Business Analysis and Financial Ratios Practice Test

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• A/R grows faster than sales. Which factors should you investigate?
• In the five-step DuPont, which ratio corresponds to asset turnover?
• Which of the following are sources of accounting risk?
• What is the simplified goodwill formula?
• In the five-step DuPont, which ratio represents the tax burden component?
• Which of the following is a primary business activity?
• Which statement describes the direction of amortization for discount and premium carrying values as they move toward par?
• Debt issuance cost presentation in the course?
• Under U.S. GAAP, what does the LIFO conformity rule require regarding tax reporting and financial reporting?
• What is OPEB?
• What is XBRL useful for?
• Which statement best distinguishes product costs from period costs?
• Which instruments and methods are described as dilution sources and methods?
• What is the formula for effective-interest expense per period?
• Which statement correctly defines dividend yield and payout ratio?
• In the three-step DuPont, the components NI/sales; sales/average assets; average assets/average equity correspond to ROE as:
• Which formula defines the price-earnings (P/E) ratio?
• Which of the following are listed as earnings-management motivations?
• What is the formula for the total debt-to-equity ratio?
• Which approach is used for dilution when accounting for options and convertibles?
• Which expression correctly represents the FCFE formula?
• The current asset time horizon is defined as:
• Which statement correctly differentiates factoring from securitization?
• What is the S&P Global approach described?
• For FIFO and average-cost inventory valuation, which test is used?
• Given D0 = 2 and growth g = 4%, what is D1?
• Which elements contribute to the initial ROU asset?
• If an asset's carrying value exceeds its fair value after an impairment test, the loss is equal to?
• Earnings yield is defined as which?
• Where are executive compensation details typically disclosed?
• Economic income is defined as:
• What information is generally in the proxy?
• Which of the following expresses basic earnings per share when preferred claims exist?
• Which statement best differentiates liquidity from solvency?
• What is the main limitation of the original Altman Z model?
• Can a large-footprint firm receive a strong ESG score?
• In what way is prospective analysis used?
• IFRS generally has how many lessee accounting models?
• Why distinguish software arrangements before capitalizing?
• Environmental examples include which of the following?
• How can factoring distort DSO?
• How does FSA relate to business analysis?
• Which statement about premiums on debt is true?
• What does prospective analysis do?
• What is the correct double-declining-balance depreciation formula?
• Why does accounting quality matter for residual income models (RIM)?
• In residual income calculations, which starting point is used for book equity?
• Fair value definition?
• Which statement best describes the balance sheet equation?
• When is a bond issued at a discount or premium?
• What is the first step in the revenue recognition process?
• Given Cost 100, Replacement Cost 72, NRV 90, Normal profit 12, what is the LCM result?
• Which activity can change reported cash flow?
• If net income rises while cash flow from operations falls, what should you investigate?
• Why are retained earnings not cash?
• Where are booked environmental obligations found?
• What is the straight-line depreciation formula?
• Which of the following is NOT one of the five DuPont factors?
• What is the long-term debt-to-equity ratio formula?
• Fair-value benefits and costs include
• Secured debt versus debentures—what is the key difference?
• If market yields rise, which statement correctly describes the fair value of a fixed-rate bond?
• Common versus preferred equity?
• Which set of ratios is included in Schedule II credit-quality ratios?
• Which statement about assurance for published metrics is true?
• In constant-growth FCFE valuation, equity value is calculated as which formula?
• Which statement about the day-count convention in collection period calculations is correct?
• Which statement correctly defines the NRV formula for inventory?
• How is FIFO COGS obtained from LIFO COGS?
• Why is recourse considered in a receivable transfer?
• What best characterizes permanent income in financial analysis?
• If FIFO inventory is 100 and LIFO inventory is 90, what is the LIFO reserve?
• Which of the following is NOT a finance-lease classification criterion?
• Which statement is NOT part of the four-part ESG analysis framework?
• What does a 10-Q contain?
• Why inspect redeemable preferred terms?
• Which item is included in major AOCI components?
• Can hosting a SaaS implementation be classified as investing cash flow?
• Why analyze purchase commitments?
• In LIFO liquidation, what happens when inventory quantities decline?
• Which of the following is an example of human capital?
• Where would you look for executive compensation disclosure?
