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Questions and Answers
To find Assets, use the equation: Assets = liabilities + ______
To find Assets, use the equation: Assets = liabilities + ______
equity
The Current Ratio is calculated by dividing Current ______ by Current Liabilities.
The Current Ratio is calculated by dividing Current ______ by Current Liabilities.
Assets
The Cash Ratio is calculated as Cash divided by Current ______.
The Cash Ratio is calculated as Cash divided by Current ______.
Liabilities
The Inventory Turnover is calculated as COGS divided by Average ______.
The Inventory Turnover is calculated as COGS divided by Average ______.
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The Debt-to-Equity Ratio is derived from Total ______ divided by Equity.
The Debt-to-Equity Ratio is derived from Total ______ divided by Equity.
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Study Notes
Financial Ratios
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Finding Assets: Assets = Liabilities + Equity
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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
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Leverage Ratios:
- Debt-to-Equity Ratio: Total Liabilities / Equity
- Debt-to-Assets Ratio: Total Liabilities / Total Assets
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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: Beginning Inventory + Purchases - Ending Inventory
- Average Inventory: (Beginning Inventory + Ending Inventory) / 2
- Receivables Turnover: Revenue / Average Receivables
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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 & Liabilities
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Current Assets (what the company owns):
- Closing Inventory
- Receivables
- Prepayments
- Cash in the bank
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Current Liabilities (what the company owes):
- Bank overdraft
- Bank loan due within one year
- Accruals
- Payables due within one year
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Description
Test your knowledge on essential financial ratios, including liquidity, leverage, profitability, and efficiency ratios. This quiz will challenge your understanding of key financial concepts and their calculations, crucial for analyzing a company's financial health.
