Which of the following is not a profitability ratio?
a) Gross profit margin
b) Return on assets
c) Current ratio
d) Net profit margin
Answer: c) Current ratio
The quick ratio is also known as the:
a) Acid-test ratio
b) Debt-to-equity ratio
c) Inventory turnover ratio
d) Return on investment ratio
Answer: a) Acid-test ratio
The debt-to-equity ratio is a measure of:
a) Liquidity
b) Profitability
c) Solvency
d) Efficiency
Answer: c) Solvency
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) Sales revenue by total assets
Answer: a) Current assets by current liabilities
The inventory turnover ratio measures:
a) How quickly a company collects its accounts receivable
b) How effectively a company manages its inventory
c) The proportion of debt to equity in a company
d) The profitability of a company’s operations
Answer: b) How effectively a company manages its inventory
The return on equity (ROE) ratio is calculated by dividing:
a) Net income by total assets
b) Net income by shareholders’ equity
c) Total liabilities by total assets
d) Gross profit by net sales
Answer: b) Net income by shareholders’ equity
The current ratio of a company is 2:1. This means:
a) The company has twice as many liabilities as assets
b) The company has twice as many assets as liabilities
c) The company has twice as much net income as expenses
d) The company has twice as much inventory as accounts payable
Answer: b) The company has twice as many assets as liabilities
The price-earnings (P/E) ratio is a measure of:
a) Liquidity
b) Profitability
c) Solvency
d) Market valuation
Answer: d) Market valuation
The receivables turnover ratio measures:
a) How quickly a company pays off its debts
b) How quickly a company collects its accounts receivable
c) The proportion of equity to debt in a company
d) The profitability of a company’s operations
Answer: b) How quickly a company collects its accounts receivable
The gross profit margin is calculated by dividing:
a) Gross profit by net sales
b) Net income by total assets
c) Total liabilities by total assets
d) Current assets by current liabilities
Answer: a) Gross profit by net sales
The debt ratio measures:
a) The proportion of debt to equity in a company
b) The profitability of a company’s operations
c) The efficiency of a company’s inventory management
d) The liquidity of a company’s assets
Answer: a) The proportion of debt to equity in a company
The asset turnover ratio is calculated by dividing:
a) Net income by total assets
b) Total liabilities by total assets
c) Total sales by average total assets
d) Gross profit by net sales
Answer: c) Total sales by average total assets
The return on assets (ROA) ratio is calculated by dividing:
a) Net income by total assets
b) Gross profit by net sales
c) Net income by shareholders’ equity
d) Current assets by current liabilities
Answer: a) Net income by total assets
The price-to-sales (P/S) ratio is a measure of:
a) Liquidity
b) Profitability
c) Solvency
d) Market valuation
Answer: d) Market valuation
The earnings per share (EPS) ratio is calculated by dividing:
a) Net income by total assets
b) Net income by average shareholders’ equity
c) Gross profit by net sales
d) Current assets by current liabilities
Answer: b) Net income by average shareholders’ equity
The fixed asset turnover ratio measures:
a) How quickly a company collects its accounts receivable
b) How efficiently a company utilizes its fixed assets
c) The proportion of debt to equity in a company
d) The profitability of a company’s operations
Answer: b) How efficiently a company utilizes its fixed assets
The debt-to-assets ratio is calculated by dividing:
a) Total liabilities by total assets
b) Gross profit by net sales
c) Net income by total assets
d) Current assets by current liabilities
Answer: a) Total liabilities by total assets
The return on investment (ROI) ratio is calculated by dividing:
a) Net income by total assets
b) Gross profit by net sales
c) Net income by shareholders’ equity
d) Current assets by current liabilities
Answer: a) Net income by total assets
The dividend payout ratio measures:
a) How quickly a company collects its accounts receivable
b) How efficiently a company utilizes its fixed assets
c) The proportion of profits distributed as dividends
d) The profitability of a company’s operations
Answer: c) The proportion of profits distributed as dividends
The working capital turnover ratio is calculated by dividing:
a) Net income by total assets
b) Gross profit by net sales
c) Net sales by average working capital
d) Current assets by current liabilities
Answer: c) Net sales by average working capital