• Which of the following is included in governance examples?
• Which turnover ratio uses COGS in the numerator?
• How do you accrue an estimated loss range?
• Does nonoperating mean nonrecurring?
• If D0 = 2, growth = 4% and r = 10%, what is the DDM value?
• What does the balance sheet measure?
• Carrying value 120, undiscounted CF 105, FV 90: impairment?
• In banking, which KPI is commonly used to assess profitability?
• Under the debt fair-value option, instrument-specific credit effects are recorded in which?
• When is a loss contingency accrued?
• What is the credit analyst's focus?
• Why use accrual income instead of relying on cash flow alone?
• Which set of criteria constitutes the three lease control tests?
• Under IFRS, upward revaluation of property, plant, and equipment generally affects which financial statement component?
• IFRS PPE revaluation versus US GAAP?
• Which statement best describes cash equivalents criteria?
• Income smoothing is the practice of:
• Value-irrelevant distortions in earnings are defined as
• Which items are typically included in debt disclosures to review?
• Accounts receivable turnover uses which value in its numerator?
• Which statement describes cash equivalents criteria?
• Which of the following is an industry-specific KPI example?
• Inventory turnover is calculated as which of the following?
• If Beginning inventory is 50, Purchases are 30, and COGS is 40, what is Ending inventory?
• Which statement most accurately compares lessee models under IFRS and US GAAP?
• Under the debt fair-value option, how does worsening own credit affect the debt's fair value, and where are instrument-specific credit effects recorded?
• Under US GAAP, are operating leases still off balance sheet?
• CECL uses historical experience, current conditions and what other factor?
• Which of the following statements about the DuPont analysis is true?
• What is the cash ratio formula?
• If plan assets exceed PBO, funded status is positive. Which statement is correct?
• Horizontal dollar and percentage change?
• Which term in the Altman Z-score represents operating profitability relative to assets and is included in the formula?
• Net income calculation on the income statement?
• Base-year value in index-number trend?
• Why does accounting income differ from economic income?
• Which items are examples of financing liabilities?
• Which statement best describes the typical expense pattern for a finance lease versus an operating lease?
• In FCFE calculation, what is the effect of net borrowing?
• Which statement correctly describes the initial right-of-use (ROU) asset formula?
• Which statement correctly defines solvency?
• With ending LIFO reserve of 20 and a tax rate of 25%, what is the deferred tax increase due to FIFO restatement?
• In the example, underfunded status implies what?
• What are the four parts of the ESG analysis framework?
• Which expression gives the depletion rate per unit used to compute depletion expense?
• What are the cash flow statement categories?
• An aggressive useful-life estimate is exemplified by:
• What is a maturity cliff?
• Basic retained earnings rollforward?
• Why are prepaids considered current assets in financial reporting?
• Which is an example of business model and innovation?
• In the quick ratio convention described, which items form the numerator?
• Real earnings management is best described as:
• What does a 10-K contain?
• Which optional periods enter the lease term?
• In consolidated financial statements, how is noncontrolling interest treated?
• Which statement about affirmative covenants is true?
• What is the primary purpose of impairment testing for long-lived assets?
• Cash, working-capital and PPE turnover are calculated as Sales divided by the average balance of what?
• CECL estimates expected lifetime credit losses using which inputs?
• Which statement correctly distinguishes physical climate risk from transition climate risk?
• What is the LIFO reserve definition?
• What is a primary reason to analyze financial statements in an efficient market?
• Where is noncontrolling interest presented in consolidated financial statements?
• In a defined contribution plan, who bears the investment risk?
• With an ending LIFO reserve of 12 and a tax rate of 30%, by how much does equity increase due to FIFO restatement under the simplified adjustment?
• Analytical debt concept: which statement is correct?
• Why is a noncash impairment economically important?
• XBRL limitation?
• Which items are included in major accumulated other comprehensive income (AOCI) components?
• Which provider uses peer-relative performance assessment?
• What is a VIE primary beneficiary assessed for?
• Which statement correctly describes the coupon payment formula?
• Which statement best describes accounting analysis?
• For sustainability reports, which statement about assurance is true?
• Which type of variable lease payment is included in lease measurements at commencement inputs?
• What does the income statement measure?
• Which of the following are main monitoring mechanisms for reporting?
