Financial Ratio Quiz

What does the Gross Profit Margin indicate?

• The company's ability to control costs

• The company's ability to pay off long-term debts

• The company's ability to increase sales volumes

• The company's ability to obtain high prices from its customers

What does the Current Ratio indicate?

• How many times can current assets cover current liabilities

• How many times can equity cover non-current liabilities

• How many times can fixed assets cover current liabilities

• How many times can total assets cover total liabilities

What does the Trade Receivables' Collection Period measure?

• The average length of time taken by the company to sell its goods

• The average length of time taken by the company to pay its suppliers

• The average length of time taken by debtors to settle their balance

• The average length of time taken by creditors to settle their balance

What does the Debt to Equity Ratio measure?

• The relationship between non-current liability and equity

• The relationship between current assets and current liabilities

• The relationship between total assets and total liabilities

• The relationship between revenue and expenses

What does the Quick or Acid Test Ratio help to find?

• Whether a business can pay its short-term debts without having to sell inventory first

• Whether a business can pay its long-term debts without having to sell inventory first

• Whether a business can pay its short-term debts by selling inventory

• Whether a business can pay its long-term debts by selling inventory

What does the Return on Equity express?

• The profit for the year as a percentage of the capital employed in generating that profit

• The profit for the year as a percentage of the capital belonging to equity participants

• The profit for the year as a percentage of the total assets

• The profit for the year as a percentage of the total liabilities

What does the Inventory Turnover show?

• How many times in the year did inventory get turned over

• How many times in the year did inventory get sold

• How many times in the year did inventory get purchased

• How many times in the year did inventory get produced

What does the Asset Turnover Ratio measure?

• The amount of revenue earned for every £1 spent on fixed assets

• The amount of revenue earned for every £1 spent on current assets

• The amount of revenue earned for every £1 spent on total assets

• The amount of revenue earned for every £1 spent on liabilities

What does the Interest Cover measure?

• The number of times interest payable is covered by liabilities

• The number of times interest payable is covered by equity

• The number of times interest payable is covered by total assets

• The number of times interest payable is covered by profits or earnings

What does the Return on Capital Employed express?

• The profit for the year as a percentage of the total equity

• The profit for the year as a percentage of the capital employed in generating that profit

• The profit for the year as a percentage of the total assets

• The profit for the year as a percentage of the total liabilities