Podcast
Questions and Answers
Which ratio measures a company's ability to pay off current liabilities with the available current assets?
Which ratio measures a company's ability to pay off current liabilities with the available current assets?
Which ratio is also known as the acid-test ratio?
Which ratio is also known as the acid-test ratio?
Which ratio compares a company's liabilities to its assets?
Which ratio compares a company's liabilities to its assets?
Which ratio measures a company's profitability against its book value?
Which ratio measures a company's profitability against its book value?
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Which ratio shows how efficiently a company is using its assets to generate sales?
Which ratio shows how efficiently a company is using its assets to generate sales?
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Which ratio is used to determine if a stock is correctly valued in comparison to another stock?
Which ratio is used to determine if a stock is correctly valued in comparison to another stock?
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Which ratio measures a company's operational efficiency?
Which ratio measures a company's operational efficiency?
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What does the Debt Coverage Ratio determine?
What does the Debt Coverage Ratio determine?
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What does the Profit Margin ratio measure?
What does the Profit Margin ratio measure?
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Which equation represents the calculation of the book value for a company?
Which equation represents the calculation of the book value for a company?
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Which ratio is used to determine if an investor is spending less money on unit sales?
Which ratio is used to determine if an investor is spending less money on unit sales?
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Which ratio takes into account the growth of a company along with its P/E ratio?
Which ratio takes into account the growth of a company along with its P/E ratio?
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What does the EV / EBITDA ratio consider that makes it more reliable than the P/E ratio?
What does the EV / EBITDA ratio consider that makes it more reliable than the P/E ratio?
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A PEG ratio of less than 1 infers that a company is ________?
A PEG ratio of less than 1 infers that a company is ________?
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What does the Price to Book Value ratio represent?
What does the Price to Book Value ratio represent?
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Study Notes
Liquidity Ratios
- The Current Ratio measures a company's ability to pay off current liabilities with available current assets.
Acid-Test Ratio
- The Acid-Test Ratio, also known as the Quick Ratio, compares a company's most liquid assets to its current liabilities.
Solvency Ratios
- The Debt-to-Equity Ratio compares a company's liabilities to its assets.
Profitability Ratios
- The Return on Equity (ROE) Ratio measures a company's profitability against its book value.
- The Profit Margin Ratio measures the percentage of profit earned from each dollar of sales.
Efficiency Ratios
- The Asset Turnover Ratio shows how efficiently a company is using its assets to generate sales.
- The Operating Ratio measures a company's operational efficiency.
Debt Ratios
- The Debt Coverage Ratio determines a company's ability to pay off its debt obligations.
Valuation Ratios
- The Price-to-Earnings (P/E) Ratio is used to determine if a stock is correctly valued in comparison to another stock.
- The Price-to-Book (P/B) Value Ratio represents the market value of a company compared to its book value.
Book Value
- The equation to calculate a company's book value is: Total Shareholders' Equity / Total Number of Outstanding Shares.
Growth Ratios
- The PEG Ratio takes into account a company's growth rate along with its P/E ratio.
- A PEG Ratio of less than 1 infers that a company is undervalued.
Enterprise Value Ratios
- The EV/EBITDA Ratio considers a company's enterprise value, EBITDA, and debt, making it more reliable than the P/E ratio.
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Description
Test your knowledge on financial ratios with this quiz! Learn about the Return on Assets (ROA) and Return on Capital Employed (ROCE) ratios and how they are used to evaluate company performance. Challenge yourself to calculate these ratios and understand their significance in comparing companies within the same industry.
