CMA (Certified Management Accountant) Practice Questions — All Questions

The current ratio measures:

• a.Profitability
• b.Short-term liquidity (current assets to current liabilities)✓
• c.Long-term leverage
• d.Market value

Current ratio = current assets / current liabilities, a liquidity measure.

A higher debt-to-equity ratio indicates:

• a.Greater financial leverage and risk✓
• b.Lower risk always
• c.More cash
• d.Higher liquidity

More debt relative to equity means higher leverage and financial risk.

Gross profit margin equals gross profit divided by:

• a.Total assets
• b.Net income
• c.Sales revenue✓
• d.Equity

Gross margin = gross profit / sales.

Inventory turnover measures:

• a.Profit per unit
• b.Cash on hand
• c.Debt levels
• d.How many times inventory is sold and replaced in a period✓

Inventory turnover = COGS / average inventory, showing how fast inventory sells.