U3, AOS 1 - KK14 - Financial indicators Flashcards
What does WCR stand for in financial analysis?
Working Capital Ratio
True or False: A higher WCR indicates better short-term financial health.
True
Fill in the blank: The formula for Working Capital Ratio (WCR) is _______.
Current Assets / Current Liabilities
What does APTO measure in a business?
Accounts Payable Turnover Ratio
How is the Accounts Payable Turnover Ratio (APTO) calculated?
Cost of Goods Sold / Average Accounts Payable
Multiple Choice: Which of the following indicates how quickly a company pays off its suppliers? A) WCR B) APTO C) ARTO D) ITO
B) APTO
What does ARTO stand for?
Accounts Receivable Turnover Ratio
True or False: A higher ARTO indicates that a company is efficient at collecting its receivables.
True
Fill in the blank: The formula for Accounts Receivable Turnover Ratio (ARTO) is _______.
Net Credit Sales / Average Accounts Receivable
What does ITO measure?
Inventory Turnover Ratio
How is the Inventory Turnover Ratio (ITO) calculated?
Cost of Goods Sold / Average Inventory
Multiple Choice: Which financial indicator helps assess how well a company manages its inventory? A) WCR B) APTO C) ARTO D) ITO
D) ITO
What is considered a healthy WCR ratio?
A WCR greater than 1
True or False: A low APTO may suggest that a company is taking longer to pay its suppliers.
True
Fill in the blank: A high ARTO suggests that a company is effective at _______.
Collecting its receivables
What is a potential risk of a very high ITO?
Stockouts or insufficient inventory
Multiple Choice: Which ratio would you analyze to determine liquidity? A) WCR B) APTO C) ARTO D) ITO
A) WCR
What does a low WCR indicate?
Potential liquidity problems
True or False: The APTO can be improved by extending payment terms with suppliers.
False
Fill in the blank: A company with a high ITO is likely experiencing _______.
Strong sales
Which financial indicator would be most relevant for a company assessing its credit policies?
Accounts Receivable Turnover Ratio (ARTO)
