Finance

Question 1

What are the three rations on the financial statement?

Answer 1

Profitability, solvency and Liquidity

Question 2

Profiltability ratio?

Answer 2

On the business level;
Return on assets
*Earningsbeforeinterest and taxes(EBIT)/Average total assets.

Equity providers;
Return on equity
Profit after tax/Average equity

Question 3

Solvency ratio?

Answer 3

A company’sabilityto meet itsfinancial obligationsin the event of liquidation.

Debt/ Total assets

Question 4

Liquidity ratio?

Answer 4

Current Ratio = Current assets/ current liabilities. (measuring a company’s ability to fulfil short-term financial obligations. It’s a good indicator of financial health and can warn of impending issues if the ratio is too low or even too high.) >1

Acid test Ratio = (Current assets – inventories)/ current liabilities.
(it measures liquidity and a company’s ability to pay its bills and other short-term obligations with short-term assets quickly convertible to cash.) >1.1

Question 5

What is a financial risk assesment?

Answer 5

an evaluation of the probability that a financial asset or investment could lose value. Investing in Growth and Innovation.

Question 6

What is cost price calculation?

Answer 6

cost price is simply the amount of money it costs you to make each product or provide a service.
Cost price = labor + overhead + materials + tools + marketing costs

Question 7

What is the difference between cost and price?

Answer 7

Cost is the amount of money you spent to make the product or service. Price is what you will charge for it.