FIN2601 - Chapter 3) Introduction to ratios Questions And Answers

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FIN2601 - Chapter 3) Introduction to
ratios Questions And Answers


Quick ratio or Current ratio: The
_____________ ratio provides a better overall
measure of liquidity only when a firm's
inventory cannot be easily converted to cash. If
inventory is liquid, the _______________ ratio
is a preferable measure of overall liquidity. -
ANSWER-Quick, Current


______________, a firm's ability to satisfy its
short-term obligations as the come due. -
ANSWER-Liquidity


What does of AAI stand for? - ANSWER-
Average Age of Inventory

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365/Inventory turnover = - ANSWER-
Average Age of Inventory


Cost of Goods/Inventory = - ANSWER-
Inventory turnover


Current ratio = 1.6, Current liabilities =
1,000,000 What is current assets? - ANSWER-
1,600,000


Quick ratio = 1.2, CA = 1,600,000
CL=1,000,000 What is inventory? - ANSWER-
400,000


Cost of Goods sold = 2,000,000 Inventory =
400,000 What is inventory turnover? -

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ANSWER-5


Which ratio measures the firms ability to meet
its short term obligations? - ANSWERCurrent
ratio

Financial ________________ is the
magnification of risk and return through the use
of fixed-cost financing, such as debt and
preference share capital. The more fixed debt a
firm uses, the greater will be its expected risk
and return. - ANSWERleverage


Which ratio measures the proportion of total
assets financed by the firms creditors? -
ANSWER-Debt ratio