CPFM Financial Performance Measurement 2

Question 1

A company reports net income of $200,000 on average total assets of $2,000,000. What is its Return on Assets (ROA)?

Accepted Answer

10%

Answer

20%

Answer

5%

Answer

0.1%

Question 2

Which ratio best measures a firm's ability to meet short-term obligations using only its most liquid assets?

Accepted Answer

Quick ratio

Answer

Debt-to-equity ratio

Answer

Gross margin

Answer

Inventory turnover

Question 3

In the DuPont framework, ROE is decomposed into net profit margin, asset turnover, and which third component?

Accepted Answer

Equity multiplier

Answer

Current ratio

Answer

Operating margin

Answer

Dividend payout

Question 4

A positive Economic Value Added (EVA) indicates that a company has:

Accepted Answer

Earned returns above its cost of capital

Answer

Reduced its total revenue

Answer

Increased its accounts payable

Answer

Lowered its tax rate

Question 5

Which performance metric is least affected by differences in capital structure across firms?

Accepted Answer

EBIT

Answer

Net income

Answer

Earnings per share

Answer

Return on equity

Question 6

An increasing inventory turnover ratio generally signals:

Accepted Answer

More efficient inventory management

Answer

Rising obsolete stock

Answer

Lower sales volume

Answer

Higher carrying costs

Question 7

What does a contribution margin represent in performance analysis?

Accepted Answer

Sales revenue minus variable costs

Answer

Sales revenue minus all costs

Answer

Net income minus dividends

Answer

Gross profit minus taxes