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CFA Level I Accounting — practice questions

Explore 30 free Accounting questions in CFA Level I Finance. Open each question or exercise to read its content, reference answers and available explanation.

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Accounting questions and exercises with answers

Showing questions 1–30 of 30.

An analyst sorts financial ratios into their main families: liquidity, solvency, profitability and:Read the answer and worked solution →Ratio results are used to spot trends, set budget expectations, compare competitors and establish:Read the answer and worked solution →A firm divides its current assets by its current liabilities. That figure is the:Read the answer and worked solution →A stricter test strips inventory and prepaid expenses out of current assets. That test is also called the:Read the answer and worked solution →Lenders often look at the ratio built on the single most liquid asset a company holds. That asset is:Read the answer and worked solution →Two ratios are named for assessing solvency: debt-to-equity and:Read the answer and worked solution →A ratio checks whether a firm can cover its interest expense as it falls due. That ratio is:Read the answer and worked solution →Operating efficiency ratios include total asset turnover, inventory turnover, days' sales in inventory and:Read the answer and worked solution →A manager wants to know how hard the asset base is working to produce sales. She should use:Read the answer and worked solution →Three profitability measures are named together: return on total assets, return on equity and:Read the answer and worked solution →An investor divides profit available to common shareholders by the shares outstanding. That figure is:Read the answer and worked solution →To reach that figure, preferred dividends are first removed from:Read the answer and worked solution →An investor divides the market price of a share by its earnings per share. That result is the:Read the answer and worked solution →Market value ratios commonly used are earnings per share, the price/earnings ratio and:Read the answer and worked solution →One method breaks return on equity into profit margin, asset turnover and leverage. That method is:Read the answer and worked solution →In that decomposition, profit margin stands for operating efficiency and total asset turnover stands for:Read the answer and worked solution →The third component of that decomposition, captured by the equity ratio, is:Read the answer and worked solution →An analyst is reminded that even careful ratio work has boundaries. Financial statement analysis has:Read the answer and worked solution →Comparing this year's ratios with the last five years lets a firm see performance:Read the answer and worked solution →A section teaches students to calculate current, quick and cash ratios in order to assess a firm's:Read the answer and worked solution →A shopkeeper wants to know how quickly stock moves off the shelves in a year. She should use:Read the answer and worked solution →Alongside debt-to-assets, the other named solvency ratio compares borrowings with owners' funds. It is:Read the answer and worked solution →Catch the liquidity ratiosRead the answer and worked solution →Pop the ratio familiesRead the answer and worked solution →Run the ratio gatesRead the answer and worked solution →Slice the ratio wordsRead the answer and worked solution →Short term or long termRead the answer and worked solution →Sort the ratiosRead the answer and worked solution →Type the numberRead the answer and worked solution →Ratio bingoRead the answer and worked solution →

Worked practice questions

An analyst sorts financial ratios into their main families: liquidity, solvency, profitability and:

  1. Efficiency
  2. Advertising
  3. Recruitment
  4. Warehousing
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Correct answer: A. Efficiency

1. Four families are named together. 2. The fourth covers use of assets. 3. It is efficiency. _Source: OpenStax Principles of Finance 2e, Chapter 6, Measures of Financial Health._

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Ratio results are used to spot trends, set budget expectations, compare competitors and establish:

  1. Office rents
  2. Benchmarks
  3. Staff rotas
  4. Delivery routes
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Correct answer: B. Benchmarks

1. Success needs a yardstick. 2. Competitors are compared against it. 3. They are benchmarks. _Source: OpenStax Principles of Finance 2e, Chapter 6, Measures of Financial Health._

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A firm divides its current assets by its current liabilities. That figure is the:

  1. Current ratio
  2. Equity ratio
  3. Quick ratio
  4. Cash ratio
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Correct answer: A. Current ratio

1. It is closely tied to working capital. 2. All current assets are included. 3. It is the current ratio. _Source: OpenStax Principles of Finance 2e, Chapter 6, Measures of Financial Health._

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More Finance topics

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