Reading 26: Understanding Balance Sheets

Question 1

Current Ratio

Liquidity Ratios

26.x

Understanding Balance Sheets

Answer 1

Current asset / Current liabilities

Ability to meet current liabilities

Question 2

Quick (acid test) Ratio

Liquidity Ratios

26.x

Understanding Balance Sheets

Answer 2

(Cash + Marketable securities + Receivables) / Current liabilities

Ability to meet current liabilities

Question 3

Cash Ratio

Liquidity Ratios

26.x

Understanding Balance Sheets

Answer 3

(Cash + Marketable securities) / Current liabilities

Ability to meet current liabilities

Question 4

Long-term debt-to-equity

Solvency Ratios

26.x

Understanding Balance Sheets

Answer 4

Total long-term debt / Total equity

Indicates financial risk and financial leverage

Question 5

Debt-to-equity

Solvency Ratios

26.x

Understanding Balance Sheets

Answer 5

Total debt / Total equity

Indicates financial risk and financial leverage

Question 6

Total Debt

Solvency Ratios

26.x

Understanding Balance Sheets

Answer 6

Total debt / Total assets

Indicates financial risk and financial leverage

Question 7

Financial Leverage

Solvency Ratios

26.x

Understanding Balance Sheets

Answer 7

Total assets / total equity

Indicates financial risk and financial leverage