Financial Statement Analysis Quiz

What is the primary purpose of ratio analysis in financial statement analysis?

• To determine tax liabilities

• To obtain a quick indication of a business’s financial performance

• To calculate employee salaries

• To forecast future market trends

Which financial document is used in ratio analysis to assess profit and loss?

• Cash flow statement

• Statement of changes in equity

• Statement of comprehensive income

• Statement of retained earnings

Which financial document is referred to as the balance sheet in ratio analysis?

• Statement of cash flows

• Statement of financial position

• Statement of comprehensive income

• Statement of changes in equity

What is one of the key uses of ratio analysis in a business?

• To measure the market share of the business

• To measure the liquidity of the business

• To measure the employee satisfaction

• To measure the environmental impact

How does ratio analysis help in understanding a business's profitability?

• By assessing the business's market trends

• By evaluating the business's customer base

• By measuring how efficient the business is at making a profit

• By analyzing the business's social media presence

Which aspect of a business's performance is assessed by ratio analysis?

• How well it uses its resources

• How innovative its products are

• How diverse its workforce is

• How strong its brand is

What does liquidity refer to in a business context?

• The ability to turn assets into cash

• The ability to increase profits

• The ability to expand market share

• The ability to reduce liabilities

Which of the following is a calculation used to analyze the liquidity of a business?

• Current ratio

• Profit margin

• Debt-to-equity ratio

• Return on investment

What is another calculation used to assess a business's liquidity?

• Liquid capital ratio

• Gross margin ratio

• Inventory turnover ratio

• Price-to-earnings ratio

Why are liquidity ratios important for a business?

• To determine if the business can pay long-term debts

• To evaluate the profitability of the business

• To determine if the business has enough current assets to pay off debts

• To assess the company's market share