Accounting: 15 questions about ratio analysis, margins, budgeting, proforma

1. What is not one of the four different methods of analyzing financial statements?
A. Ratio analysis
B. Trend analysis
C. Lateral analysis
D. Vertical analysis

2. What type of ratio helps determine a company's ability to generate sufficient
cash to meet its obligations?
A. Liquidity ratios
B. Profitability ratios
C. Activity ratios
D. Leverage ratios

3. What type of ratio helps assess how effectively a company uses its assets?
A. Liquidity ratios
B. Profitability ratios
C. Activity ratios
D. Leverage ratios

4.. What type of ratios help assess a company's ability to meet its obligations?
A. Liquidity ratios
B. Profitability ratios
C. Activity ratios
D. Leverage ratios

5. Which of the following is the correct calculation for the contribution margin ratio?
A. Revenue divided by variable costs.
B. Revenue divided by contribution margin.
C. Contribution margin divided by revenue.
D. Contribution margin divided by variable costs.

6. Total assets turnover ratio is calculated by dividing ____ by total assets
A) Average inventory
B) Accounts receivable
C) Sales
D) Total expenses

7. What percentage of the contribution margin is profit on units sold in excess of the breakeven point?
A. It's 50% to the contribution margin ratio.
B. It's equal to the variable cost ratio.
C. It's equal of the gross profit ratio.
D. It's 100%.

8. Which of the following is not one of the 4 steps required to establish effective objectives?
A. Determine strengths and weaknesses of previous periods.
B. Perform ratio analysis.
C. Decide what resources are needed to achieve objectives
D. Make necessary adjustments to objectives

9. Which of the following is not a strong reason for budgeting?
A. Budgets provide a benchmark for judging performance.
B. Budgeting requires little effort by non-accounting managers.
C. Budgeting requires management to plan.
D. Budgeting requires coordination among the functional areas of the firm.

10. Which of the following is not one of the characteristics of an objective?
A. Relevant.
B. Realistic
C. Reliable.
D. Measurable

11. Pro forma financial statements are included in a company's annual financial statements.
A. True
B. False

12. The Pro Forma Income Statement is the most common pro forma statement used by companies.
A. True
B. False

13. Analyzing the prior period is the main key to budgeting.
A. True
B. False

14. Vertical analysis focuses on relationships of items over several periods of time.
A. True
B. False

15. The current ratio is a profitability ratio.
A. True
B. False