Financial Statements and Ratio Analysis Quiz

Which of the following is a type of liquidity ratio?

• Return on Assets

• Debt-to-Equity

• Current Ratio

• Inventory Turnover

What is the formula for Return on Assets?

• Net Income / Total Assets

• Gross Profit / Revenue

• Total Assets / Net Income

• Revenue / Gross Profit

What could high profits with a low current ratio potentially indicate about a company's financial practices?

• Earnings manipulation

• Excellent customer service

• Strong market position

• High employee morale

Which financial ratio best measures a company's ability to pay its short-term obligations?

• Return on Equity

• Gross Profit Margin

• Current Ratio

• Debt-to-Equity Ratio

If a company's current assets are $50,000 and current liabilities are $25,000, what is its current ratio?

• 2.5

• 0.5

• 1.0

• 2.0

Which of the following would increase a company's gross profit?

• Issuing new shares

• Paying off long-term debt

• Increasing administrative expenses

• Reducing cost of goods sold

Which ratio is used to evaluate a company's profitability relative to its equity?

• Gross Profit Margin

• Return on Equity

• Debt Ratio

• Current Ratio

If a company has revenue of $200,000 and cost of goods sold of $120,000, what is its gross profit?

• $200,000

• $120,000

• $320,000

• $80,000

What does a current ratio below 1 generally indicate about a company's financial position?

• It has no long-term debt

• It is highly profitable

• It may have difficulty meeting short-term obligations

• It has more current assets than current liabilities