AC 220 Finance Review Exam Q & A 2026 (Complete And Verified Study material) (19pages) LEARNEXAMS

plaintext

1. When evaluating a company's financial performance over the past year,

which of the following ratios would provide the most comprehensive view

of its operational efficiency?

 A) Debt-to-Equity Ratio

 B) Current Ratio

 C) Return on Equity

 D) Inventory Turnover

 Answer: C) Return on Equity

 Rationale: Return on Equity (ROE) measures a corporation's

profitability in relation to shareholders' equity, providing a comprehensive

view of financial performance and operational efficiency.

2. In measuring cash flow, which statement best represents the cash

generated from operating activities?

 A) Income Statement

 B) Balance Sheet

 C) Statement of Cash Flows

 D) Statement of Retained Earnings

 Answer: C) Statement of Cash Flows

 Rationale: The Statement of Cash Flows provides detailed information

about the cash generated from a company's core business operations.

3. Which capital budgeting technique takes into account the time value of

money?

 A) Payback Period

 B) Accounting Rate of Return

 C) Net Present Value

 D) Internal Rate of Return

 Answer: C) Net Present Value

 Rationale: Net Present Value (NPV) considers the time value of money

by discounting future cash flows to present value, making it a vital tool for

capital budgeting decisions.

4. A firm's cost of capital is primarily influenced by which of the

following factors?

 A) Market trends

 B) Its operational efficiency