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Questions and Answers
What is the quick ratio calculated based on the provided financial statements?
What is the quick ratio calculated based on the provided financial statements?
Why is the quick ratio considered a better measure of liquidity than the current ratio?
Why is the quick ratio considered a better measure of liquidity than the current ratio?
What does a higher inventory turnover ratio indicate?
What does a higher inventory turnover ratio indicate?
What is the calculated inventory turnover ratio based on the financial statements?
What is the calculated inventory turnover ratio based on the financial statements?
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What does the average payment period measure?
What does the average payment period measure?
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If a company has a current ratio of less than 1, what does it imply?
If a company has a current ratio of less than 1, what does it imply?
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What is the net profit after taxes as provided in the financial statements?
What is the net profit after taxes as provided in the financial statements?
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Which of the following ratios is NOT part of the financial ratios discussed?
Which of the following ratios is NOT part of the financial ratios discussed?
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What happens to each unit of currency when the price level rises?
What happens to each unit of currency when the price level rises?
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How does inflation primarily affect fixed-income securities?
How does inflation primarily affect fixed-income securities?
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What is a consequence of higher interest rates on corporate spending?
What is a consequence of higher interest rates on corporate spending?
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What effect does a decrease in interest rates have on firms?
What effect does a decrease in interest rates have on firms?
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What typically occurs in the stock market when interest rates are falling?
What typically occurs in the stock market when interest rates are falling?
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What challenge does inflation present to businesses regarding production costs?
What challenge does inflation present to businesses regarding production costs?
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Which of the following describes the effect of higher interest rates on borrowing?
Which of the following describes the effect of higher interest rates on borrowing?
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What is one impact of increased uncertainty in the economy due to inflation?
What is one impact of increased uncertainty in the economy due to inflation?
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What impact can new entrants have on established industries?
What impact can new entrants have on established industries?
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When is the bargaining power of a buyer group considered to be high?
When is the bargaining power of a buyer group considered to be high?
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Which factor does NOT increase the threat of new entrants in an industry?
Which factor does NOT increase the threat of new entrants in an industry?
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What condition enhances the bargaining power of suppliers?
What condition enhances the bargaining power of suppliers?
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What are entry barriers typically NOT influenced by?
What are entry barriers typically NOT influenced by?
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What is a characteristic of a powerful supplier group?
What is a characteristic of a powerful supplier group?
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What is a sign that the threat of new entrants is low?
What is a sign that the threat of new entrants is low?
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Which of the following accurately describes backward integration?
Which of the following accurately describes backward integration?
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What are the two primary variables for technical analysis?
What are the two primary variables for technical analysis?
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Which of the following time frames is NOT commonly examined in technical analysis?
Which of the following time frames is NOT commonly examined in technical analysis?
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What information does the highest point of a candlestick represent?
What information does the highest point of a candlestick represent?
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What does a blue candlestick body indicate?
What does a blue candlestick body indicate?
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How does the selection of a time frame affect a trader's analysis?
How does the selection of a time frame affect a trader's analysis?
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Which candlestick shows the price action over a 4-hour period?
Which candlestick shows the price action over a 4-hour period?
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What does the 'body' of a candlestick represent?
What does the 'body' of a candlestick represent?
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Which of the following is NOT a common feature of candlestick charting?
Which of the following is NOT a common feature of candlestick charting?
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What are the three major components of balance sheet analysis?
What are the three major components of balance sheet analysis?
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Why is the cash flow statement critical to understanding a company's fundamentals?
Why is the cash flow statement critical to understanding a company's fundamentals?
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What is referred to as a company's business model?
What is referred to as a company's business model?
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What primarily drives a company's long-term success?
What primarily drives a company's long-term success?
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What role does corporate governance play in a company?
What role does corporate governance play in a company?
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Which component is NOT a focus of balance sheet analysis?
Which component is NOT a focus of balance sheet analysis?
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What does effective management within a company ensure?
What does effective management within a company ensure?
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Which of the following does NOT describe a characteristic of the cash flow statement?
Which of the following does NOT describe a characteristic of the cash flow statement?
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What does a doji candlestick specifically indicate?
What does a doji candlestick specifically indicate?
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Which statement is true about the characteristics of a doji candlestick?
Which statement is true about the characteristics of a doji candlestick?
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How does the length of the shadows on a doji candlestick affect its indication?
How does the length of the shadows on a doji candlestick affect its indication?
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Which moving average strategy might suggest buying conditions?
Which moving average strategy might suggest buying conditions?
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What does a moving average crossover typically indicate?
What does a moving average crossover typically indicate?
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Which of the following statements about moving averages is false?
Which of the following statements about moving averages is false?
