D076 Finance By ME (Module Quizzes)

A company currently has a ratio of 1.5 but hopes to improve the ratio to 2 to align more with the industry benchmark. To achieve this goal, costs were cut in production through an investment in efficient equipment, and the company achieved a higher profit margin. If this continues, you are certain that the firm will achieve its goal in two years. What is this an example of? a) Flexibility b) Trend analysis c) Cross-sectional analysis d) Progress measurement - d) Progress measurement You are comparing the company's ratio to the goal and checking how the company is progressing toward the goal. For what purpose are market ratios used? a) To measure how well a company uses its assets to generate sales or cash b) To consider how a firm is financed c) To evaluate the current share price of a public firm's stock d) To assess a firm's ability to meet short-term obligations without raising external capital - c) To evaluate the current share price of a public firm's stock Market ratios are used to evaluate whether the current share of a public firm's stock is correctly priced. You are considering starting a new business to sell Widgets in your hometown. You can import the Widgets at a low cost, and you hope to be able to sell them for significantly more. Which ratio can help you calculate how much profit you will earn from the sale of each Widget? (Assume you are only considering the cost of the Widget, not any other operating costs.)