12 Questions
What is the primary purpose of setting credit terms in account receivable?
To determine the creditworthiness of customers
What is the main advantage of debt financing over equity financing?
It does not require additional shareholder investment
What is the formula to calculate the Net Present Value (NPV) of an investment?
NPV = Cash Flow / (1 + i)^t
What is the purpose of factoring in short term financing?
To sell accounts receivable to another company at a discounted rate
What is the main source of revenue for a business?
Inventory
What is the primary purpose of a revolving credit agreement?
To borrow money on an ongoing basis
What is the primary purpose of liquidity ratios in finance?
To determine how easily assets can be converted into cash to pay debts
What does a high inventory turnover ratio indicate?
Goods are sold quickly and inventory levels are low
What is the purpose of the debt-to-equity ratio?
To determine the relationship between debts and equity
What is the formula for calculating the return on equity?
Net income - Dividend on preferred shares / Average outstanding shares
What is the definition of net working capital?
Current assets - current liabilities
What is the purpose of the current ratio?
To assess a company's liquidity and ability to pay short-term debts
Test your knowledge of finance and securities, focusing on liquidity ratios and asset management ratios. Learn how to calculate and interpret these ratios to evaluate a company's financial health.
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