Unit 15:Analysing Financial Ratios Quiz

Profit margin is calculated by dividing:

• Revenue by Net Income

• Net Income by Revenue

• Revenue by Total Assets

• Gross Profit by Liabilities

Solvency ratios assess:

• Short-term cash flow

• Market competition

• Long-term debt management

• Number of customers

• 0.6

• 1.5

• 2.0

• 0.3

What might a very low Debt-to-Equity Ratio suggest?

• Too much risk

• Underutilization of leverage

• High liquidity

• Strong growth

Which ratio is most useful for short-term creditors?

• Debt-to-Equity

• Return on Assets

• Current Ratio

• Inventory Turnover

What is a primary use of profitability ratios in decision-making?

• Evaluate revenue trends

• Measure company debt

• Assess efficiency of earnings

• Track asset purchases

A business with a consistent trend of decreasing current ratio may be facing...

• Strong credit terms

• Growth in market share

• Short-term financial pressure

• Tax benefits

Which ratio would most interest a long-term investor?

• Cash Ratio

• Net Profit Margin

• Return on Equity

• Days Sales Outstanding

Which ratio is most affected by inventory levels?

• Quick Ratio

• Debt Ratio

• Net Margin

• Return on Assets

A high Return on Assets (ROA) shows...

• Slow asset turnover

• Poor cost control

• Efficient use of assets

• High debt levels