Chapter 36, Introduction to ratio analysis and liquidity ratios Flashcards
1
Q
Stakeholders that benefit from ratio analysis
A
- directors
- managers
- employees
- banks
- suppliers
- customers
- shareholders
- competitors
- government
2
Q
Ratio Analysis is used for
A
- measure performance of a given period of time
- comparisons
- comparisons between different departments
3
Q
Types of Ratios
A
- Liquidity
- Profitability
- financial efficency
- Shareholder
- gearing
4
Q
Liquidity Ratios
A
- Current Ratio
- Acid Test
5
Q
Current ratio
A
ratio between the number of current assets and current liabilities
Current assets / current liabilities
6
Q
Acid Test
A
takes into account business cannot seel all their stock
Current assets - inventory (stock) / Current liabilities
7
Q
Uses for ratios
A
- comparisons from year to year
- Stakeholders
- Potential suppliers
- Decision making
8
Q
Limitations of ratios
A
- Inflation may distort
- state of economy isnt take into account
- External influences
