Section 1: 30–40%1F
Financial Statement Ratios and Performance Metrics
Exam insight
Ratio questions look easy until the AICPA changes one line item and asks you to recompute. The most common trap is confusing the current ratio with the quick ratio (quick excludes inventory and prepaid). Know exactly what goes in each formula's numerator and denominator - they hand you extra line items just to distract you.
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What AICPA wants you to know
- 1Calculate and interpret liquidity ratios (current, quick, cash)
- 2Calculate and interpret solvency/leverage ratios (debt-to-equity, interest coverage)
- 3Calculate and interpret profitability ratios (ROA, ROE, profit margin, gross margin)
- 4Calculate and interpret efficiency/turnover ratios (AR, inventory, asset turnover)
- 5Understand what each ratio tells an analyst and what changes improve/worsen it