ACCT1011

Question 1

What is Efficiency Ratio?

Answer 1

Sales generated per dollar invested.

Question 2

What is Liquidity Ratio?

Answer 2

A measure of the short term ability to pay down debts. It is current assets / current liabilities.

Question 3

Define Capital Structure Ratio.

Answer 3

The ability for a business to meet its long term investing goals.

Question 4

Which companies use Market Performance Ratios?

Answer 4

Only companies listed on a stock exchange.

Question 5

Why do businesses use benchmarks?

Answer 5

• To identify change over time.
• To compate intra-industry (within)
• To compare inter-industry (between)

Question 6

What is the Return on Equity ratio?

Answer 6

Profit available to owners / average equity

Question 7

What is the Return on Assets ratio?

Answer 7

Profit or loss / Value of Assets

Question 8

What is Gross Profit Margin?

Answer 8

(Sales - COGS) / revenue

Question 9

How to calculate Profit Margin ratio?

Answer 9

Profit or Loss / Revenue

Question 10

How to calculate Cash Flow to Sales ratio?

Answer 10

Cash from Operating Activities / Sales Revenue

Question 11

How do you calculate Asset Turnover Ratio?

Answer 11

Sales Revenue / Average Total Sales

Question 12

What is Days Inventory?

Answer 12

Average Inventory / Cost of Sales * 365

Question 13

What is Days Debtors?

Answer 13

Average Trade Debtors / Sales Revenue * 365

Question 14

Define inventory turnover.

Answer 14

Cost of Sales / Inventory

Question 15

Define Debtors Turnover

Answer 15

Sales Revenue / Average Trade Debtors