Financial Indicators

How is the ROI measured?

• Net Profit/Avg Assets x 100

• Net Profit/Net Sales x 100

• Net Profit/Avg Capital x 100

• Net Profit/Avg Current Liabilities x 100

The ROI measures...

• How effectively the business has used it's owner's capital to earn revenue

• How effectively the business has used it's owner's capital to control expenses

• How effectively the business has used it's owner's capital to earn a profit

• How effectively the business has used it's assets to earn a profit

If the ROI has increased but net profit has remained constant, what has happened?

• The owner has a bigger capital investment

• The owner has a smaller capital investment

• The owner has turned their assets into profit

• All of the above

The debt ratio is a ____________ indicator

• Liquidity

• Stability

• Efficiency

• Effectiveness

The debt ratio measure the portion of ______________ funded by _______________

• Profit/Expenses

• Sales/Assets

• Assets/Capital

• Assets/Liabilities

Once you know the portion of assets funded by debt/liabilities, you then also know the portion of assets funded by:

• Equity

• Revenue

• Profit

• Drawings

The higher the debt ratio, the greater the ______ for the business

• Profit

• Reward

• Interest revenue

• Risk

How is the ROA measured?

• Profit/Avg Capital x 100

• Sales/Avg Assets x 100

• Profit/Avg Assets x 100

• Profit/Net Sales x 100

The ROA measures...

• How effectively the firm is using its assets to earn revenue

• How effectively the firm is using its assets to control expenses

• How effectively the firm is using its assets to earn a profit

• None of the above

True or false? The ROI will always be higher than the ROA

• True

• False