Financial Ratios

A company with a debt-to-equity ratio of 2.5 and $10 million of assets has debt of:

• $2.9 million

• $5 million

• $7.14 million

• $8.23 million

An asset's liquidity measures its:

• potential for generating a profit.

• cash requirements.

• ease and cost of being converted to cash.

• proportion of debt financing.

When Tri-C Corp. compares its ratios to industry averages, it has a higher current

ratio, an average quick ratio, and a low inventory turnover. What might you assume

about Tri-C?

• Its cash balance is too low.

• Its cost of goods sold is too low.

• Its current liabilities are too low.

• Its average inventory is too high.

Which of the following would be most detrimental to a firm's current ratio if that ratio

is currently 2.0?

• Buy raw materials on credit.

• Sell marketable securities at cost.

• Pay off accounts payable with cash.

• Pay off a portion of long-term debt with cash.

A ratio that compares investors' and creditors' stake in a company is

• Debt ratio

• Debt to Equity ratio

• Equity ratio

• Investor creditor ratio

The ratio that explains how efficiently companies use their assets to generate revenue

• Revenue Asset ratio

• Receivables Turnover ratio

• Income ratio

• Asset Turnover ratio

The best ratio to evaluate short-term liquidity is

• Current ratio

• Working capital

• Cash ratio

• Debt to Assets Ratio

Inventory turnover ratio evaluates

• A company's ability to move inventory

• A company's inventory purchasing efficiency

• Both A and B

• None of the above

The equity multiplier helps creditors:

• Evaluate future earning

• Evaluate company profitability

• Evaluate company lending risk

• Evaluate company profitability

The quick ratio formula uses which of the following:

• Total Assets

• Cash

• Total current assets

• Inventory