Podcast
Questions and Answers
What formula is used to calculate Capital Employed?
What formula is used to calculate Capital Employed?
- Total Assets + Current Liabilities
- Total Assets - Current Liabilities (correct)
- Total Assets + Equity
- Total Assets - Equity
How do you calculate the Quick Ratio?
How do you calculate the Quick Ratio?
- Cash / Current Liabilities
- Current Assets + Inventory / Current Liabilities
- (Current Assets - Inventory) / Current Liabilities (correct)
- Current Assets / Current Liabilities
Which of the following formulas correctly represents the Gross Profit Margin?
Which of the following formulas correctly represents the Gross Profit Margin?
- (Revenue / COGS) x 100
- (Gross Profit / Revenue) x 100 (correct)
- (Revenue - COGS) / Revenue
- (Gross Profit / COGS) x 100
What does the Debt-to-Assets Ratio measure?
What does the Debt-to-Assets Ratio measure?
What does Receivables Turnover measure?
What does Receivables Turnover measure?
Flashcards
Capital Employed
Capital Employed
Represents the total amount of funds invested in a business by its owners and creditors.
Current Ratio
Current Ratio
Measures a company's ability to pay its short-term obligations using its current assets.
Debt-to-Equity Ratio
Debt-to-Equity Ratio
Indicates the proportion of debt used to finance a company's assets relative to the equity invested by owners.
Gross Profit Margin
Gross Profit Margin
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Inventory Turnover
Inventory Turnover
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Study Notes
Financial Ratio Analysis
- Calculating Assets: Assets = Liabilities + Equity
- Capital Employed: Capital Employed = Total Assets - Current Liabilities
- Liquidity Ratios:
- Current Ratio: Current Assets / Current Liabilities
- Quick Ratio: (Current Assets - Inventory) / Current Liabilities
- Cash Ratio: Cash / Current Liabilities
- Leverage Ratios:
- Debt-to-Equity Ratio: Total Liabilities / Equity
- Debt-to-Assets Ratio: Total Liabilities / Total Assets
- Profitability Ratios:
- Gross Profit Margin: (Gross Profit / Revenue) x 100
- Gross Profit: Revenue - Cost of Goods Sold (COGS)
- Efficiency Ratios:
- Inventory Turnover: COGS / Average Inventory
- COGS Calculation: Opening Inventory + Purchases - Closing Inventory
- Average Inventory: (Opening Inventory + Closing Inventory) / 2
- Receivables Turnover: Revenue / Average Receivables
- Payables Turnover: Purchases / Average Payables
- Asset Turnover: Revenue / Total Assets
- Operational Ratios:
- Inventory Days: Closing Inventory / COGS
- Payable Days: Payables due within one year / Purchases
- Receivable Days: Receivables / Revenue
Current Assets (What the Company Owns)
- Closing Inventory
- Receivables
- Prepayments
- Cash in the bank
Current Liabilities (What the Company Owe)
- Bank overdraft
- Bank loan (due within one year)
- Accruals
- Payables (due within one year)
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Description
Test your knowledge on financial ratios and their calculations in this comprehensive quiz. Explore key concepts such as liquidity, leverage, profitability, and efficiency ratios, and learn how they impact financial analysis. Perfect for accounting and finance students.
