ENT 101 Ch. 8 Vocabulary Terms exam
with correct answers
Ratio Analysis - correct answer✔✔A series of ratios along four areas of company performance
(liquidity, activity, leverage, profitability) that provides a picture of the health of the company.
Liquidity Ratios - correct answer✔✔ratios that measure the short-term ability of the firm to
meet its obligations
Current Ratio - correct answer✔✔current assets divided by current liabilities
Quick (Acid) Ratio - correct answer✔✔(Current Assets - Inventory) / Current Liabilities The
quick ratio removes the ability to sell inventory and examines the pure cash position relative to
the current liabilities. The term here is quick ratio, but is also sometimes referred to as an acid
test
Activity Ratios - correct answer✔✔measure the efficiency with which you are handling the
resources of the business
Inventory Turnover - correct answer✔✔cost of goods sold/average inventory. Cost of goods
sold is the direct costs involved with a product
Account Receivable Turnover - correct answer✔✔Credit Sales / Accounts Receivable. This
metric examines how fast the company turns credit sales into cash. The faster the firm is able to
turn credit sales into cash, the better the cash flow position of the firm is
Total/Fixed Asset Turnover - correct answer✔✔Net Sales/Fixed Assets or Total Assets
with correct answers
Ratio Analysis - correct answer✔✔A series of ratios along four areas of company performance
(liquidity, activity, leverage, profitability) that provides a picture of the health of the company.
Liquidity Ratios - correct answer✔✔ratios that measure the short-term ability of the firm to
meet its obligations
Current Ratio - correct answer✔✔current assets divided by current liabilities
Quick (Acid) Ratio - correct answer✔✔(Current Assets - Inventory) / Current Liabilities The
quick ratio removes the ability to sell inventory and examines the pure cash position relative to
the current liabilities. The term here is quick ratio, but is also sometimes referred to as an acid
test
Activity Ratios - correct answer✔✔measure the efficiency with which you are handling the
resources of the business
Inventory Turnover - correct answer✔✔cost of goods sold/average inventory. Cost of goods
sold is the direct costs involved with a product
Account Receivable Turnover - correct answer✔✔Credit Sales / Accounts Receivable. This
metric examines how fast the company turns credit sales into cash. The faster the firm is able to
turn credit sales into cash, the better the cash flow position of the firm is
Total/Fixed Asset Turnover - correct answer✔✔Net Sales/Fixed Assets or Total Assets
