Financial Ratios-Balance Sheet

Open Ended

How can understanding financial ratios enhance your ability to analyze a company's balance sheet?

Multiple Choice

Why is it important to use financial ratios when analyzing balance sheets?

• They help identify trends and make comparisons between companies.

• They are only used for tax purposes.

• They are required by law for all businesses.

• They are used to calculate employee salaries.

Open Ended

What financial information do you think is the most important for evaluating the health of a company?

Multiple Select

Select all that apply: Which of the following are summarized in a balance sheet?

• Assets

• Liabilities

• Owner's equity

• Sales

Multiple Choice

Which components of a balance sheet are used to evaluate a company's financial strength?

• Assets, liabilities, and owner's equity

• Revenue and expenses

• Cash flow and profit

• Market share and growth

Open Ended

Explain how financial ratios can provide insights into a company's performance, efficiency, and risk.

Multiple Choice

What is the main purpose of liquidity ratios in financial analysis?

• To measure a company's profitability

• To assess a company's ability to obtain cash for short-term debt obligations

• To evaluate a company's long-term investments

• To analyze a company's market share

Open Ended

Explain how the current ratio is calculated and what it indicates about a company's financial health.

Multiple Choice

Which of the following statements about the current ratio is correct?

• A current ratio under 1.0 means a company has enough assets to pay its short-term liabilities.

• A higher current ratio makes it harder for a company to pay its short-term debts.

• A current ratio under 1.0 means a company does not have enough assets to pay its short-term liabilities.

• Comparing current ratios to industry averages is not useful.

Open Ended

Which company do you think has more liquidity, Nike or Adidas?

Multiple Choice

Given Nike's current assets of $25.202 billion and current liabilities of $9.256 billion in 2023, what is Nike's current ratio?

• 2.72

• 2.40

• 2.72

• 2.73

Multiple Choice

Which company had a higher current ratio in May of 2023, Nike or Adidas?

• Nike

• Adidas

• Both had the same ratio

• Neither

Open Ended

Explain the significance of leverage ratios in financial analysis.

Multiple Choice

Which of the following statements about highly leveraged companies is correct?

• They rely heavily on debt financing.

• They have low financial risk.

• They are less affected by economic downturns.

• They played a minor role in the 2008 financial meltdown.

Open Ended

Compare the debt-to-asset ratios of Nike and Adidas in May of 2024. What does this indicate about their reliance on debt financing?

Multiple Choice

Based on the debt-to-asset ratios provided for Nike and Adidas in May 2023, which company is more leveraged, and what does this imply about their financial risk?

• Nike is more leveraged, implying higher financial risk.

• Adidas is more leveraged, implying higher financial risk.

• Both companies have equal leverage and financial risk.

• Neither company is leveraged.

Open Ended

What do the current ratio and debt-to-equity ratio tell you about a company's financial health?

Open Ended

After learning about balance sheet financial ratios, what questions do you still have or what would you like to know more about?

Multiple Choice

What is one way financial ratios can help you analyze a balance sheet?

• They show the profitability of a company.

• They reveal the liquidity position of a company.

• They indicate the company's market share.

• They measure the company's employee satisfaction.