Finance

Question 1

What is the Ratio for profitability?

Answer 1

1. Gross Profit Ratio
2. Net Profit Ratio
3. Return on Equity Ratio

Question 2

What is the Ratio for efficiency?

Answer 2

1. Accounts Receivable Turnover Ratio
2. Expense Ratio

Question 3

What is the Ratio for liquidity?

Answer 3

Current Ratio

Question 4

What is the Ratio for Solvency

Answer 4

Debt to Equity Ratio

Question 5

Formula for net profit ratio

Answer 5

net profit / sales

Question 6

formula for gross profit ratio

Answer 6

gross profit / sales

Question 7

formula for return on equity ratio

Answer 7

net profit / total equity

Question 8

formula for expense ratio

Answer 8

total expenses / sales

Question 9

formula for accounts receivable turnover ratio

Answer 9

sales / accounts receivables

Question 10

formula for current ratio

Answer 10

current assets / current liabilities

Question 11

formula for debt to equity ratio

Answer 11

total liabilities / total equity

Question 12

what is profitability

Answer 12

profitability is the ability to maximize profits

Question 13

how can a business maximize its profits

Answer 13

the business can reduce costs, monitor revenue and cash policies; cost and expenses; inventory and asset levels

Question 14

what is growth

Answer 14

growth is the ability to increase business size in the long term - this can be internal growth (hiring more staff) or external growth (merging/acquiring new businesses)

Question 15

what does growth depend on

Answer 15

the businesses ability to develop and use asset structure in order to increase sales, profit and market share

Question 16

what is efficiency

Answer 16

the ability for a business to minimise costs and manage assets in order to maximise profits and have profitability and financial stability

Question 17

what is profitability

Answer 17

using business resources effectively to reduce costs

Question 18

what is financial stability

Answer 18

how efficiently the business is achieving its financial obligations

Question 19

how can a business achieve efficiency

Answer 19

a business must monitor cash, inventory and collection of receivables

Question 20

what is the strategic role of financial management?

Answer 20

• long term (10 years)
• involves efficient financial management that monitor and plans financial resources
• achieves finance goals

Question 21

What happens when there is an ineffective financial management

Answer 21

• insufficient funds to pay to suppliers
  business is unable to pay for inputs → no products made/sold → business doesn’t generate any cash
• not enough capital for expansion :
  business doesn’t have enough money to expand → no increase in market share/ target market → decrease of competitiveness
• delays in accounts payed:
  not paying bills on time → stress on businesses and creditors