Financial Statement Analysis Quiz

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What does the Gross Profit Margin measure?

Percentage of revenue available to cover operating and other expenditures (correct)
Percentage of revenue available to cover long-term debt obligations
Percentage of net income available to shareholders after paying interest and taxes
Percentage of revenue available to cover short-term debt obligations

What does ROE (Return on Equity) measure?

Net income in relation to equity (correct)
Net income in relation to total assets
Operating income in relation to equity
Operating income in relation to total assets

What does ROIC (Return on Invested Capital) measure?

Operating income in relation to total assets
EBIT in relation to equity and net debt (correct)
Net income in relation to total assets
Net income in relation to equity

What does the Quick Ratio measure?

The company's ability to meet short-term liabilities with its most liquid assets (C) Signup and view all the answers

What does the Cash Conversion Cycle (CCC) represent?

The time it takes for a company to convert its investments in inventory and other resources into cash flows from sales (C) Signup and view all the answers

What does the Long-term Debt to Equity Ratio (L/E Ratio) indicate?

How much debt a company is using to finance its assets relative to the value of shareholders’ equity (A) Signup and view all the answers

What is the purpose of the Interest Coverage Ratio (EBIT basis)?

To show the number of times a firm’s income would cover interest expenses (B) Signup and view all the answers

What does the Debt Ratio (Total Liabilities/Total Assets) show?

The proportion of a company's assets which are financed through debt (C) Signup and view all the answers

What does the Working Capital Ratio (WC ratio) measure?

Operating working capital to annual sales (A) Signup and view all the answers

What is the purpose of the Interest Coverage Ratio (CF Basis)?

To show the number of times a firm’s cash flows from operations would cover interest expenses (B) Signup and view all the answers

What does the Debt to Equity Ratio (L/A Ratio) indicate?

The ratio of long-term debt to total equity, also known as the 'Gearing' ratio (B) Signup and view all the answers

What does the Net Profit Margin measure?

The percentage of each dollar in revenue that is available to shareholders after paying interest and taxes (C) Signup and view all the answers

What does the Return on Assets (ROA) measure?

The company's ability to generate profit from its assets (C) Signup and view all the answers

What does the Return on Invested Capital (ROIC) measure?

The company's overall profitability and the efficiency with which its capital is being used (B) Signup and view all the answers

What does the Cash Conversion Cycle (CCC) represent?

The time it takes for a company to convert inventory into cash (C) Signup and view all the answers

What does the Debt to Equity Ratio (L/A Ratio) indicate?

The proportion of a company's assets financed through debt (D) Signup and view all the answers

What does the Interest Coverage Ratio (CF Basis) measure?

The number of times a firm’s income would cover interest expenses (B) Signup and view all the answers

What does the Quick Ratio measure?

The company's ability to meet short-term liabilities with its most liquid assets (D) Signup and view all the answers

What does the Interest Coverage Ratio (EBIT basis) indicate?

The company's ability to cover its interest expenses from its earnings before interest and taxes (C) Signup and view all the answers

What does the Working Capital Ratio (WC ratio) measure?

The company's ability to cover its short-term liabilities with its most liquid assets (B) Signup and view all the answers

What does the Long-term Debt to Equity Ratio (L/E Ratio) indicate?

How much debt a company is using to finance its assets relative to the value of shareholders’ equity (C) Signup and view all the answers

What does the Total Liabilities/Total Assets Ratio show?

The proportion of a company's assets which are financed through debt (A) Signup and view all the answers

Financial Statement Analysis Quiz

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Questions and Answers

What does the Gross Profit Margin measure?

What does ROE (Return on Equity) measure?

What does ROIC (Return on Invested Capital) measure?

What does the Quick Ratio measure?

What does the Cash Conversion Cycle (CCC) represent?

What does the Long-term Debt to Equity Ratio (L/E Ratio) indicate?

What is the purpose of the Interest Coverage Ratio (EBIT basis)?

What does the Debt Ratio (Total Liabilities/Total Assets) show?

What does the Working Capital Ratio (WC ratio) measure?

What is the purpose of the Interest Coverage Ratio (CF Basis)?

What does the Debt to Equity Ratio (L/A Ratio) indicate?

What does the Net Profit Margin measure?

What does the Return on Assets (ROA) measure?

What does the Return on Invested Capital (ROIC) measure?

What does the Cash Conversion Cycle (CCC) represent?

What does the Debt to Equity Ratio (L/A Ratio) indicate?

What does the Interest Coverage Ratio (CF Basis) measure?

What does the Quick Ratio measure?

What does the Interest Coverage Ratio (EBIT basis) indicate?

What does the Working Capital Ratio (WC ratio) measure?

What does the Long-term Debt to Equity Ratio (L/E Ratio) indicate?

What does the Total Liabilities/Total Assets Ratio show?

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