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Questions and Answers
Which financial ratio measures a company's profitability by comparing its net income to its revenue?
Which financial ratio measures a company's ability to generate profit from its investments?
Which financial ratio measures a company's ability to pay off its short-term liabilities with its short-term assets?
Which financial ratio measures a company's efficiency in managing its inventory by comparing the cost of goods sold to the average inventory value?
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Which financial ratio measures a company's ability to meet its long-term debt obligations by comparing its earnings before interest and taxes (EBIT) to its interest expense?
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Which financial ratio measures a company's ability to generate profit from its investments?
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Which financial ratio measures a company's efficiency in managing its inventory by comparing the cost of goods sold to the average inventory value?
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Which financial ratio measures a company's liquidity by comparing its current assets to its current liabilities?
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Which financial ratio measures a company's profitability by comparing its net income to its revenue?
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Which accounting principle requires that a business's financial statements be prepared assuming that the business will continue to operate indefinitely?
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Which accounting principle requires that financial statements present all relevant information that could impact the decision-making of users?
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Which accounting principle states that expenses should be recognized in the same period as the revenues they helped generate?
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Which financial valuation method calculates the present value of future cash flows and discounts them back to the present using a discount rate?
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Which financial ratio measures a company's ability to meet its short-term obligations by comparing its current assets to its current liabilities?
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Which accounting principle requires that expenses should be recognized in the same period as the revenues they helped generate?
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Study Notes
Financial Ratios
- The net profit margin ratio measures a company's profitability by comparing its net income to its revenue.
- The return on investment (ROI) ratio measures a company's ability to generate profit from its investments.
- The current ratio measures a company's ability to pay off its short-term liabilities with its short-term assets.
- The inventory turnover ratio measures a company's efficiency in managing its inventory by comparing the cost of goods sold to the average inventory value.
- The interest coverage ratio measures a company's ability to meet its long-term debt obligations by comparing its earnings before interest and taxes (EBIT) to its interest expense.
- The return on investment (ROI) ratio measures a company's ability to generate profit from its investments.
- The inventory turnover ratio measures a company's efficiency in managing its inventory by comparing the cost of goods sold to the average inventory value.
- The current ratio measures a company's liquidity by comparing its current assets to its current liabilities.
Accounting Principles
- The going concern principle requires that a business's financial statements be prepared assuming that the business will continue to operate indefinitely.
- The full disclosure principle requires that financial statements present all relevant information that could impact the decision-making of users.
- The matching principle states that expenses should be recognized in the same period as the revenues they helped generate.
Financial Valuation
- The discounted cash flow (DCF) method calculates the present value of future cash flows and discounts them back to the present using a discount rate.
Financial Ratios (Again)
- The current ratio measures a company's ability to meet its short-term obligations by comparing its current assets to its current liabilities.
Accounting Principles (Again)
- The matching principle requires that expenses should be recognized in the same period as the revenues they helped generate.
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Description
Test your knowledge of financial ratios with this quiz! Learn about the ratio that measures a company's ability to pay off short-term liabilities, the ratio that measures profitability, and the ratio that measures profit generation from investments. Challenge yourself and become a financial ratio expert!
