Fundamentals of a business - Quiz

Lesson 3 – Fundamentals of a business

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What is fundamental analysis?

A process of evaluating a company’s marketing strategies.

A process of evaluating a company’s employee performance.

A process of evaluating a company’s financial health and performance.

A process of evaluating a company’s production efficiency.

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What does the income statement reveal?

A company’s asset allocation.

A company’s cash flow.

A company’s financial performance over a specific period.

A company’s future business plans.

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What does the cost of goods sold represent?

The expenses related to marketing and sales.

The expenses directly associated with producing or acquiring the goods sold by the company.

The company’s net profit.

The expenses related to employee salaries and benefits.

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How is the gross profit calculated?

By dividing the net profit by the revenue.

By subtracting the cost of goods sold from the revenue.

By adding the cost of goods sold to the

By subtracting the revenue from the cost of goods sold.

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How is the net profit margin calculated?

By subtracting the gross profit from the revenue.

By dividing the gross profit by the revenue.

By adding the gross profit to the revenue.

By dividing the net profit by the revenue.

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Based on the income statement analysis, what did we learn about Apple Inc.?

The company has a declining revenue trend.

The company has shown consistent revenue growth, increasing net income, and competitive profit margins.

The company has increasing operating expenses.

The company has a decreasing net income.

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What characterizes growth companies?

They prioritize market expansion over short-term profitability.

They prioritize immediate profitability over revenue growth.

They maintain a balance between market expansion and profitability.

They focus on minimizing operating expenses.

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What is a key indicator of success for growth companies?

Net profit margin.

Gross profit margin.

Revenue growth rates exceeding 25% annually.

Reduced operating expenses.

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When analyzing a company’s income statement, which of the following should you look for?

Decreasing revenue and net income over time.

Consistent or increasing revenue and net income over time.

Increased operating expenses.

Reduced gross profit margin.

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What should investors do for a comprehensive analysis of a company’s financial health?

Analyze the income statement only.

Analyze the balance sheet only.

Analyze the cash flow statement only.

Analyze the income statement, balance sheet, and cash flow statement.

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What does the current ratio measure?

A company’s ability to cover its long-term liabilities with its long-term assets.

A company’s ability to cover its short-term liabilities with its short-term assets.

A company’s ability to cover its short-term liabilities with its long-term assets.

A company’s ability to cover its long-term liabilities with its short-term assets.

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Which of the following is considered a favorable current ratio?

Less than 1

Exactly 1

More than 1

None of the above

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The debt-to-equity ratio is used to assess:

How a company finances its operations.

The profitability of a company.

The market value of a company’s shares.

The liquidity of a company.

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A debt-to-equity ratio below 1 indicates:

The company has more debt than equity.

The company has more equity than debt.

The company is financially unstable.

The company is not profitable.

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How is the debt servicing ratio calculated?

By dividing net interest expense by the cash flow from operations.

By dividing total liabilities by total equity.

By dividing current assets by current liabilities.

By dividing the cash flow from operations by the net interest expense.

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The cash flow statement provides information about:

The actual cash coming into and going out of the company.

The company’s revenues and profits.

The company’s creditworthiness.

The company’s sales and customer base.

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What does the cash flow from operations indicate?

How much cash has entered or left the company due to its investments.

How much cash has entered or left the company due to its business activities.

How much cash the company has raised or repaid.

How much cash the company has spent on its employees.

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Why might a company have negative cash flow from operations?

The company is not profitable.

The company is in the process of investing heavily in its growth, e.g., building new properties.

The company is repaying a large amount of debt.

The company is failing to manage its expenses.

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What does negative cash flow from investing indicate?

The company is making losses.

The company is spending money to buy assets or make investments.

The company is not managing its cash flow well.

The company is failing to generate sufficient revenues.

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Why is cash flow from operations considered the most important part of the cash flow statement?

It shows the company’s investment activities.

It shows how the company is raising or repaying money.

It indicates whether the company is generating more cash from its business activities.

It shows how much the company’s shareholders are earning.

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The average score is 18%