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Which type of moving average is specifically mentioned in a common trading strategy?
Which type of moving average is specifically mentioned in a common trading strategy?
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In technical analysis, how are doji candlesticks most commonly interpreted?
In technical analysis, how are doji candlesticks most commonly interpreted?
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Study Notes
Financial Ratio Analysis
- Ratio analysis involves calculating and interpreting financial ratios to monitor a firm's performance.
- Financial ratios are numerical expressions that show the relationship between financial statement items (assets, liabilities, revenues, expenses).
- These are important for businesses, investors, creditors, to evaluate a company's health, performance, and market position.
Liquidity Financial Ratios
- Current Ratio: (Current Assets / Current Liabilities) Measures ability to meet short-term obligations using current assets.
- Quick Ratio: ((Current Assets - Inventory) / Current Liabilities) Measures immediate liquidity, excluding inventory, to cover short-term obligations.
- Cash Ratio: (Cash and Cash Equivalents / Current Liabilities) Measures ability to meet short-term obligations using only cash.
Solvency Financial Ratios
- Debt Ratio: (Total Liabilities / Total Assets) Measures proportion of assets financed by debt.
- Equity Ratio: (Total Equity / Total Assets) Measures proportion of assets financed by shareholder's equity.
- Debt-to-Equity Ratio: (Total Liabilities / Total Equity) Compares debt financing to equity financing.
Profitability Financial Ratios
- Gross Margin Ratio: (Gross Profit / Net Sales) Measures gross profitability and pricing strategy effectiveness.
- Operating Margin Ratio: (Operating Income / Net Sales) Provides insights into operational efficiency and profitability.
- Net Profit Margin Ratio: (Net Income / Net Sales) Reveals overall profitability and financial performance.
- Return on Assets (ROA): (Net Income / Total Assets) Measures management's effectiveness in utilizing assets to generate profit.
- Return on Equity (ROE): (Net Income / Total Equity) Indicates the company's ability to generate returns for investors by relating profitability to equity.
Efficiency Financial Ratios
- Receivables Turnover Ratio: (Sales Revenue / Accounts Receivable) Measures how well firms manage credit and collection.
- Average Collection Period: (365 Days / Accounts Receivable Turnover Ratio) Measures the number of days it takes to collect accounts receivable.
- Inventory Turnover Ratio: (Cost of Goods Sold / Average Inventory) Measures inventory management effectiveness.
- Average Age of Inventory: (365 Days / Inventory Turnover Ratio) Measures the number of days of inventory the firm has.
- Payables Turnover Ratio: (Net Purchases / Accounts Payable) Measures how well firms manage their payables.
- Average Payment Period: (365 Days / Accounts Payable Turnover Ratio) Measures the number of days it takes for a company to pay its obligations.
- Total Assets Turnover Ratio: (Sales / Total Assets) Indicates the efficiency of using assets to generate sales revenue.
Market Financial Ratios
- Price-to-Earnings (P/E) Ratio: (Market Price per Share / Earnings per Share) Indicates market's perception of a company's growth and stock valuation.
- Price-to-Sales (P/S) Ratio: (Market Price per Share / Sales per Share) Provides insights into the market's assessment of the firm's sales performance and growth prospects.
- Price-to-Book (P/B) Ratio: (Market Price per Share / Book Value per Share) Measures market's perception of the firm's underlying asset value.
Capital Market & Ratios
- Dividend Yield Ratio: (Dividend per Share / Market Price per Share) Indicates market's perception of a company's growth potential and stock valuation.
- Return on Assets (ROA): Measures profitability in relation to total assets.
- Return on Equity (ROE): Measures profitability in relation to shareholders' equity.
Fundamental Analysis
- Fundamental analysis involves examining economic, financial, and other factors to determine a security's intrinsic value.
- This utilizes a top-down approach, initially evaluating major factors affecting the economy, then industry-specific conditions, and finally examining individual companies.
- Key Factors Utilized: Economic analysis, industry analysis, and company analysis are used.
Technical Analysis
- Aims to predict future price movements using patterns and trends observed in the market's past behaviors.
- Technical analysis relies on charts and indicators, such as moving averages, and candlestick patterns.
Summary of Regulatory Bodies
- SEC: Regulates securities industry.
- BSP: Central bank of the Philippines, manages monetary policy and financial stability within the country.
- PDIC: Insures bank deposits in the Philippines.
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Description
Test your knowledge on financial ratio analysis, including liquidity and solvency ratios. This quiz covers key concepts such as the current, quick, and cash ratios, as well as debt ratios and their implications for a company's financial health. Perfect for students and professionals looking to enhance their understanding of financial metrics.
