Financial Analysis Objectives

Front

What does Working Capital indicate about a company?

Back

Ability to pay bills, Ability to make payroll, Ability to make loan payments.

Front

True or False: A current ratio between one and two is considered ideal because it means all of a company’s current liabilities would be covered by current assets.

Back

True

Front

Back

1.0

Front

Back

0.75

Front

What is the profitability ratio that measures a company's profitability by revealing how much profit a company generates with the money shareholders have invested?

Back

Return on equity.

Front

What is the profitability ratio that measures the gain or loss generated on an investment relative to the amount of money invested?

Back

Return on investment.

Front

What does the Gross Profit Margin examine?

Back

A company's ability to create cost-effective sellable products

Front

Back

77.78%

Front

What does the operating margin measure?

Back

The percentage of total revenue made up of operating income

Front

Fill in the blank: Operating margin is important to creditors and investors because it shows the _______ and profitability of a company’s operations.

Back

strength