Week 4 - Performance measurement

Question 1

Financial ratios

Answer 1

Created with the use of numerical values taken from financial statements to gain meaningful information about the investment and financing decisions

Question 2

Two main purposes of financial ratios

Answer 2

1. track company performance
2. making comparative judgements

Question 3

Market capitalization

Answer 3

Refers to the total value of a companys outstanding shares of stock.
Used as a measure of company size

Question 4

Market value added

Answer 4

Shows the difference between a companys market value and the capital invested by its investors

Determines how much value the firm has accumulated over time

Question 5

Market to book ratio

Answer 5

Financial ratios used to evaluate a companys current market value in comparison to its book value