11 Questions
Which financial statement is used to calculate financial ratios?
Balance sheet
Who may use financial ratios to evaluate the overall financial condition of a corporation or organization?
All of the above
How are financial ratios usually expressed?
Both as a decimal value and an equivalent percent value
Which type of ratio measures the availability of cash to pay debt?
Liquidity ratios
Which type of ratio measures how quickly a firm converts non-cash assets to cash assets?
Activity ratios
Which type of ratio measures the firm's ability to repay long-term debt?
Debt ratios
Which type of ratio measures the firm's use of its assets and control of its expenses to generate an acceptable rate of return?
Profitability ratios
Which ratio measures the availability of cash to pay debt?
Current ratio
Which ratio measures the effectiveness of the firm's use of resources?
Stock turnover ratio
Which ratio quantifies the firm's ability to repay long-term debt?
Debt to equity ratio
Which ratio measures investor response to owning a company's stock?
Price to book value ratio
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.
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.
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