Module 3

Question 1

Common Size Ratios.

Answer 1

can be developed from both the balance sheet and income statement.

Question 2

use the common size ratio by

Answer 2

calculating each line item on the statement as a % of the total

Question 3

the common size ratio is most affective when

Answer 3

compared across multiple companies that operate in the same industry over time

Question 4

use common size ratio to

Answer 4

rank companies based on specific metrics

Question 5

the common size ratio helps to identify

Answer 5

strengths and weaknesses

Question 6

Financial Ratios

Answer 6

offer entrepreneurs a way to evaluate their companies performance and compare it to other similar businesses in their industry

Question 7

types of financial ratios

Answer 7

probability, liquidity, solvency, activity

Question 8

liquidity ratios measure

Answer 8

a company ability to pay its short term obligations

Question 9

solvency ratios mesure

Answer 9

a company ability to pay long term debt obligations

Question 10

Activity ratios measure

Answer 10

a firm’s operating efficiency