Madero Module 4
Other name for Quick Ratio
Acid Test Ratio
Signifies the firm's capacity to meet its current financial obligations using its current assets
Current Ratio
Example of Ratio that gauges or measures liquidity
Current Ratio/ Quick Ratio/ Current Assets to total Assets/ Each current assets item to total current assets
Example of ratio used to gauge efficiency in the use of its debts
Debt to Equity Ratio / Equity to Debt Ratio / Equity Ratio/ Debt Ratio
Financial ratios alone without any interpretation will enable managers to make decisions
False
Financial ratios made from audited financial statements are not reliable.
False
Is a a quantitative method of gaining insight into a company's liquidity , operational efficiency, and profitability by studying its financial statements such as statement of financial position, income statement, and cash flow statement
Financial Ratio Analysis
Are relationships determined to a company's financial information and used for comparison purposes.
Financial Ratios
Example of documents used in computing financial ratios
Financial Statements
Example of ratio used to gauge the firm's profitability and return to owners
Gross Profit Ratio Net Profit Ratio Earnings per Share
What are the main categories/classification of financial ratios
Liquidity Profitability Use of Debts Use of Assets
Classification of ratios used to gauge the capacity of the firm to meet its current financial obligation
Liquidity Ratio
Classification of ratios used to gauge the capacity of the firm to generate returns from the use of its resources.
Profitability / Profitability and Return to Owners
Signifies the firm's capacity to meet its current financial obligations using its quick assets
Quick Ratio
Example of ratio used to gauge the firm's efficiency in the use of its assets.
Receivable Turnover/ Average Collection Period / Merchandise Turnover
What are the documents needed in the computation of Financial Ratios
Statement of Financial Position Income Statement
Financial Ratios can probe firms liquidity, profitability, use of assets and use of debts.
True
Financial statements are needed in the analysis of financial ratios
True
Liquidity ratios can detect whether the firm is able to pay its current financial obligations using its current assets.
True
Profitability ratios can measure the ability of the firm to generate income to cover for expenses.
True
The result of your ratio computation is more meaningful compared with the firms standard
True