Accounting financial indicators

Question 1

Profitability

Answer 1

The ability of a business to earn profit as expressed
in relative terms by comparing profit against a base
like sales, assets or owner’s equity

Question 2

Liquidity

Answer 2

The ability of a business to meet its short-term debts
as they fall due

Question 3

Efficiency

Answer 3

The ability of the business to manage its assets and
liabilities

Question 4

Gross Profit Margin

Answer 4

profitability indicator that measures the average mark-up

Question 5

Net Profit Margin

Answer 5

profitability indicator that indicates expense control

Question 6

Return on Owner’s Investment

Answer 6

A profitability indicator that indicates how effectively a business has used the owner’s
capital to earn profit

Question 7

Asset Turnover

Answer 7

An efficiency indicator that indicates how productively a business has used its assets
to earn revenue

Question 8

Working Capital Ratio

Answer 8

liquidity indicator that measures the ratio of current assets to current liabilities

Question 9

Quick Asset Ratio

Answer 9

A liquidity indicator that measures the ratio of quick assets to quick liabilities

Question 10

Debt Ratio

Answer 10

A stability indicator that measures the percentage of a firm’s assets that are
financed by liabilities