1)What is the purpose of ratio analysis in accounting?
a) To determine the absolute value of assets
b) To evaluate financial performance and relationships
c) To calculate tax liabilities
d) To predict future stock prices
Answer: b
2)The current ratio is calculated by dividing:
a) Total liabilities by total assets
b) Current assets by current liabilities
c) Long-term liabilities by current assets
d) Current liabilities by current assets
Answer: b
3)The debt-to-equity ratio measures:
a) A company's profitability
b) A company's liquidity
c) The relationship between short-term and long-term liabilities
d) The proportion of debt to shareholders' equity
Answer: d
4)Gross profit margin is calculated by dividing:
a) Gross profit by net sales
b) Net income by net sales
c) Operating expenses by net sales
d) Net sales by total assets
Answer: a
5)Return on Assets (ROA) is calculated by dividing:
a) Net income by average total assets
b) Net sales by total assets
c) Total assets by net income
d) Total liabilities by average total assets
Answer: a
6)Which ratio indicates a company's ability to meet its short-term obligations?
a) Debt-to-Equity ratio
b) Quick ratio
c) Return on Equity (ROE)
d) Earnings per Share (EPS)
Answer: b
7)A higher inventory turnover ratio implies:
a) Efficient utilization of inventory
b) Inventory obsolescence
c) Lower sales volume
d) Higher cost of goods sold
Answer: a
8)The formula for the current ratio is:
a) Current Assets / Current Liabilities
b) Total Assets / Total Liabilities
c) Total Liabilities / Current Assets
d) Current Liabilities / Current Assets
Answer: a
9)Which ratio provides insights into the operational efficiency of a company?
a) Debt Ratio
b) Return on Equity (ROE)
c) Asset Turnover Ratio
d) Price-Earnings (P/E) Ratio
Answer: c
10)The acid-test ratio excludes which asset from its calculation?
a) Cash
b) Accounts Receivable
c) Inventory
d) Prepaid Expenses
Answer: c
11)What is the purpose of ratio analysis in accounting?
a) To determine the absolute value of assets
b) To evaluate financial performance and relationships
c) To calculate tax liabilities
d) To predict future stock prices
Answer: b
12)The current ratio is calculated by dividing:
a) Total liabilities by total assets
) Current assets by current liabilities
c) Long-term liabilities by current assets
d) Current liabilities by current assets
Answer: b
13)The debt-to-equity ratio measures:
a) A company's profitability
b) A company's liquidity
c) The relationship between short-term and long-term liabilities
d) The proportion of debt to shareholders' equity
Answer: d
14)Gross profit margin is calculated by dividing:
a) Gross profit by net sales
b) Net income by net sales
c) Operating expenses by net sales
d) Net sales by total assets
Answer: a
15)Return on Assets (ROA) is calculated by dividing:
a) Net income by average total assets
b) Net sales by total assets
c) Total assets by net income
d) Total liabilities by average total assets
Answer: a
16)Which ratio indicates a company's ability to meet its short-term obligations?
a) Debt-to-Equity ratio
b) Quick ratio
c) Return on Equity (ROE)
d) Earnings per Share (EPS)
Answer: b
17)A higher inventory turnover ratio implies:
a) Efficient utilization of inventory
b) Inventory obsolescence
c) Lower sales volume
d) Higher cost of goods sold
Answer: a
18)The formula for the current ratio is:
a) Current Assets / Current Liabilities
b) Total Assets / Total Liabilities
c) Total Liabilities / Current Assets
d) Current Liabilities / Current Assets
Answer: a
19)Which ratio provides insights into the operational efficiency of a company?
a) Debt Ratio
b) Return on Equity (ROE)
c) Asset Turnover Ratio
d) Price-Earnings (P/E) Ratio
Answer: c
20)The acid-test ratio excludes which asset from its calculation?
a) Cash
b) Accounts Receivable
c) Inventory
d) Prepaid Expenses
Answer: c
21)The debt ratio is calculated by dividing:
a) Total liabilities by total assets
b) Total assets by total liabilities
c) Long-term debt by equity
d) Current liabilities by equity
Answer: a
22)Which ratio measures the proportion of profit available to shareholders after deducting interest and taxes?
