Balance Sheet & Financial Ratios Quiz

What does the debt ratio measure?

• The company's net profit

• The percentage of assets financed by liabilities

• The ability to cover short-term liabilities

• The total revenue earned

What does the current ratio indicate?

• The company's reliance on debt

• The company's long-term financial health

• Whether the company can pay short-term liabilities with short-term assets

• The company’s profitability

How is working capital calculated?

• Total Assets ÷ Total Liabilities

• Current Assets ÷ Current Liabilities

• Current Assets - Current Liabilities

• Total Equity + Total Liabilities

What does the assets-to-equity ratio show?

• The percentage of liabilities financed by equity

• The funding balance between equity and liabilities

• The proportion of revenue generated by assets

• The company’s net income ratio

What is a good indicator of a company’s debt ratio?

• Below 50%

• Exactly 100%

• Above 75%

• Equal to 60%

What does a high debt-to-equity ratio indicate?

• A balanced funding mix

• High financial risk

• Low reliance on debt

• High liquidity

What does the current portion of long-term debt represent?

• Debts to be paid in more than a year

• Debts to be paid within the current year

• Investments held by the company

• Accumulated depreciation on fixed assets

What is the purpose of a balance sheet?

• To calculate a company’s net profit

• To summarize financial data at a specific time

• To assess operational efficiency

What does the term "current assets" include?

• Property and equipment

• Accounts receivable and cash

• Long-term investments

• Deferred income taxes

What does a negative working capital indicate?

• The company has excess funds

• The company may face liquidity issues

• The company is not generating revenue

• The company is profitable