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Questions and Answers
What formula is used to calculate Capital Employed?
What formula is used to calculate Capital Employed?
How do you calculate the Quick Ratio?
How do you calculate the Quick Ratio?
Which of the following formulas correctly represents the Gross Profit Margin?
Which of the following formulas correctly represents the Gross Profit Margin?
What does the Debt-to-Assets Ratio measure?
What does the Debt-to-Assets Ratio measure?
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What does Receivables Turnover measure?
What does Receivables Turnover measure?
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Study Notes
Financial Ratio Analysis
- Calculating Assets: Assets = Liabilities + Equity
- Capital Employed: Capital Employed = Total Assets - Current Liabilities
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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)
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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
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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.