• What is the purpose of business analysis?
• Which of the following is a core step in a earnings-quality review?
• Residual income for the period is defined as which expression?
• In LCM testing for LIFO/retail, replacement cost is constrained between which values?
• P/E and earnings yield formulas are defined as which of the following?
• In a constant-growth DDM, what condition must hold between r and g for the model to be valid?
• Which Altman Z-score term is a measure of leverage?
• Which formula correctly defines ROA?
• Level 1 inputs are best described as
• Examples of unrecorded economic assets?
• What does SASB contribute in the course?
• What is the formula for the current ratio?
• Which formula correctly defines common book value per share?
• According to US GAAP, how are cash flows classified for a finance lease?
• Which of the following is a core step in earnings-quality review related to cash flows?
• Which form is used by foreign registrants and may require US GAAP reconciliation unless IFRS is used?
• Which ratio uses only liquid assets to measure short-term liquidity?
• What are the four business activities?
• Does a critical audit matter automatically indicate fraud or a qualified opinion?
• Which action would increase analytical debt?
• Which are examples of financing liabilities?
• What is the equity analyst's focus?
• Cumulative arrears must be paid before common dividends.
• Why can finance leases show higher EBITDA and cash flow from operations (CFO) compared with other lease types?
• Which formula computes the number of days to sell inventory?
• In market efficiency categories, which statement is accurate?
• Which statement about nonoperating items is true?
• If interest expense exceeds cash coupon, ending carrying value tends to do what?
• Which equation correctly computes ending carrying value given beginning carrying value, interest expense, and cash coupon?
• Which sequence correctly represents the five steps of revenue recognition?
• Which item is a governance example?
• Common-size statement denominators?
• Can reported cash flow be influenced by management decisions?
• Audited versus filed versus published information?
• Which description correctly reflects product costs and their relation to revenue?
• Accrual-based earnings management differs from real earnings management in that accrual-based management:
• How can share repurchases affect commonly used profitability ratios when underlying performance remains unchanged?
• In residual income valuation, how is the value of equity calculated?
• A hosted SaaS implementation is typically classified as which type of cash flow?
• Which is one of the three lease control criteria?
• Permanent, transitory and value-irrelevant components: which statement is true?
• Fair-value Level 3 inputs are characterized by
• Under LIFO liquidation, which statement best describes the effect on COGS and earnings?
• Index-number trend formula?
• What constitutes the NRV floor in the LCM framework?
• In a defined benefit plan, who bears the investment and longevity risk?
• When prices rise and there is no liquidation, which statement is true about FIFO and LIFO?
• Which statement best describes SASB's contribution in the course?
• Intrinsic value is best described as which of the following?
• How are finite-life and indefinite-life intangible assets treated?
• Which statement about faithful reporting is most accurate?
• What are the three reasons ESG ratings differ?
• In audit terminology, a CAM is intended to identify what?
• Which practice involves changing where an item appears on the financial statements rather than when it is recognized?
• Debt issuance costs are presented as what on the balance sheet?
• Why can LIFO improve cash flow when prices are rising?
• Why does ESG matter for financial statement analysis (FSA)?
• Affirmative versus negative covenants—what describes them?
• Filing deadlines stated in the slides?
• Which is the correct three-step DuPont formula for ROE?
• Who establishes US GAAP?
• Which of the following is a KPI quality check?
• Which statement best describes why CECL estimates are compared with subsequent write-offs?
• What is the effect of capitalizing initial costs relative to immediate expensing?
• In the hotel industry, which KPI is used to measure revenue efficiency per available room?
• Which filing discloses material corporate events?
• Which statement correctly classifies short-term accruals?
• In the allowance rollforward, which term represents amounts recovered after previously written-off accounts?
• What is the impairment test for held-and-used long-lived assets?
• Which expression correctly represents the five-step DuPont decomposition of ROE?
• What rate is used as the discount rate hierarchy when the implicit rate is not readily determinable?
• In valuation modeling, what is the role of KPIs?
• Which of the following is an example of social capital?
• Common-size denominator for income statement and balance sheet?
• Does the undiscounted impairment screen apply to all assets?
• How does semi-strong form relate to information types?
• Which statement about LIFO and IFRS is true?
• What is the primary reason to separate restricted cash?
