#1
What does the current ratio measure?
A company's ability to pay short-term liabilities with short-term assets
ExplanationCurrent ratio assesses liquidity by comparing current assets to current liabilities.
#2
Which financial ratio indicates the efficiency of a company in generating profits from its assets?
Return on Assets (ROA)
ExplanationROA measures how efficiently a company uses its assets to generate profit.
#3
What does the term 'inventory turnover ratio' indicate?
The efficiency of a company in managing its inventory
ExplanationInventory turnover ratio measures how quickly a company sells and replaces inventory.
#4
Which financial ratio assesses the ability of a company to cover its interest expenses with its operating income?
Times Interest Earned Ratio
ExplanationTimes interest earned ratio shows how easily a company can pay interest on outstanding debt.
#5
Which financial ratio measures a company's ability to turn its receivables into cash quickly?
Accounts Receivable Turnover Ratio
ExplanationAccounts receivable turnover ratio assesses how efficiently a company collects payments.
#6
What does the term 'EBITDA' stand for in financial analysis?
Earnings Before Interest, Taxes, Depreciation, and Amortization
ExplanationEBITDA represents earnings before certain expenses are deducted.
#7
What is the formula for calculating the debt-to-equity ratio?
Total liabilities / Total equity
ExplanationDebt-to-equity ratio shows how much debt a company uses relative to its equity.
#8
What is the formula for calculating the gross profit margin?
(Revenue - Cost of Goods Sold) / Revenue
ExplanationGross profit margin measures the percentage of revenue that exceeds the cost of goods sold.
#9
Which financial ratio measures the proportion of debt used to finance a company's assets?
Debt to Equity Ratio
ExplanationDebt to equity ratio shows the balance between a company's debt and its equity.
#10
Which financial ratio indicates the portion of profit retained for future use?
Retention Ratio
ExplanationRetention ratio shows the percentage of profit that a company keeps for reinvestment or growth.
#11
Which financial ratio is a measure of a company's ability to meet its short-term obligations with its most liquid assets?
Quick Ratio
ExplanationQuick ratio measures the company's ability to cover short-term obligations with liquid assets.
#12
What does the term 'working capital' represent in financial analysis?
The difference between current assets and current liabilities
ExplanationWorking capital indicates the liquidity available to a company for day-to-day operations.
#13
Which financial ratio measures the efficiency of a company in using its assets to generate revenue?
Return on Assets (ROA)
ExplanationROA measures how effectively a company utilizes its assets to generate revenue.
#14
What does the term 'return on invested capital (ROIC)' measure?
The return generated by the company's total capital
ExplanationROIC measures the return a company generates from its total invested capital.
#15
What does the term 'financial leverage' refer to?
The use of debt to finance a company's operations and investments
ExplanationFinancial leverage refers to the use of debt to amplify returns.