ratios test

Question 1

cash build

Answer 1

net sales -increase in receivables

Question 2

current ratio

Answer 2

average current assets/a average current liabilities

Question 3

quick ratio

Answer 3

avg current assets - avg inventories/ avg current liabilities

Question 4

nwc to total assets ratio

Answer 4

avg current assets - avg current liabilities / avg total assets

Question 5

total debt to total assets ratio

Answer 5

avg total debt/ avg total assets

Question 6

equity multiplier

Answer 6

avg total assets/ avg owners equity

Question 7

current liabilities to total debt ratio

Answer 7

avg current liabilities/ avg total debt

Question 8

interest coverage

Answer 8

ebitda/interest

Question 9

gross profit margin

Answer 9

net sales - cost of goods sold/ net sales

Question 10

operating profit margin

Answer 10

ebit/ net sales

Question 11

net profit margin

Answer 11

net income/ net sales

Question 12

nopat margin

Answer 12

{ ebit (1-tax rate) } / net sales1

Question 13

sales to total assets ratio

Answer 13

net sales/ avg total assets

Question 14

operating return on assets

Answer 14

EBIT/AVG Total Assets

Question 15

return on assets

Answer 15

net income/net sales x net sales/avg total assets

Question 16

return on equity

Answer 16

net income/ avg owners equity

Question 17

cash burn

Answer 17

income statement based operating, interest, and tax expenses + increase in inventories - (changes in payables and accrued liabilities) + capital expenditures

Question 18

working capital

Answer 18

current assets - current liabilities

Question 19

financial ratios

Answer 19

show the relationship between two or more financial variables

Question 20

trend analysis

Answer 20

used to examine a ventures performance over time

Question 21

net profit/ sales x net sales / avge total assets / avg equity

Answer 21

roe model

Question 22

roe

Answer 22

net income/avg owners equity

Question 23

roa model

Answer 23

the decomposition of roa into the product of the net profit margin and the sales to total assets ratio

Question 24

return on total assets

Answer 24

net profit/ ave total assets

Question 25

proportion of a ventures interest payment paid by the ogvernment because interest is deductible before taxes are paid

Answer 25

interest tax shield

Question 26

net sales - cogs/ net sales

Answer 26

gross profit margin

Question 27

indicate how efficiently a venture controls its expenses

Answer 27

profitability ratios

Question 28

indicate how efficently a venture uses its assets in producing sales

Answer 28

efficiency ratio

Question 29

indicates the extent to which the venture is in debt and its ability to repay its debt obligations

Answer 29

leverage ratio

Question 30

dollar amount borrowed from a lender

Answer 30

low principal amount

Question 31

indicates the average time it takes in days to convert certain current assets and current liability accounts into cash

Answer 31

conversion period ratios

Question 32

time it takes to purchase, produce, and sell the ventures products plus the time needed to collect receivables if the sales are on credit

Answer 32

operating cycle

Question 33

sum of the inventory to sale conversion period and the sales to cash conversion period less the purchase to payment conversion period

Answer 33

cash conversion cycle

Question 34

rapid growth stage financial ratios

Answer 34

leverage ratios

profitability and efficiency ratios

Question 35

rapid growth types of financing

Answer 35

second round, mezzanine, and liquidity stage financing

Question 36

survival stage financial ratios

Answer 36

cash burn, liquidity, and conversion ratios