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Ratio Analysis: Debt Utilization Ratios in Financial Statements

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Ratio Analysis: Debt Utilization Ratios in Financial Statements

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Questions and Answers

What does the return on equity ratio measure?

How many times a firm sells and replaces inventory in a year

How quickly a firm collects payments on credit sales

How well a firm uses its assets to generate sales

How much income is generated per dollar invested by the owners (correct)

Which ratio is used to indicate how efficiently a firm collects its accounts receivable?

Total asset turnover

Receivables turnover (correct)

Return on equity

Inventory turnover

What does the inventory turnover ratio measure?

How well a firm uses its assets to generate sales

How quickly a firm collects payments on credit sales

How many times a firm sells and replaces inventory in a year (correct)

How much income is generated per dollar invested by the owners

Which ratio is used to evaluate how efficiently a company uses its assets to generate each dollar of sales?

Total asset turnover Signup and view all the answers

What is the purpose of asset utilization ratios?

To assess how efficiently assets generate sales Signup and view all the answers

How is the Receivables turnover ratio calculated?

$\text{Sales} / \text{Receivables}$ Signup and view all the answers

Which ratio demonstrates how many times a firm sells and replaces its inventory over a year?

Inventory turnover Signup and view all the answers

Why do managers use asset utilization ratios?

To identify inefficiencies in operations Signup and view all the answers

What is the purpose of the Total Asset Turnover ratio?

To assess how well assets generate sales Signup and view all the answers

Which ratio is used to show how many times a firm collects its accounts receivable in one year?

Receivables turnover Signup and view all the answers