Test Your Accounting Know-How!

What do liquidity ratios measure?

• Current Assets ÷ ____________

• (Cash + ___________ + A/R) ÷ Current Liabilities

What do activity ratios measure?

• Net Credit Sales ÷ ____________________________

• (365 days ÷ A/R turnover)

• Cost of Goods Sold ÷ __________________________

What do profitability ratios measure?

• Net Income ÷ _____________

• Net Income ÷ ____________

• Net Income ÷ Average _______________

What do solvency ratios measure?

• Total Liabilities ÷ ____________________

• Operating Income ÷ ____________________

• Total Equity ÷ _________________________

WHICH OF THE FOLLOWING IS NOT A MEASURE OF ASSET UTILIZATION?

• INVENTORY TURNOVER

• AVERAGE AR COLLECTION PERIOD

• FIXED ASSET TURNOVER

• DEBT TO TOTAL ASSETS

wHAT FINANCIAL ANALYSIS TECHNIQUE WOULD IMPLY BENCHMARKING WITH OTHER FIRMS?

• HORIZONTAL ANALYSIS

• VERTICAL ANALYSIS

• CROSS-SECTIONAL ANALYSIS

• RATIO ANALYSIS

Match the following ratios to their correct use-case:

• Measures how much investors are willing to pay per peso of earnings. It reflects market expectations about a company’s future performance.

• Measures the return on investment in the form of dividends. It shows how much cash a company returns to shareholders relative to its share price.

• Indicates the asset value per share that stockholders would theoretically receive if the company were liquidated.

• Measures how efficiently a company uses its assets to generate sales. A higher ratio means better efficiency.