Intro to Finance

Profitability ratios include :

• gearing

• current

• return on capital employed

• stock (inventory) turnover

Long term loans are :

• current liabilities

• non-current liabilities

• non-current assets

• current assets

Capital employed =

• total equity + non-current liabilities

• total equity - non-current liabilities

• total equity x non-current liabilities

• total equity /

  non-current liabilities

Current ratio =

• current assets x current liabilities

• current assets + current liabilities

• current assets / current liabilities

• current assets - current liabilities

Which is a type of efficiency ratio ?

• gross profit margin

• gearing

• current ratio

• inventory (stock) turnover

What does the Receivable Days ratio assess ?

• How long it takes the business to pay suppliers

• How long it takes the business to pay customers

• How long it takes the customers to pay the business

• How quickly stock is delivered to the business

Payables Days ratio assesses :

• How quickly the firm pays its suppliers

• How quickly the suppliers pay the firm

• How quickly customers pay the firm

• How quickly the firm pays loans

Profit ratios = type of profit / ? (denominator)

• cost of goods sold

• revenue

• expenses

• finance costs

An investor will be most concerned with :

• Receivables days

• Payables days

• Operating profit margin

• Stock turnover

A firm has just ended its calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The possible problem this firm may face is

• low profitability.

• lack of cash flow.

• inability to receive credit

• high leverage.