Podcast Beta
Questions and Answers
What is the formula to calculate the current ratio, and what does it indicate about a company's liquidity?
The formula is Current Assets / Current Liabilities. It indicates whether a company has sufficient current assets to pay its short-term debts.
A company has a net profit of $100,000 and sales revenue of $500,000. Calculate the net profit margin.
Net profit margin = (Net Profit / Sales Revenue) x 100 = ($100,000 / $500,000) x 100 = 20%
Distinguish between current liabilities and non-current liabilities, providing examples of each.
Current liabilities are short-term debts due within one year or less, such as accounts payable and bank overdrafts. Non-current liabilities are long-term debts due after one year, such as mortgages and long-term loans.
What is the formula to calculate operating profit margin, and what does it indicate about a company's operational efficiency?
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A company has current assets of $200,000 and current liabilities of $150,000. Calculate the current ratio and interpret the result.
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