Financial Ratios Flashcards
1
Q
Who owns the a corporation?
A
The shareholders
2
Q
What is the principal-agent problem (agency)?
A
Management and shareholders have different views and goals
3
Q
What do shareholders want most?
A
Return on capital & low risk
4
Q
How can profitability be adjusted?
A
if scale is reduce profitability is increased. Increase earnings and it also adjusts the ratio.
5
Q
What is the equation for Profitability?
A
6
Q
What makes up Earnings?
A
Gross profit, EBITDA, EBIT, Net Earnings
7
Q
What makes up the scale?
A
8
Q
What is the equation for Return on Assets (ROA)?
A
9
Q
What is the definition of Return on Assets (ROA)?
A
10
Q
The equation for Return on Equity?
A
11
Q
What is the equation for Gross Profit?
A
12
Q
A