a) Earnings Before Interest and Taxes (EBIT) Margin
b) Return on Equity (ROE)
c) Operating Profit Margin
d) Earnings Per Share (EPS)
Answer: b
23)A high receivables turnover ratio can indicate:
a) Efficient management of accounts payable
b) A lower number of credit sales
c) Difficulty in collecting accounts receivable
d) A decrease in sales
Answer: a
24)The formula for calculating the quick ratio is:
a) (Current Assets - Inventory) / Current Liabilities
b) Current Assets / (Current Liabilities - Inventory)
c) Current Assets / Current Liabilities
d) (Current Assets + Inventory) / Current Liabilities
Answer: a
25)Which ratio is also known as the "profit margin"?
a) Gross Profit Margin
b) Current Ratio
c) Debt Ratio
d) Acid-Test Ratio
Answer: a
26)The times interest earned ratio assesses a company's:
a) Profitability
b) Liquidity
c) Ability to cover interest payments
d) Inventory turnover
Answer: c
27)The formula for calculating the debt-to-equity ratio is:
a) Total Debt / Total Equity
b) Total Equity / Total Debt
c) Long-Term Debt / Total Equity
d) Total Debt / Long-Term Debt
Answer: a
28)The return on investment (ROI) ratio is also known as:
a) Return on Assets (ROA)
b) Return on Equity (ROE)
c) Return on Sales (ROS)
d) Return on Capital Employed (ROCE)
Answer: a
29)Which ratio measures a company's ability to turn its accounts receivable into cash?
a) Receivables Turnover Ratio
b) Current Ratio
c) Quick Ratio
d) Debt Ratio
Answer: a
30)The formula for calculating the earnings per share (EPS) ratio is:
a) Net Income / Total Assets
b) Net Income / Average Total Equity
c) Net Income / Average Number of Shares Outstanding
d) Net Income / Total Liabilities
Answer: c
31)The fixed asset turnover ratio measures:
a) The efficiency of a company's investment in fixed assets
b) The percentage of fixed assets financed by equity
c) The ratio of current assets to fixed assets
d) The turnover of current assets
Answer: a
32)The price-earnings (P/E) ratio is calculated by dividing:
a) Market Price per Share / Earnings per Share (EPS)
b) Earnings per Share (EPS) / Market Price per Share
c) Net Income / Total Assets
d) Dividends per Share / Earnings per Share (EPS)
Answer: a
33)The dividend payout ratio is calculated by dividing:
a) Dividends per Share / Market Price per Share
b) Dividends per Share / Earnings per Share (EPS)
c) Dividends per Share / Total Equity
d) Dividends per Share / Net Income
Answer: b
34)A low inventory turnover ratio might indicate:
a) Efficient management of inventory
b) Excessive investment in inventory
c) Higher sales volume
d) Strong liquidity position
Answer: b
35)The formula for calculating the operating profit margin is:
a) Operating Profit / Net Sales
b) Net Income / Net Sales
c) Operating Expenses / Net Sales
d) Operating Profit / Total Assets
Answer: a
36)Which ratio measures the proportion of a company's assets financed by debt?
a) Debt-to-Assets Ratio
b) Equity Ratio
c) Debt-to-Equity Ratio
d) Debt-to-Revenue Ratio
Answer: a
37)The cash ratio includes which asset in its calculation?
a) Cash and Cash Equivalents
b) Accounts Receivable
c) Inventory
d) Prepaid Expenses
Answer: a
38)The formula for calculating the inventory turnover ratio is:
a) Cost of Goods Sold / Average Inventory
b) Average Inventory / Cost of Goods Sold
c) Sales / Average Inventory
d) Average Inventory / Sales
Answer: a
39)The formula for calculating the return on equity (ROE) is:
a) Net Income / Total Equity
b) Net Income / Average Total Assets
c) Net Income / Average Total Liabilities
d) Net Income / Average Number of Shares Outstanding
Answer: a
40)Which ratio measures the efficiency of a company's use of its assets to generate sales?
a) Inventory Turnover Ratio
b) Debt Ratio
c) Total Asset Turnover Ratio
d) Return on Investment (ROI) Ratio
Answer: c
