Financial Management Quiz: Ratio Analysis

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

• To determine stock prices

• To measure company performance and compare with benchmarks

• To identify accounting errors

• To compute taxes

Liquidity ratios measure:

• The firm’s ability to turn inventory into cash

• The firm’s long-term profitability

• The firm’s ability to meet short-term obligations

• The value of fixed assets

Which ratio is a liquidity ratio?

• Return on Equity

• Debt-to-Equity Ratio

• Current Ratio

• Total Asset Turnover

Which of the following is a profitability ratio?

• Quick Ratio

• Inventory Turnover

• Gross Profit Margin

• Interest Coverage Ratio

The debt management ratio shows:

Which of the following is true about profitability ratios?

• They indicate how well assets are turned into cash

• They measure the firm’s ability to meet short-term obligations

• They reflect how well a firm generates earnings from its resources

• They are based on market prices and stock performance

A high current ratio may indicate:

• Good short-term liquidity

• Poor inventory management

• Excessive fixed assets

• None of the above

Which ratio is used to assess how efficiently a firm is using its assets?

• Quick Ratio

• Asset Turnover Ratio

• Debt Ratio

• Operating Margin

Which is true regarding ratio analysis?

• Ratios are always constant over time

• Ratios are not affected by industry changes

• Ratios allow for inter-company comparisons

• Ratio analysis replaces financial statements

If the current liabilities total ₱200,000 and the inventory includes ₱150,000, what is the firm's acid-test or quick ratio?

• 1.25

• 1.50

• 1.75

• 2.00