Financial Management Principles Quiz
60 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is a fundamental ratio of financial analysis that helps assess the capacity of repayment of a company?

  • Ratio of reduced liquidity
  • Ratio of immediate liquidity
  • Current ratio
  • Capacity of repayment (correct)

    • Which ratio defines the liquidity of the balance sheet by ensuring that assets within one year exceed liabilities within one year?

  • Ratio of immediate liquidity
  • Current ratio (correct)
  • Ratio of reduced liquidity
  • Capacity of repayment

    • For long term lenders, why is Free Cash Flow considered an essential element?

  • To assess the capacity of repayment (correct)
  • To ensure immediate liquidity
  • To compare with the growth of the turnover
  • To calculate the current ratio

    • What should the Current ratio ideally be to indicate good liquidity on the balance sheet?

    <p>Greater than 1</p> Signup and view all the answers

    What does the Ratio of reduced liquidity consider in its calculation?

    <p>Availability (including marketable securities)</p> Signup and view all the answers

    What indicates that a company is solvent according to the text?

    <p>Sufficient real asset to pay debts</p> Signup and view all the answers

    What type of income is considered 'current income' in the text?

    <p>Operational income</p> Signup and view all the answers

    What is the main characteristic of exceptional results mentioned in the text?

    <p>They fluctuate and cannot be used for forecasting</p> Signup and view all the answers

    Which financial elements are considered part of the 'current' according to the text?

    <p>Debts used to finance assets generating turnover</p> Signup and view all the answers

    What does the 'Ratio of variation of Turnover' allow to analyze according to the text?

    <p>Development of the activity</p> Signup and view all the answers

    What does the 'Ratio of variation of Added Value' compare according to the text?

    <p>Sale price and purchasing cost</p> Signup and view all the answers

    What type of operations are included in the 'Autonomous balance' as defined in the text?

    <p>Management operations</p> Signup and view all the answers

    What is calculated by subtracting the Cost of Purchased sold goods from Sales of goods?

    <p>Gross Margin</p> Signup and view all the answers

    Which financial metric represents Earning Before Interest, Taxes, Depreciation, and Amortization?

    <p>Earning Before Interest Taxes Depreciation and Amortization (EBITDA)</p> Signup and view all the answers

    What is calculated as Sold production + Stored production + Fixed production?

    <p>Production of the exercise</p> Signup and view all the answers

    Which metric is calculated by deducting Taxes and Staff expenses from Added Value?

    <p>Earning Before Interest Taxes Depreciation and Amortization (EBITDA)</p> Signup and view all the answers

    What is determined by adding Financial revenues to Earning Before Interest and Taxes (EBIT)?

    <p>Current Income Before Tax (RCAI)</p> Signup and view all the answers

    In which types of companies is the Gross Margin specifically calculated?

    <p>In both commercial and industrial companies that insure a trade activity</p> Signup and view all the answers

    What is the formula for calculating the Working Capital Need (WCN)?

    <p>Inventories + short term receivables - short term debts</p> Signup and view all the answers

    What does a negative Working Capital Need indicate?

    <p>Resource release</p> Signup and view all the answers

    What are some factors that influence the evolution of Working Capital Need?

    <p>Level of inventory, receivables, debts, and deadlines</p> Signup and view all the answers

    How is Net Cash related to Working Capital and Working Capital Need?

    <p>Net Cash = Working Capital + Working Capital Need</p> Signup and view all the answers

    What does the analysis of big financial equilibrium involve?

    <p>Time-varying comparison of Working Capital, Working Capital Need, and Net Cash evolutions</p> Signup and view all the answers

    What does Negative working capital do in terms of resources?

    <p>Absorbs resources</p> Signup and view all the answers

    What does the concept of profitability refer to?

    <p>The company's capacity to pay invested capitals over time</p> Signup and view all the answers

    How is margin different from profitability?

    <p>Margin measures the relation between a result and volume of activity, while profitability is the relation between income and activity.</p> Signup and view all the answers

    What does ROCE represent in terms of profitability?

    <p>Return on Overall Capital Employed</p> Signup and view all the answers

    Which financial indicator serves as a performance measure for shareholders?

    <p>ROE</p> Signup and view all the answers

    What is included in economic assets according to the text?

    <p>Net fixed assets, Working Capital Need, and Availabilities</p> Signup and view all the answers

    How is economic profitability different from financial profitability?

