Activity 9 -Ratio Analysis

What do liquidity ratios help us understand about a company?

• Long-term financial stability

• Short-term solvency

• Earning efficiency

• Operational performance

Which of the following is a common liquidity ratio?

• Debt-to-equity ratio

• Current ratio

• Return on equity

• Inventory turnover

How is the solvency ratio calculated?

What does a high solvency ratio indicate?

• Strong short-term financial health

• High earning efficiency

• Strong long-term financial stability

• High operational performance

Which ratio measures a company's earning efficiency?

• Liquidity ratio

• Solvency ratio

• Profitability ratio

• Efficiency ratio

What is the formula for calculating the return on equity (ROE)?

Why are efficiency ratios important?

• They measure short-term solvency

• They assess long-term financial stability

• They evaluate operational performance

• They determine earning efficiency

Which of the following is an example of an efficiency ratio?

• Current ratio

• Debt-to-equity ratio

• Return on assets

• Inventory turnover

What is the purpose of comparing financial ratios?

• To measure temperature

• To evaluate a company's financial health

• To calculate distances

• To determine weight

Which ratio would you use to compare a company's ability to pay off its short-term debts?

• Profit margin

• Current ratio

• Debt-to-equity ratio

• Return on equity