#1
Which financial ratio measures a company's ability to pay off its short-term liabilities with its short-term assets?
Current ratio
ExplanationMeasures liquidity by comparing current assets to current liabilities.
#2
What does the quick ratio measure?
A company's ability to pay off its short-term liabilities with its most liquid assets
ExplanationAssesses immediate liquidity using only the most liquid assets.
#3
What does a high debt-to-equity ratio indicate?
The company has a higher proportion of debt relative to equity
ExplanationShows reliance on debt financing over equity.
#4
How is Return on Equity (ROE) calculated?
Net income divided by shareholders' equity
ExplanationMeasures profitability relative to shareholder investment.
#5
What does the Gross Profit Margin measure?
The percentage of sales revenue retained after deducting the cost of goods sold
ExplanationShows profitability after accounting for production costs.
#6
Which financial ratio measures a company's efficiency in utilizing its assets to generate revenue?
Asset turnover ratio
ExplanationEvaluates how effectively assets are used to generate sales.
#7
What does the Debt-to-Asset ratio indicate?
The percentage of a company's assets financed by debt
ExplanationShows the proportion of assets financed by debt.
#8
What does the Return on Assets (ROA) ratio measure?
A company's ability to generate profit from its core business operations
ExplanationShows efficiency in generating profits from assets.
#9
What does a high Price-to-Earnings (P/E) ratio imply?
Investors are willing to pay more for each dollar of earnings
ExplanationIndicates high investor expectations for future earnings growth.
#10
What does the Operating Profit Margin measure?
The company's ability to generate profit from its core business operations
ExplanationAssesses profitability from core operational activities.
#11
What does the Price-to-Book (P/B) ratio indicate?
The value investors are willing to pay for each dollar of a company's book value
ExplanationCompares market value to the company's book value per share.
#12
What does the Inventory Turnover ratio measure?
The efficiency of a company in managing its inventory
ExplanationAssesses how quickly inventory is sold and replaced.
#13
What does the Return on Capital Employed (ROCE) ratio measure?
The efficiency of a company's utilization of its assets
ExplanationMeasures profitability relative to capital employed.
#14
Which financial ratio indicates the proportion of debt a company uses to finance its assets?
Debt-to-Equity ratio
ExplanationShows the relative use of debt in financing assets.