Profitability and Liquidity Consolidation

A profitability ratio that measures a firm’s efficiency and profitability in relation to its size (as measured by the value of the organization’s capital employed).

• GPM

• NPM

• ROCE

If sales revenue equals $10 million, cost of goods sold equal $6 million and expenses equals $3 million, what is the gross profit margin?

• 90%

• 40%

• 60%

• 10%

Items owned by a business with the intention of converting into cash within one year of the balance sheet date.

• Fixed assets

• Inventory

• Current assets

• Current liabilities

A short-term liquidity ratio used to calculate the ability of an organization to meet its short-term debts (within the next twelve months of the balance sheet date).

• GPM

• NPM

• Current ratio

If current assets equal $15.6 million, current liabilities equal $11.2 million and stocks equal $1.8 million, what is the value of the acid test ratio?

• 0.89:1

• 1.65:1

• 1.23:1

• 1.39:1

Which of the following statements best describes the net profit margin?

• A. It shows what proportion of profits are being distributed to shareholders

• B. It shows what return is being made on assets employed in the business

• C. It shows how well a company is controlling its costs, including expenses

• D. It show how efficiently a company is turning profits into cash

Which of the following performance measures is concerned with a firm’s liquidity?

• A. Gross profit margin

• B. Return on capital employed

• C. Acid test

• D. Net profit margin

If current assets equal $15.6 million, current liabilities equal $11.2 million and stock equals $1.8 million, what is the value of the current ratio?

• A. 0.89:1

• B. 1.65:1

• C. 1.39:1

• D. 1.23:1