Week 3 lecture

Question 1

What is Debt Ratio?

Answer 1

A Measure of Leverage

Question 2

What is Current Ratio?

Answer 2

A Measure of Liquidity

Question 3

What is Return on Sales?

Answer 3

A Measure of the Amount of Profit Earned per Dollar of Sales

Question 4

What is Asset
Turnover?

Answer 4

A Measure of Company Efficiency

Question 5

What is Return on Equity?

Answer 5

A Measure of the Amount of Profit Earned per Dollar of Investment

Question 6

What is Price-Earnings Ratio?

Answer 6

A Measure of Growth Potential, Earnings Stability, and Management Capabilities

Question 7

What is the formula of Asset
Turnover?

Answer 7

Sales / Total Assets

Question 8

What is the formula of Return on Sales?

Answer 8

Net Income / Sales

Question 9

What is the formula of Current Ratio?

Answer 9

Current Assets / Current Liabilities

Question 10

What is the formula of Debt Ratio?

Answer 10

Total Liabilities / Total Assets

Question 11

What is the formula of Return on Equity?

Answer 11

Net Income / Shareholders’ Equity

Question 12

What is the formula of Price-Earnings Ratio?

Answer 12

Market Value of Shares / Net Income

Question 13

What is the Rule of Thumb for the Current Ratio?

Answer 13

CR greater than 1

Question 14

What is the normal Debt Ratio?

Answer 14

50-60%

Question 15

What is the normal Return on Equity?

Answer 15

10-20%

Question 16

What is the normal Price-Earnings Ratio?

Answer 16

Normal Price-Earnings Ratio is 15

Question 17

What is Break-Even point?

Answer 17

A measure of activity at which
revenues equal costs

Question 18

What is the formula for Break-Even point?

Answer 18

Break-Even point (in units) = Total Fixed Costs / (Price per unit – Variable Cost per unit)