W2_Ratio Analysis

Which of the following best describes the purpose of financial ratio analysis?

• To calculate the total assets of a company

• To evaluate a company's financial performance and position using quantitative measures

• To determine the number of employees in a company

• To set the price of a company's products

What does the Gross Profit Margin ratio measure?

• The proportion of net profit to total assets

• The percentage of revenue remaining after deducting cost of goods sold

• The ability to pay short-term liabilities

• The value of inventory held

Which formula correctly represents the Current Ratio?

Which of the following is a profitability ratio?

• Current Ratio

• Debt-to-Equity Ratio

• Gross Profit Margin

• Inventory Turnover

The Price-to-Earnings (P/E) Ratio is calculated as:

Which of the following is considered a leverage ratio?

• Current Ratio

• Debt-to-Equity Ratio

• Inventory Turnover

• Gross Profit Margin

Liquidity ratios are primarily used to assess:

• A company's profitability

• A company's ability to meet short-term obligations

• The value of a company's shares

• The efficiency of asset utilisation

If a company has a Current Ratio of less than 1, what does this indicate?

• The company has more current assets than current liabilities

• The company may have difficulty meeting its short-term obligations

• The company is highly profitable

• The company has no debt

A high Price-to-Earnings (P/E) Ratio may suggest that:

• The company is undervalued

• Investors expect high future growth

• The company is not profitable

• The company has high debt

Which of the following best describes working capital management?

• Managing long-term investments

• Managing short-term assets and liabilities to ensure liquidity

• Setting product prices

• Calculating net profit