flow statement and balance sheet include all financial transactions.

• All three statements provide different perspectives on a company's financial performance and position.

• The cash flow statement only includes cash transactions, while the income statement and balance sheet include all types of transactions.

What does the income statement analysis reveal about a company's financial performance?

• It reveals the company's marketing budget

• It reveals the company's customer satisfaction rating

• It reveals the company's revenue, expenses, and net income over a specific period.

• It reveals the company's employee turnover rate

How can the balance sheet be used to assess a company's financial health?

• By assessing the company's social media presence

• By analyzing its marketing strategies and customer base

• By analyzing its assets, liabilities, and equity to assess liquidity, solvency, and overall financial health.

• By looking at the CEO's personal financial statements

What are the key components of a balance sheet?

• Income, expenses, and revenue

• Debits, credits, and ledgers

• Assets, liabilities, and equity

• Cash, inventory, and accounts receivable

What is the formula for calculating the current ratio?

• Current Ratio = Current Assets / Current Liabilities

• Current Ratio = Net Income / Total Liabilities

• Current Ratio = Fixed Assets / Current Liabilities

• Current Ratio = Total Assets / Total Liabilities

What does a high debt-to-equity ratio indicate about a company's financial structure?

• Increased profitability

• Higher financial risk

• Stable financial position

• Lower financial risk

How is the operating cash flow ratio calculated?

• Net income divided by total assets

• Gross profit divided by total equity

• Operating cash flow divided by current liabilities

• Free cash flow divided by long-term liabilities

What does a negative operating cash flow indicate?

• It indicates that the company is very profitable

• It indicates that the company has a strong financial position

• It indicates that the company is not generating enough cash from its core business operations to cover its expenses and investments.

• It indicates that the company is experiencing rapid growth