Ratio's

Question 1

What is working capital?

Answer 1

Current Assets - Current Liabilities

Question 2

What is current ratio?

Answer 2

Current Assets / Current Liabilities

Question 3

What is quick ratio?

Answer 3

Cash + Marketable Securities + Net receiv / Current Liabilities

Question 4

If ratio is less than 1, equal INCREASE of numerator/denominator

Answer 4

Increase (the same direction)

Question 5

If ratio is less than 1, equal DECREASE of numerator/denominator

Answer 5

Decrease (the same direction)

Question 6

If ratio is greater than 1, equal INCREASE of numerator/denominator

Answer 6

Decrease (the opposite direction)

Question 7

If ratio is greater than 1, equal DECREASE of numerator/denominator

Answer 7

Increase (the opposite direction)

Question 8

What is the accounts receivable turnover ratio?

Answer 8

Net credit sales / Average balance in receivables

Question 9

Days’ sales in receivables ratio?

Answer 9

Days in year / Accounts receivable turnover ratio

Question 10

What is the inventory turnover ratio?

Answer 10

COGS / Average balance in inventory

Question 11

Days’ sales in inventory?

Answer 11

Days in year / Inventory turnover ratio

Question 12

What is the Economic Order Quantity Model?

Answer 12

Square root of (2ordering costunit demand) / carry costs

Question 13

What is the operating cycle?

Answer 13

Days sales in receivables + Days sales in inventory

Question 14

What is the cash conversion cycle?

Answer 14

Average collection period + Days sales in inventory - Average payables period.

Question 15

What is the accounts payable turnover?

Answer 15

COGS / Average balance in A/P

Question 16

What is the average payable period?

Answer 16

Days in year / Accounts payable turnover