Business Financial Health Quiz

What does liquidity refer to in a business context?

• The total liabilities of a business

• The total assets of a business

• The short-term health and efficiency of a business

• The long-term health of a business

Which of the following is a measure of liquidity?

• Equity-to-Asset Ratio

• Debt-to-Asset Ratio

• Working Capital

• Debt-to-Equity Ratio

What is the target range for the current ratio?

• 2.0 - 3.0

• 1.0 - 2.0

• 0.5 - 1.0

• 0.0 - 0.5

What does a current ratio of 2.0 indicate?

• The business has $0.50 in debt for every dollar of assets

• The business has $2.00 in debt for every dollar of assets

• The business has $1.00 in assets for every dollar of debt

• The business has $2.00 in assets for every dollar of debt

Which of the following is NOT a way to improve liquidity?

• Maximize income by billing clients more quickly

• Decrease money removed by the owner for living expenses

• Increase production efficiency by using more modern practices

• Increase owner’s equity

What does solvency refer to in a business context?

• The total current assets of a business

• The short-term health and efficiency of a business

• The ability to meet immediate financial needs

• The overall or longer-term health of a business

Which ratio measures the leverage of a business?

• Debt-to-Asset Ratio

• Equity-to-Asset Ratio

• Current Ratio

• Debt-to-Equity Ratio

What is the target range for the Debt-to-Equity Ratio?

• 1.5 - 2.0

• 1.0 - 1.5

• 0.5 - 1.0

• 0.0 - 0.5

Which of the following is a potential solution to improve solvency?

• Generate additional income by charging higher prices

• Sell noncurrent assets to pay off debt

• Negotiate longer payment terms with accounts receivable vendors

• Increase labor efficiency from workers

What does a Debt-to-Asset Ratio of 0.50 indicate?

• The business has $1.00 of debt for every $0.50 in business assets

• The business has $0.50 of debt for every $1 in business assets

• The business has $1.00 of assets for every $0.50 in business debt

• The business has $0.50 of assets for every $1 in business debt