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IIA CIA Exam
Certified Internal Auditor Exam (Page 42 )

Updated On: 12-Jan-2026
Page 42 of 342
PDF with 1702 Questions

The entity has return on assets of

  1. 21.1%
  2. 39.2%
  3. 42.1%
  4. 45.3%

Answer(s): A

Explanation:

The return on assets is the ratio of profit to total assets. It equals 21.1% US $200 profit $950 total assets). An entity's financial statements for the current year are presented below:



The Entity has dividend-payoyt ratio of

  1. 19.6%
  2. 28.6%
  3. 40.0%
  4. 50.0%

Answer(s): D

Explanation:

The dividend-payout ratio is the ratio of dividends paid to profit for the period. Hence, it equals 50.0% US $100 dividends $200 profit). An entity's financial statements for the current year are presented below:



All else being equal, an entity with a higher dividend-payout ratio will have a <List A> debt-to-assets ratio and a <List B} current ratio.

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): B

Explanation:

An entity with a higher dividend-payout ratio is distributing more of its earnings as dividends to ordinary shareholders. It will have less cash and less total assets than a comparable entity with a lower payout ratio. The debt-to-assets ratio will be higher because total assets are lower, and the current ratio will be lower because cash is lower. An entity's financial statements for the current year are presented below:



Return on investment ROD is a very popular measure employed to evaluate the performance of corporate segments because it incorporates all of the major ingredients of profitability revenue, cost, investment) into a single measure. Under which one of the following combination of actions regarding a segment's revenues, costs, and investment would a segment's POI always increase?

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): D

Explanation:

An increase in revenue and a decrease in costs will increase the ROI numerator. A decrease in investment will decrease the denominator. The ROI must increase in this situation.



Which of the following financial statement analyses is most useful in determining whether the various expenses of a given entity are higher or lower than industry
averages?

  1. Horizontal.
  2. Vertical.
  3. Activity ratio.
  4. Defensive-interval ratio.

Answer(s): B

Explanation:

Vertical analysis is the expression of each item on a financial statement in a given period in relation to a base figure. On the income statement, each item is stated as a percentage of sales Thus, the percentages for the entity in question can be compared with industry norms.



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