Financial Analysis - Chapter 3

What is the ability of a business to generate enough cash to pay bills without disrupting business operations?

• Liquidity

• Profitability

• Solvency

• Leverage

What are the current assets (from a net worth statement) divided by the current liabilities (from a net worth statement)?

• Current ratio

• Debt-to-equity ratio

• Net profit margin

• Return on assets

What measures the ability of the farm’s current assets, if sold, to cover the short-term liabilities?

(a)  

What is defined as current assets - current liabilities?

• Working capital

• Net profit

• Gross income

• Fixed assets

What is defined as current liabilities / total liabilities?

What is an indication of the % of total farm debt that is due in one year?

• Current portion of total debt

• Total farm assets

• Net farm income

• Long-term liabilities

What is defined as current assets / total assets?

• Current asset ratio

• Debt equity ratio

• Quick ratio

• Inventory turnover ratio

What is an indication of % total assets that will be used or sold in one year?

• Current asset ratio

• Debt to equity ratio

• Net profit margin

• Fixed asset turnover

What measures the ability of all assets, if sold at market value, to cover all debts?

(a)  

A business is considered solvent if what occurs?

• Total assets exceed total liabilities

• Total liabilities exceed total assets

• The business has no assets or liabilities

• The business is not making any profit