Section 1: 30–40%1F
Financial Statement Ratios and Performance Metrics
Ratio questions look easy until the AICPA changes one line item in the balance sheet and asks you to recompute. The most common trap: confusing current ratio with quick ratio (quick excludes inventory and prepaid). Know exactly what goes in each formula's numerator and denominator — they'll give you extra line items specifically to distract you.
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