Financial Statement Analysis Quiz
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Questions and Answers

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?

    <p>The company's ability to meet short-term liabilities with its most liquid assets</p> Signup and view all the answers

    What does the Cash Conversion Cycle (CCC) represent?

    <p>The time it takes for a company to convert its investments in inventory and other resources into cash flows from sales</p> Signup and view all the answers

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

    <p>How much debt a company is using to finance its assets relative to the value of shareholders’ equity</p> Signup and view all the answers

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

    <p>To show the number of times a firm’s income would cover interest expenses</p> Signup and view all the answers

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

    <p>The proportion of a company's assets which are financed through debt</p> Signup and view all the answers

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

    <p>Operating working capital to annual sales</p> Signup and view all the answers

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

    <p>To show the number of times a firm’s cash flows from operations would cover interest expenses</p> Signup and view all the answers

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

    <p>The ratio of long-term debt to total equity, also known as the 'Gearing' ratio</p> Signup and view all the answers

    What does the Net Profit Margin measure?

    <p>The percentage of each dollar in revenue that is available to shareholders after paying interest and taxes</p> Signup and view all the answers

    What does the Return on Assets (ROA) measure?

    <p>The company's ability to generate profit from its assets</p> Signup and view all the answers

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

    <p>The company's overall profitability and the efficiency with which its capital is being used</p> Signup and view all the answers

    What does the Cash Conversion Cycle (CCC) represent?

    <p>The time it takes for a company to convert inventory into cash</p> Signup and view all the answers

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

    <p>The proportion of a company's assets financed through debt</p> Signup and view all the answers

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

    <p>The number of times a firm’s income would cover interest expenses</p> Signup and view all the answers

    What does the Quick Ratio measure?

    <p>The company's ability to meet short-term liabilities with its most liquid assets</p> Signup and view all the answers

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

    <p>The company's ability to cover its interest expenses from its earnings before interest and taxes</p> Signup and view all the answers

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

    <p>The company's ability to cover its short-term liabilities with its most liquid assets</p> Signup and view all the answers

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

    <p>How much debt a company is using to finance its assets relative to the value of shareholders’ equity</p> Signup and view all the answers

    What does the Total Liabilities/Total Assets Ratio show?

    <p>The proportion of a company's assets which are financed through debt</p> Signup and view all the answers

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