#1
Which financial ratio measures a company's ability to generate profits from its resources?
Return on assets (ROA)
ExplanationROA assesses a company's profitability relative to its total assets.
#2
What does the debt-to-equity ratio indicate about a company?
Its reliance on debt financing versus equity financing
ExplanationThis ratio reveals the balance between debt and equity in a company's capital structure.
#3
What does the price-to-earnings (P/E) ratio indicate about a company?
Its current stock price relative to its earnings per share
ExplanationP/E ratio reflects the relationship between stock price and earnings per share.
#4
Which financial ratio measures a company's ability to cover its short-term liabilities with its short-term assets?
Current ratio
ExplanationCurrent ratio evaluates a company's capacity to meet short-term obligations with current assets.
#5
What does the gross profit margin measure?
The proportion of revenue remaining after deducting the cost of goods sold
ExplanationGross profit margin indicates the percentage of revenue retained after covering the cost of goods sold.
#6
Which financial ratio is calculated by dividing net income by average total assets?
Return on assets (ROA)
ExplanationROA is the ratio of net income to the average total assets, measuring profitability.
#7
What does a high quick ratio indicate about a company?
High liquidity and strong ability to meet short-term obligations
ExplanationA high quick ratio signifies ample liquidity for short-term obligations.
#8
What does the inventory turnover ratio measure?
The efficiency of a company's inventory management
ExplanationInventory turnover ratio assesses how efficiently a company manages its inventory.
#9
What does a high debt ratio indicate about a company?
High reliance on debt financing
ExplanationA high debt ratio indicates significant reliance on debt for financing.
#10
What does the return on equity (ROE) ratio indicate about a company?
Its ability to generate profit from its shareholder investments
ExplanationROE reflects a company's proficiency in generating profit from shareholder investments.
#11
Which financial ratio assesses a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT)?
Times interest earned ratio
ExplanationTimes interest earned ratio gauges a company's capability to cover interest costs with EBIT.
#12
Which financial ratio assesses a company's ability to turn its inventory into sales?
Inventory turnover ratio
ExplanationInventory turnover ratio measures how quickly a company converts inventory into sales.
#13
What does a low accounts receivable turnover ratio suggest about a company?
Slow collection of outstanding debts
ExplanationA low accounts receivable turnover ratio indicates delayed collection of outstanding debts.
#14
Which financial ratio measures the proportion of debt a company uses to finance its assets?
Debt-to-equity ratio
ExplanationDebt-to-equity ratio gauges the balance between debt and equity in financing a company's assets.
#15
What does a high fixed charge coverage ratio suggest about a company?
Sufficient income to cover fixed expenses
ExplanationA high fixed charge coverage ratio suggests adequate income to cover fixed expenses.