    <p>Economic profitability considers return on all capital employed, financial profitability focuses only on equity.</p> Signup and view all the answers

    What does the Added Value (VA) measure in a company?

    <p>Wealth created during the exercise</p> Signup and view all the answers

    In financial analysis, what does EBITDA represent?

    <p>Residual resource generated by exploitation</p> Signup and view all the answers

    What does the Earning Before Interest Taxes Depreciation and Amortization (EBITDA) intend to pay?

    <p>Invested capitals and production capacity maintenance</p> Signup and view all the answers

    How is the Gross Domestic Product (GDP) of a country determined?

    <p>By summing the added values of all economic agents</p> Signup and view all the answers

    What does the EARNING BEFORE INTEREST TAXES DEPRECIATION and AMORTIZATION (EBITDA) represent?

    <p>$20 + $15 - $5</p> Signup and view all the answers

    Which financial metric calculates the surplus of wealth created by a company?

    <p>$10 + $20 - $5</p> Signup and view all the answers

    What does a negative Working Capital Need indicate?

    <p>The company has excess resources tied up in working capital.</p> Signup and view all the answers

    Which of the following factors influences the evolution of Working Capital Need?

    <p>Level of debts</p> Signup and view all the answers

    How is Net Cash related to Working Capital Need?

    <p>Net Cash is inversely proportional to Working Capital Need.</p> Signup and view all the answers

    What does the analysis of big financial equilibrium involve?

    <p>Studying the time-varying comparison of Working Capital, WCN, and Net Cash evolutions.</p> Signup and view all the answers

    How is economic profitability different from financial profitability?

    <p>Economic profitability incorporates opportunity costs, while financial profitability does not.</p> Signup and view all the answers

    What is the formula for calculating the Working Capital Need (WCN)?

    <p>$Inventories - Short-term receivables + Short-term debts$</p> Signup and view all the answers

    What does the Equity ratio represent in financial analysis?

    <p>Equity divided by total liabilities</p> Signup and view all the answers

    When is a company considered 'under capitalized' based on the capitalization ratio?

    <p>When the ratio is lower than 33%</p> Signup and view all the answers

    What does the Working Capital (WC) measure in a company?

    <p>Capacity to cover investment cycle needs</p> Signup and view all the answers

    Why is it essential for current assets to have stable financing?

    <p>To cover the needs for the investment cycle</p> Signup and view all the answers

    In a functional balance sheet, how are resources and uses typically estimated?

    <p>At the value of origin (gross value)</p> Signup and view all the answers

    What characterizes a company that is 'under capitalized' according to the text?

    <p>'Ratio of general solvency' above 33%</p> Signup and view all the answers

    What does the ratio 'Cover of stable uses' aim to measure?

    <p>Financial safety margin in terms of profitability</p> Signup and view all the answers

    How is the increase of fixed assets typically financed according to the text?

    <p>Under-investment and disposal of assets</p> Signup and view all the answers

    What does a positive Working Capital indicate about a company according to the text?

    <p>Adequate resources absorption</p> Signup and view all the answers

    In the context of financial deleveraging, what does 'repayment by anticipation' refer to?

    <p>Paying off existing financial debts before the due date</p> Signup and view all the answers

    What does a decrease in stable resources usually imply for a company's working capital?

    <p>Decrease in working capital</p> Signup and view all the answers

    How is the 'Ratio of reduced liquidity' calculated based on the information provided?

    <p>$\frac{Working,Capital}{360,days}$</p> Signup and view all the answers

    What is the formula for calculating Return on Capital Employed (ROCE) according to the text?

    <p>Economic Income * (1 – Corporate Income rate) / Economic assets * 100</p> Signup and view all the answers

    What is the impact of increasing the part of debts in invested capital on the relationship between ROCE and ROE?

    <p>Increases the gap between ROCE and ROE</p> Signup and view all the answers

    What does the leverage effect refer to in financial analysis?

    <p>Difference between the profitability of equity (ROE) and the economic profitability (ROCE)</p> Signup and view all the answers

    In financial terms, when does ROE equal ROCE with a 'sledgehammer blow' effect?

    <p>When ROE is less than ROCE</p> Signup and view all the answers

    What causes a decrease in financial profitability according to the text?

    <p>Increase in the part of debts in invested capital</p> Signup and view all the answers

    What is the leverage effect in financial analysis primarily attributed to?

    <p>Debts of the company on equity profitability</p> Signup and view all the answers

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser