#1
What is the purpose of the price-to-earnings (P/E) ratio?
To measure a company's ability to generate profit
ExplanationEvaluates profit generation relative to stock price
#2
Which financial ratio measures a company's efficiency in managing its assets to generate sales?
Asset Turnover Ratio
ExplanationAssesses asset utilization for sales generation
#3
Which of the following is a measure of a company's ability to cover its short-term liabilities with its most liquid assets?
Current Ratio
ExplanationAssesses short-term liquidity position
#4
Which financial ratio measures a company's ability to meet its short-term obligations with its most liquid assets?
Quick Ratio
ExplanationEvaluates ability to cover short-term obligations with liquid assets
#5
What does the term 'EPS' stand for in financial analysis?
Earnings Per Share
ExplanationRepresents earnings attributed to each outstanding share
#6
Which of the following is a measure of a company's financial leverage?
Debt-to-Equity Ratio
ExplanationIndicates proportion of debt relative to equity
#7
Which of the following is not a liquidity ratio?
Debt-to-Equity Ratio
ExplanationMeasures financial leverage, not liquidity
#8
What does the debt-to-equity ratio indicate about a company?
The proportion of debt used to finance its operations relative to shareholders' equity
ExplanationShows reliance on debt for operational financing
#9
Which valuation method estimates the intrinsic value of a stock by discounting its future cash flows?
Dividend Discount Model
ExplanationValues stock based on projected future cash flows
#10
What does the term 'EBIT' stand for in financial analysis?
Earnings Before Interest and Taxes
ExplanationMeasures profit before deducting interest and taxes
#11
Which financial ratio measures a company's efficiency in managing its inventory?
Inventory Turnover Ratio
ExplanationAssesses speed of inventory conversion to sales
#12
What is the purpose of the price-to-book (P/B) ratio?
To measure a company's valuation relative to its assets
ExplanationCompares market value to book value of company's assets
#13
How does the DuPont analysis break down a company's return on equity (ROE)?
Into three components: profit margin, asset turnover, and financial leverage
ExplanationDecomposes ROE into key contributing factors
#14
Which financial ratio measures a company's ability to cover its interest expenses with its earnings before interest and taxes?
Interest Coverage Ratio
ExplanationAssesses ability to meet interest payments
#15
In asset valuation, what does the term 'DCF' refer to?
Discounted Cash Flow
ExplanationValues assets based on discounted future cash flows
#16
Which financial ratio indicates a company's ability to generate profit from its operations before deducting interest and taxes?
Earnings Before Interest and Taxes (EBIT) Margin
ExplanationShows profit margin before interest and taxes
#17
Which financial ratio measures a company's profitability by comparing its net income to its shareholders' equity?
Return on Equity (ROE)
ExplanationAssesses profit generation relative to shareholders' equity
#18
Which financial ratio measures a company's ability to pay off its short-term debt obligations with its cash and cash equivalents?
Quick Ratio
ExplanationAssesses ability to cover short-term debt with liquid assets