Financial Concepts and Calculations Quiz

Simple interest is calculated using the formula Principal x Rate x Time.

ROI stands for Return on Investment in finance, measuring the profitability of an investment relative to its cost.

Variance is not a measure of central tendency; it is a measure of the spread or dispersion of data points.

PE stands for Price to Earnings, a financial metric that compares a company's share price to its earnings per share.

The Income Statement displays a company's revenues and expenses, providing a snapshot of its financial performance over a specific time frame.

Compound interest is calculated using the formula P(1 + r/n)^nt, where P is the principal amount, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

The present value is calculated using the formula PV = FV / (1 + r)^t, where PV is the present value, FV is the future value, r is the discount rate, and t is the number of years. In this case, PV = $10,000 / (1 + 0.08)^5 = $6,629.56.

The future value with compound interest is calculated using the formula P(1 + r/n)^nt, where P is the principal amount, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

The debt-to-equity ratio is calculated by dividing total debt by total equity, providing insight into a company's financial leverage.

The current ratio is calculated by dividing current assets by current liabilities, assessing a company's short-term liquidity and ability to cover its obligations.

EBIT stands for Earnings Before Interest and Taxes, representing a company's operating profit before deducting interest and taxes.

NPV is calculated by summing the cash flows (CF) discounted to their present value using the formula Σ(CF / (1 + r)^t), where r is the discount rate and t is the time period.

ROE is a measure of a company's profitability relative to its equity, calculated by dividing net income by shareholders' equity.

The Quick Ratio measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory from current assets.

WACC is calculated by multiplying the cost of debt by the proportion of debt in the capital structure, adding it to the cost of equity multiplied by the proportion of equity.