Section 1: 40–50%B1

Financial Statement Analysis and Ratios

Exam insight

BAR leans hard on computing and interpreting ratios. You'll be handed two financial statements and asked for a clean current ratio, DSO, or DuPont-decomposed ROE, and knowing the exact numerator and denominator of each one is the difference between a fast point and a guess.

What AICPA wants you to know

1Compute and interpret the core liquidity ratios (current, quick, cash)
2Calculate activity ratios and convert turnovers into days (DSO, days inventory, days payable, operating and cash cycles)
3Apply solvency and leverage ratios (debt-to-equity, debt ratio, times-interest-earned)
4Compute profitability ratios (gross/operating/net margin, ROA, ROE)
5Decompose ROE using the three-step DuPont model
6Perform horizontal, vertical, and common-size analysis

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Ratio ReadName the ratio, plug the exact numerator over denominator, and watch the sales versus COGS swap and the inventory exclusion.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.