WorksheetsFinancial Statements Review
Total questions: 33
Worksheet time: 17mins
Days Sales Outstanding (DSO) measures:
How quickly receivables are collected
How long inventory sits before sale
How fast assets depreciate
How long suppliers are paid
A firm reports Annual Sales of 900,000 and Accounts Receivable of 150,000. Assuming sales are evenly distributed throughout the year, what is the Days Sales Outstanding (DSO)?
75 days
60 days
45 days
30 days
If Accounts Receivable rise to 225,000 while annual sales remain 900,000, and sales are evenly distributed, what is the new DSO?
75 days
60 days
105 days
90 days
Using the DSO scenario, which change would most likely reduce DSO over time?
Extending credit terms to customers
Slower invoicing and collections
Increasing inventory on hand
Implementing early payment discounts
Which asset represents money that can be immediately spent by the firm?
Cash and cash equivalents
Property, plant, and equipment
Accounts receivable
Inventory
Given Total Assets of $2,000,000 and a Debt Ratio of 60%, what is Total Equity?
$600,000
$400,000
$800,000
$1,200,000
A firm reports Net Income of 240,000, Total Assets of 2,000,000, and a Debt Ratio of 60%. What is the firm’s Return on Equity (ROE)?
12%
40%
30%
20%
Which item is least liquid among the listed assets?
Inventory
Property, plant, and equipment
Accounts receivable
Cash and cash equivalents
Which action would increase ROE, holding net income constant?
Issuing new equity shares
Reducing total debt outstanding
Selling equipment to increase assets
Repurchasing shares to reduce equity
Which of the following Assets has the highest liquidity?
Inventory highest
Accounts receivable highest
Property, plant, and equipment highest
Cash and cash equivalents highest
Which ratio measures a firm’s ability to meet short-term obligations?
Total asset turnover
Current ratio
Return on equity
Debt ratio
A firm reports inventory of 220,000 and cost of goods sold of 1,600,000. Using average inventory, what is the inventory turnover ratio?
7.27 times
8.00 times
8.89 times
9.41 times
Which statement summarizes revenues and expenses over a period of time?
Statement of cash flows
Statement of retained earnings
Income statement
Balance sheet
The debt ratio measures:
Liquidity risk
Interest coverage ability
Profitability per dollar of sales
Percentage of assets financed by debt
Given current assets of 500,000 and current liabilities of 250,000, what is the current ratio?
3.0
2.5
2.0
1.5
Total asset turnover is best interpreted as:
Assets financed per dollar of equity
Cash collected per dollar of sales
Sales generated per dollar of assets
Profit earned per dollar of assets
A company reports: Cash = $140,000 Accounts Receivable = $90,000 Inventory = $170,000 Property, Plant, and Equipment = $20,000 Current Liabilities = $200,000 What is the quick ratio?
1.15
0.85
0.3
0.65
Which of the following is NOT typically included in a firm’s annual report?
Chairman’s letter
Discussion of operations
Future stock price projections
Financial statements
The income statement primarily measures:
Liquidity over a period
Profitability over a period
Asset valuation at a date
Owner’s equity changes
A low Times-Interest-Earned (TIE) ratio most likely signals which condition for a firm?
High overall profitability
Difficulty paying interest
Low leverage across capital
Strong interest coverage
Which financial statement shows the firm’s financial position at a specific point in time?
Statement of retained earnings
Income statement report
Statement of cash flows
Balance sheet
A firm has Total Assets of 2,000,000 and Total Liabilities of 950,000. What is the debt ratio?
210.52 percent
47.5 percent
52.5 percent
57.5 percent
Which ratio best evaluates a company’s ability to meet interest obligations from operating earnings?
Quick ratio test
Debt-to-equity ratio
Times-Interest-Earned
Current ratio measure
Given assets of 2,000,000 and liabilities of 950,000, what is the equity amount under the accounting equation?
$1,050,000 equity
$1,000,000 equity
$950,000 equity
$2,950,000 equity
Which statement best distinguishes profitability analysis from liquidity analysis?
Profitability emphasizes earnings generation; liquidity emphasizes near-term cash capacity
Profitability emphasizes cash holdings; liquidity emphasizes long-term earnings stability
Profitability emphasizes interest coverage; liquidity emphasizes capital structure
Profitability emphasizes asset turnover; liquidity emphasizes income recognition
The primary purpose of ratio analysis is to:
Maximize reported profits
Assess future financial health
Eliminate accounting differences
Predict future stock prices
Why are ratios useful when comparing firms of different sizes?
Ratios reflect market values
Ratios eliminate accounting bias
Ratios remove inflation effects
Ratios standardize financial information
Return on assets (ROA) measures:
Market valuation
Profit per dollar of assets
Profit per dollar of equity
Profit per dollar of sales
A current ratio below the industry average suggests:
Stronger short-term liquidity
Improved asset utilization
Higher profitability margins
Weaker short-term liquidity
The balance sheet shows:
Changes in equity over time
Cash inflows and outflows over time
Revenues earned during the year
Assets and how they are financed
A firm reports Net Income = 180,000 and Total Assets= 1,650,000. What is the firm’s ROA?
12.0%
11.5%
10.9%
13.3%
A high inventory turnover ratio generally indicates:
Poor sales performance
Excess inventory
High prices
Efficient inventory management
A firm reports the following: Beginning of Year Current Assets = 420,000 Current Liabilities= 290,000 End of Year Current Assets = 510,000 Current Liabilities= 340,000 What is the firm’s current ratio at year-end, and how did it change over the year?
1.32, liquidity declined
1.50, liquidity declined
1.50, liquidity improved
1.24, liquidity improved
