BUS FINANCE

Question 1

In a broad sense, “an
investment is a sacrifice
of current money or
other resources for
future benefits”

Answer 1

INVESTMENT

Question 2

employment of funds on
assets to earn income or
capital appreciation.

Answer 2

INVESTMENT

Question 3

two key aspects of any investment

Answer 3

time and risk.

Question 4

All investments are
characterized by the
expectation of

Answer 4

RETURN

Question 5

may be received in
the form of yield or capital
appreciation or both.

Answer 5

RETURN

Question 6

is a rise in an investment’s
market price.

Answer 6

Capital appreciation

Question 7

commonly used to refer to interest
payments an investor receives.

Answer 7

Yield

Question 7

difference between the purchase price and
the selling price of an investment.

Answer 7

Capital appreciation

Question 8

often
expressed as a percentage, based on either the
investment’s market value or purchase price.

Answer 8

Yield

Question 9

may relate to loss
of capital, delay in
repayment of capital, non-
payment of interest, or
variability of returns.

Answer 9

Risk

Question 10

An investment which is
easily saleable or
marketable without loss of
time and money

Answer 10

Liquidity

Question 11

taking up the business
risk in the hope of achieving short-
term gain.

Answer 11

SPECULATION

Question 12

involves buying and selling activities
with the expectation of making a profit
from price fluctuations.

Answer 12

SPECULATION

Question 13

a type of financial ratio used to
determine a company
s ability to pay its short-term debt
obligations.

Answer 13

LIQUIDITY RATIOS

Question 14

IMPORTANCE OF LIQUIDITY RATIOS

Answer 14

• Determine the ability to cover
  short-term obligations.
• Determine creditworthiness
• Determine investment worthiness

Question 15

Types of Investment ratios

Answer 15

CURRENT RATIO
QUICK RATIO
CASH RATIO

Question 16

also known as
the working capital ratio.

Answer 16

CURRENT RATIO

Question 17

way to assess the overall liquidity of the
company by comparing current
assets to current liabilities.

Answer 17

CURRENT RATIO

Question 18

also known as the
acid test ratio.

Answer 18

QUICK RATIO

Question 19

considers only those assets that
can be rapidly converted to cash—
cash, marketable securities, and
receivables.

Answer 19

QUICK RATIO

Question 20

They are the assets that are most
readily available to a company to pay short-term obligations.

Answer 20

CASH RATIO

Question 20

any kind of financial ratio that
indicates the LEVEL OF DEBT incurred by a business entity
against several other accounts in its balance sheet,
income statement, or cash flow statement. .

Answer 20

LEVERAGE RATIO

Question 21

Types of
Leverage
Ratios

Answer 21

Debt ratio
Equity ratio
Time Interest Earned (TIE)
Ratio

Question 22

measures
the percentage of assets
funded by the creditors. It is
computed as:

Answer 22

Debt ratio

Question 23

indicates the percentage of
assets funded by the owners.

Answer 23

Equity ratio

Question 24

Total Debt / Total Equity

Answer 24

Equity ratio

Question 25

Also known as the interest-
covered ratio.

Answer 25

Time Interest Earned (TIE)
Ratio

Question 26

• It evaluates the ability of the
  company to pay the interest
  on its debt.
• shows how many
  times a company could pay
  the interest with their before-
  tax income.

Answer 26

Time Interest Earned (TIE)
Ratio

Question 27

Operating Income/ Interest Expense

Answer 27

Time Interest Earned (TIE)
Ratio

Question 28

to measure and evaluate the ability of a company to generate income (profit)

Answer 28

PROFITABILITY RATIOS

Question 29

Types of
Profitability
Ratios

Answer 29

GROSSS PROFIT MARGIN
OPERATING PROFIT MARGIN
NET PROFIT OR RETURN SALES

Question 30

used to
assess a company’s financial
health and business model by
revealing the proportion of
money left over from revenues
after the cost of goods sold.

Answer 30

GROSSS PROFIT MARGIN

Question 31

Gross profit/Net Sales

Answer 31

Gross Profit Margin =

Question 32

demonstrates how much
revenues are left over after all
the variable or operating costs
have been paid.

Answer 32

Operating Profit Margin

Question 33

Operating Profit/Net Sales

Answer 33

Operating Profit Margin =

Question 34

measures the overall
profitability of the company.

Answer 34

Net Profit or Return Sales

Question 35

Net Income/ Net Sales

Answer 35

Net Profit Margin =