Ratios

Question 1

Liquidity/Solvency Ratios

Answer 1

measures ability to meet short and long term obligations

Question 2

Operational/Efficiency Ratios

Answer 2

measures the efficiency of ops

Question 3

Profitability

Answer 3

measures operational results

Question 4

Leverage/Equity

Answer 4

measures magnitude of debt and equity financing

Question 5

Working Capital

Answer 5

Current Assets - Current Liabilities (absolute value not a ratio)

Question 6

Acid or Quick Ratio

Answer 6

uses most liquid assets to measure the ability to meet maturing obligations (current liabs) - tells you dollar amount of CA to CL

Question 7

Times Interest Earned

Answer 7

measures extent current earnings can cover interest costs for period - tells you how many times over earnings can cover costs

Question 8

AR Turnover

Answer 8

how many times AR turns over in a year

Question 9

Number of days receivable outstanding

Answer 9

tells you how many days it takes for receivables to be collected

Question 10

Inventory Turnover

Answer 10

how many times Inventory turns over in a year

Question 11

Operating Cycle

Answer 11

total period of time from purchase of inventory, to sale, to collection of cash from receivables