FINMAN QUIZ REVIEW

To analyze a balance sheet for financial strength and liquidity, you should:*

• Compare the company's current assets to its current liabilities

• Calculate the company's profit margin

• Analyze the company's cash flow statement

• Compare the company's revenue to its expenses

If a company's operating expenses increase, what will happen to its net income, assuming all other factors remain constant?

• Net income will remain unchanged.
• Net income will increase.
• Net income will decrease

• Net income will become positive

The purpose of the income statement in financial analysis is to:*

• Show a company's financial position at a specific point in time

• Show a company's profitability over a period of time

• Show a company's cash inflows and outflows

• Show a company's equity

The current ratio measures a company's:*

• Profitability

• Liquidity

• Solvency

• Efficiency

To analyze an income statement to assess a company's profitability and financial performance, you should:*

• Compare the company's current assets to its current liabilities

• Calculate the company's profit margin, gross profit margin, and net profit margin

• Analyze the company's cash flow statement

• Compare the company's revenue to its expenses

The Return on Assets (ROA) measures a company's:*

• Profitability

• Solvency

• Efficiency

• Liquidity

A high ROA indicates that a company:*

• Is using its assets efficiently

• Is holding too much inventory

• Is highly Leveraged

• Is generating a loss

A low inventory turnover ratio indicates that a company:*

• Is selling its inventory quickly

• Is holding too much inventory

• Is highly profitable

• Is generating a loss

If a company's net income is negative, it indicates that the company:*

• Has a strong liquidity position

• Has a weak liquidity position

• Is highly profitable

• Is generating a loss

A high asset turnover ratio indicates that a company is:*

• Holding too much inventory

• Relying on debt financing

• Charging high prices

• Using its assets efficiently