#1
What is the purpose of the current ratio?
To measure a company's liquidity
ExplanationAssesses a company's ability to cover short-term liabilities with short-term assets.
#2
What does the Return on Assets (ROA) ratio measure?
A company's ability to generate profit from its assets
ExplanationEvaluates efficiency in generating profits from assets.
#3
What is the meaning of EBITDA?
Earnings Before Interest, Taxes, Depreciation, and Amortization
ExplanationProvides a measure of a company's operating performance.
#4
Which of the following is a measure of a company's efficiency in managing its inventory?
Inventory Turnover Ratio
ExplanationReflects how quickly a company sells and replaces inventory.
#5
What does the Gross Profit Margin measure?
The profitability of a company's core business activities
ExplanationAssesses profitability after direct production costs.
#6
Which financial metric measures a company's efficiency in using its assets to generate revenue?
Asset Turnover Ratio
ExplanationIndicates how well a company utilizes assets to generate sales.
#7
What is the formula for the Debt-to-Equity ratio?
Total Liabilities / Equity
ExplanationShows the proportion of debt to equity in a company's capital structure.
#8
What does the Price-to-Earnings (P/E) ratio indicate?
The relationship between a company's stock price and its earnings
ExplanationCompares a company's market price per share to its earnings per share.
#9
Which financial metric helps evaluate a company's ability to cover its interest payments with its operating profit?
Times Interest Earned ratio
ExplanationMeasures a company's capacity to meet interest payments.
#10
What is the formula for the Operating Profit Margin?
Operating Income / Sales
ExplanationCalculates profitability before non-operating items.
#11
Which of the following is NOT a component of the DuPont Analysis?
Operating Margin
ExplanationContrary to popular belief, operating margin isn't a direct component of DuPont Analysis.
#12
What does the Sustainable Growth Rate (SGR) measure?
The rate at which a company can grow its sales without additional capital
ExplanationIndicates the maximum growth rate attainable without external financing.
#13
What is the formula for the Return on Investment (ROI) ratio?
(Net Income - Dividends) / Shareholders' Equity
ExplanationMeasures returns relative to shareholders' equity.
#14
What does the Inventory Turnover Ratio indicate?
The efficiency of a company in managing its inventory
ExplanationReflects how often a company sells and replaces its inventory.
#15
What does the term 'Free Cash Flow' represent in finance?
The cash a company generates from its operations after accounting for capital expenditures.
ExplanationIndicates cash available after operational and capital expenses.