Accounting Ratio Analysis -Quiz

What is the main objective of accounting ratios?

• To calculate profit

• To evaluate financial position and performance

• To determine market share

• To analyze customer satisfaction

Which ratio measures the firm's ability to meet current obligations?

• Liquidity ratios

• Profitability ratios

• Activity ratios

• Leverage ratios

What do leverage ratios measure?

• Relationship between sales and assets

• Overall performance of the firm

• Efficiency in utilizing assets in generating sales

• Proportion of outsiders capital in financing the firm's assets

Which ratio reflects the firm's efficiency in utilizing its assets in generating sales?

• Ratios to Judge the Financial Position

• General Profitability Ratios

• Turnover/Efficiency Ratios

• Liquidity Ratios

What is the ideal standard for the Current Ratio/Working Capital Ratio?

• 4:1

• 1:1

• 3:1

• 2:1

What problem makes the interpretation of ratios difficult due to differences in the definitions of items in the balance sheet and the profit and loss statement?

• Price level changes

• Differences in definitions

• Short-term changes

• Proper basis of comparison

What makes the ratios calculated at a point of time less informative and defective?

• They suffer from short-term changes

• They are calculated from past financial statements

• They are not affected by price level changes

• They are indicators of future

What is the main purpose of the ratio analysis?

• To evaluate the financial strengths and weaknesses of the firm

• To determine market share

• To predict future financial performance

• To calculate current liabilities

Which ratio measures the proportion of outsiders capital in financing the firm's assets?

• Activity ratios

• Liquidity ratios

• Profitability ratios

• Financial leverage ratios

What is the main problem in using ratios for comparison?

• Short-term changes

• Differences in situations of companies

• Price level changes

• Differences in definitions