CFA — Certificate in Financial Analysis Ratio Practice Questions

During a financial analysis of Company X, it is noticed that its current ratio has decreased from 2.5 to 1.5. What might this suggest?

• AA. Increased debt
• BB. Improved liquidity
• CC. Decreased liquidity
• DD. Increased profitability

When assessing a firm's financial health, a high debt-to-equity ratio could indicate:

• AA. Good capital efficiency
• BB. Strong equity position
• CC. Risk of bankruptcy
• DD. High liquidity

If Company Y has a P/E ratio of 15 and its earnings per share (EPS) is $2, what is its market price per share?

• AA. $20
• BB. $15
• CC. $30
• DD. $10