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Questions and Answers
Which financial statement is used to calculate financial ratios?
Who may use financial ratios to evaluate the overall financial condition of a corporation or organization?
How are financial ratios usually expressed?
Which type of ratio measures the availability of cash to pay debt?
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Which type of ratio measures how quickly a firm converts non-cash assets to cash assets?
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Which type of ratio measures the firm's ability to repay long-term debt?
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Which type of ratio measures the firm's use of its assets and control of its expenses to generate an acceptable rate of return?
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Which ratio measures the availability of cash to pay debt?
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Which ratio measures the effectiveness of the firm's use of resources?
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Which ratio quantifies the firm's ability to repay long-term debt?
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Which ratio measures investor response to owning a company's stock?
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Study Notes
Financial Ratios
- Financial ratios are calculated using financial statements.
- Financial ratios are used by various stakeholders, including investors, creditors, and management, to evaluate the overall financial condition of a corporation or organization.
Types of Financial Ratios
- Liquidity ratios measure the availability of cash to pay debt.
- Asset utilization ratios measure how quickly a firm converts non-cash assets to cash assets.
- Solvency ratios measure the firm's ability to repay long-term debt.
- Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return.
- Cash flow ratios measure the availability of cash to pay debt.
- Efficiency ratios measure the effectiveness of the firm's use of resources.
- Solvency ratios quantify the firm's ability to repay long-term debt.
- Market ratios measure investor response to owning a company's stock.
Ratio Expressions
- Financial ratios are usually expressed as a decimal value or a percentage.
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Description
Test your knowledge of financial ratios and accounting with this quiz! Explore the importance of ratios in evaluating a company's financial health and learn how they are used by managers and shareholders.