Financial Ratios MCQs

Financial Ratios MCQs

Which financial ratio measures a company’s ability to meet its short-term obligations?
a) Current ratio
b) Debt-to-equity ratio
c) Return on investment (ROI)
d) Gross profit margin
Answer: a) Current ratio

The quick ratio is a measure of a company’s:
a) Liquidity
b) Profitability
c) Efficiency
d) Solvency
Answer: a) Liquidity

The debt-to-equity ratio indicates:
a) The percentage of debt in a company’s capital structure
b) The company’s ability to generate profit
c) The level of risk associated with the company’s operations
d) The efficiency of a company’s asset management
Answer: a) The percentage of debt in a company’s capital structure

The return on assets (ROA) ratio measures:
a) The company’s profitability relative to its total assets
b) The company’s ability to generate a return for its shareholders
c) The company’s efficiency in utilizing its assets to generate sales
d) The company’s liquidity position
Answer: a) The company’s profitability relative to its total assets

The gross profit margin is calculated by dividing:
a) Gross profit by net sales
b) Net income by net sales
c) Total assets by total liabilities
d) Operating income by total assets
Answer: a) Gross profit by net sales

The inventory turnover ratio measures:
a) How quickly a company can convert its inventory into cash
b) The efficiency of a company’s debt management
c) The return on investment for shareholders
d) The company’s ability to meet short-term obligations
Answer: a) How quickly a company can convert its inventory into cash

The price-earnings (P/E) ratio is a measure of:
a) The market value of a company’s common stock relative to its earnings
b) The company’s ability to generate sales
c) The level of risk associated with the company’s operations
d) The company’s ability to generate profit from its assets
Answer: a) The market value of a company’s common stock relative to its earnings

The current ratio is calculated by dividing:
a) Current assets by current liabilities
b) Total assets by total liabilities
c) Net income by total assets
d) Gross profit by net sales
Answer: a) Current assets by current liabilities

Financial Ratios MCQs

The return on equity (ROE) ratio measures:
a) The company’s profitability relative to its equity capital
b) The company’s liquidity position
c) The company’s ability to generate sales
d) The company’s efficiency in managing its assets
Answer: a) The company’s profitability relative to its equity capital

The debt ratio is calculated by dividing:
a) Total debt by total assets
b) Net income by total assets
c) Total liabilities by total equity
d) Earnings before interest and taxes (EBIT) by total assets
Answer: a) Total debt by total assets

Which financial ratio measures the efficiency of a company’s accounts receivable management?
a) Return on equity (ROE)
b) Inventory turnover ratio
c) Accounts receivable turnover ratio
d) Debt-to-equity ratio
Answer: c) Accounts receivable turnover ratio

The asset turnover ratio measures:
a) The company’s ability to generate profit from its assets
b) The company’s liquidity position
c) The company’s debt management efficiency
d) The company’s ability to meet short-term obligations
Answer: a) The company’s ability to generate profit from its assets

Financial Ratios MCQs

The operating profit margin is calculated by dividing:
a) Operating income by net sales
b) Net income by net sales
c) Gross profit by net sales
d) Total assets by total liabilities
Answer: a) Operating income by net sales

Which financial ratio indicates the percentage of a company’s earnings distributed to its shareholders as dividends?
a) Price-earnings (P/E) ratio
b) Dividend yield ratio
c) Return on investment (ROI)
d) Debt ratio
Answer: b) Dividend yield ratio

The fixed asset turnover ratio measures:
a) The company’s efficiency in managing its fixed assets
b) The company’s ability to generate sales
c) The company’s profitability relative to its equity capital
d) The company’s liquidity position
Answer: a) The company’s efficiency in managing its fixed assets

The earnings per share (EPS) ratio is calculated by dividing:
a) Net income by total assets
b) Net income by total equity
c) Net income by the number of common shares outstanding
d) Gross profit by net sales
Answer: c) Net income by the number of common shares outstanding

Financial Ratios MCQs

The times interest earned ratio is used to assess:
a) The company’s ability to generate profit
b) The company’s liquidity position
c) The company’s solvency and ability to meet interest obligations
d) The company’s efficiency in managing its assets
Answer: c) The company’s solvency and ability to meet interest obligations

The price-to-sales (P/S) ratio is a measure of:
a) The market value of a company’s common stock relative to its sales
b) The company’s profitability relative to its equity capital
c) The level of risk associated with the company’s operations
d) The company’s ability to generate profit from its assets
Answer: a) The market value of a company’s common stock relative to its sales

The return on investment (ROI) ratio is calculated by dividing:
a) Net income by total assets
b) Net income by total equity
c) Operating income by net sales
d) Gross profit by net sales
Answer: a) Net income by total assets

The working capital turnover ratio measures:
a) The company’s liquidity position
b) The company’s ability to generate profit from its assets
c) The company’s efficiency in managing its working capital
d) The company’s solvency and ability to meet short-term obligations
Answer: c) The company’s efficiency in managing its working capital

Financial Ratios MCQs

Which financial ratio measures the ability of a company to cover its interest expenses with its operating income?
a) Debt-to-equity ratio
b) Times interest earned ratio
c) Price-earnings (P/E) ratio
d) Return on equity (ROE)
Answer: b) Times interest earned ratio

The return on investment (ROI) ratio is a measure of:
a) The company’s profitability relative to its equity capital
b) The company’s ability to generate profit from its assets
c) The company’s liquidity position
d) The company’s efficiency in managing its working capital
Answer: b) The company’s ability to generate profit from its assets

The current ratio is a measure of a company’s:
a) Liquidity
b) Profitability
c) Debt management efficiency
d) Solvency
Answer: a) Liquidity

Financial Ratios MCQs

The inventory turnover ratio measures:
a) The efficiency of a company’s inventory management
b) The company’s ability to generate sales
c) The company’s profitability relative to its equity capital
d) The company’s solvency and ability to meet short-term obligations
Answer: a) The efficiency of a company’s inventory management

The debt-to-equity ratio indicates:
a) The proportion of debt financing relative to equity financing in a company’s capital structure
b) The company’s ability to generate profit
c) The level of risk associated with the company’s operations
d) The efficiency of a company’s asset management
Answer: a) The proportion of debt financing relative to equity financing in a company’s capital structure

The price-earnings (P/E) ratio is a measure of:
a) The market value of a company’s common stock relative to its earnings
b) The company’s ability to generate sales
c) The company’s liquidity position
d) The company’s efficiency in managing its working capital
Answer: a) The market value of a company’s common stock relative to its earnings

The quick ratio is also known as the:
a) Acid-test ratio
b) Debt ratio
c) Return on assets (ROA) ratio
d) Asset turnover ratio
Answer: a) Acid-test ratio

Financial Ratios MCQs

The return on equity (ROE) ratio measures:
a) The company’s profitability relative to its equity capital
b) The company’s liquidity position
c) The company’s ability to generate sales
d) The company’s efficiency in managing its fixed assets
Answer: a) The company’s profitability relative to its equity capital