• Under US GAAP, do lessees recognize right-of-use (ROU) assets for operating leases on the balance sheet?
• In the constant-growth dividend discount model, which formula and condition characterize the model?
• Do all accounting changes apply retrospectively?
• What are the four components of business analysis?
• In the LIFO/retail LCM test, replacement cost is constrained between which values before comparing to cost?
• When a write-off is recorded for an account already covered by the allowance, what happens to gross A/R and the allowance?
• What is considered relevant financial information for decision making?
• In an allowance rollforward, which expression correctly links beginning allowance, provision, write-offs, recoveries, and ending allowance?
• Three fair-value valuation approaches?
• What is the times interest earned formula?
• Higher expected return on plan assets affects pension cost how?
• Which part of the 10-K is not necessarily covered by the financial statement audit?
• Which term is included in the Altman Z-score formula?
• What is the collection period formula?
• Which statement best distinguishes income shifting from classificatory management?
• When is percentage growth misleading?
• Which combination determines the primary beneficiary of a VIE?
• Which of the following is a finance-lease criterion?
• If the pension discount rate used to calculate the PBO decreases, what is the likely effect on PBO and funded status?
• Why does GAAP still permit accounting risk?
• Materiality in financial reporting depends on:
• Which statement best describes the operating income treatment of pension costs?
• Which formula calculates depletion expense?
• What are the equity and deferred-tax effects of restating from LIFO to FIFO under simplified adjustments?
• DSO is calculated as 365 divided by the receivables turnover.
• Which statement about fair-value reporting is true?
• Which describes short-term versus long-term accrual examples?
• Accounts receivable turnover is calculated as which of the following?
• Why separate restricted cash in analysis?
• If a loss contingency is probable but not reasonably estimable, what is the proper treatment?
• Plan assets 420 and PBO 500; what is the funded status and presentation?
• Transitory components in income statements are characterized by
• Extending the useful life of an asset will generally result in:
• What is the current-period net income effect of a FIFO restatement under simplified tax assumptions?
• Fair-value Level 2 inputs are defined as
• What are the traditional Altman Z-score zones?
• In residual income valuation, which component makes up the equity value beyond current book equity?
• Does later market yield reset amortized-cost interest expense under ordinary accounting, or does it continue with the original yield?
• A big bath is best described as what?
• Does a sustainability report automatically have full audit assurance?
• In the turnover calculation, which expression equals the receivables turnover?
• What is 8-K used for?
• Which statement about Form 20-F and IFRS reconciliation is true?
• What is technical default?
• When is a loss contingency disclosed but not accrued?
• Which statement correctly describes the combined effects of cash dividends, stock dividends, and stock splits on the financial statements?
• What is the impact on bad debt expense when a write-off is recorded and the allowance already covers it?
• Does capitalization always raise ROA and ROE?
• In pension funded-status, which statement is correct?
• Which item is an example of a business model and innovation variable?
• How do you derive FIFO inventory from LIFO values using the ending LIFO reserve?
• Debt valuation is calculated as which formula?
• Which costs are deducted from the estimated selling price to determine NRV?
• Which statement best describes why higher ROE is not always better?
• The 75% and 90% thresholds in lease accounting are best described as:
• Form 20-F is?
• Operating cycle definition?
• Which item is deducted from gross receivables to calculate net receivables?
• Which component of business analysis focuses on aligning accounting reports with economic reality and identifying distortions?
• Which statement correctly describes the formulas for ROA and ROE?
• Which of the following is one of the seven KPI quality checks?
• Which statement best describes the treatment of finite-life and indefinite-life intangible assets?
• Analytical debt add to reported borrowings includes which items?
• What defines the difference between ESG ratings from providers?
• Which equation correctly expresses ending inventory using beginning inventory, purchases, and COGS?
• Why can EBT/EBIT exceed one?
• Cumulative and participating preferred features?
• Which instrument is an unsecured general claim against the issuer?
• Level 2 inputs are defined as
• What is the formula for net receivables?
• Which of the following are three major sources of accounting risk?
• What is the formula for working capital?
• What is the price-to-book ratio formula?
• What is the MSCI focus described?
• Which entities have the option to elect a risk-free rate for lease measurement?
• Historical cost accounting is best described as: