Ratios and Financial Data

Question 1

What are the three categories of ratios

Answer 1

Solvency
Efficiency
Profitability

Question 2

Solevency

Answer 2

Provides lenders perspective in meeting financial obligations and giving insight into if the company can pay the pills

Question 3

Efficiency

Answer 3

provides management with perspective in how effective are the operations of the firm, the effectiveness of the company using and controlling assets

Question 4

Profitability

Answer 4

Provides the owners perspective on if the firm is yielding advantageous returns or results, how profitable is a company in relation to the assets and the sales

Question 5

Which Ratios are involved in Solvency/Liquidity

Answer 5

• Current Ratio
• Quick Ratio
• Current Liabilities to Net Worth
• Total Liabilities to Net worth
• Liabilities to inventories
  (Think about LIabilities and LIquidity)

Question 6

Which Ratios are involved in Efficiency Ratios

Answer 6

• Collection Period
• Sales to Inventory
• Asset to Sales
• Accounts Payable to sales
  (Think about Sales showing a companies efficiency)

Question 7

Which Ratios are involved in Profitability

Answer 7

• Return on Sales
• Return on Assets
• Return on Net Worth
  (Think ALL Profitability Involves Return)