Financial Ratios
Financial Ratios

Financial Ratios

Lead Author(s): Saylor Academy

Source: Saylor

Student Price: FREE

This question pack looks at statement analysis and practical examples exploring problems with financial ratios.

This content is licensed under the Creative Commons Attribution 3.0 Unported License.

Financial Ratios Question 1

A financial analyst examined the financial statements of a company from fiscal years: 2009, 2010, 2011, and 2012. This would be an example of which type of financial statement analysis?

A

Historical analysis

B

Vertical analysis

C

Horizontal analysis

D

Comparative analysis

Financial Ratios Question 2

Which of the following is NOT a ratio that can be calculated to determine a company's profitability?

A

Inventory turnover

B

Profit margin

C

Return on equity

D

Return on assets

Financial Ratios Question 3
question description

Review the following income statement for ABCD Builders. What can be concluded from the financial data?

A

The company’s operating expenses are higher due to the decrease in inventory held.

B

The company saw a net gain in profit due to the increase in inventory held.

C

The company discontinued operations that resulted in a higher cost of good sold.

D

The company is generating a low net income due to the high operating expenses.

Financial Ratios Question 4

Platinum Enterprises, Inc. had a net income in 2010 of $1.2 million. In 2011, operations suffered after several plants were destroyed following an earthquake, and net income dropped to $650,000. How would this affect the return on equity ratio for 2011? (Assume shareholders' equity remains constant.)

A

The return on equity would decrease by 35.5%.

B

The return on equity would decrease by 45.8%.

C

The return on equity would increase by 25.2%.

D

The return on equity would increase by 37.6%.

Financial Ratios Question 5

Historical financial statement ratios are often used to generate future financial statements when financial analysts conduct which of the following?

A

Pro‑forma estimation

B

Vertical analysis

C

Financial statement forecasting

D

Comparative analysis

Financial Ratios Question 6

In 2012, company AlphaBites generated a total revenue of $125,000 with $500,000 of total assets on the company's financial statements. The total overall expense for the fiscal year was recorded as $88,500. What was the ROA for this firm?

A

4.5%

B

6.1%

C

7.3%

D

10.2%

Financial Ratios Question 7

Which of the equations is commonly used to determine a company's long‑term solvency?

A

Long‑Term Debt ÷ Current Assets

B

Total Debt ÷ Total Assets

C

Current Debt x Total Liabilities

D

(Equity + Total Debt) ÷ Total Assets

Financial Ratios Question 8

Toys‑A‑Bunch's 2012 financial statements were recently released to the public. Revenues totaled $14.8 million, current assets totaled $21.89 million, current liabilities totaled $3.45 million, and long‑term liabilities remained unchanged at $5.35 million. What is Toys‑A‑Bunch's working capital?

A

$11.45 million

B

$16.54 million

C

$18.44 million

D

$27.89 million

Financial Ratios Question 9

In 2012, Utility Queen recorded an EBIT (Earning before Income Tax) of $535,000; $1.35 million in shareholder's equity; an accounts payable balance of $250,000; and $385,000 in total liabilities. What was the company's debt-to‑equity ratio for 2011?

A

0.29

B

0.33

C

0.40

D

1.54

Financial Ratios Question 10

In 2012, company AlphaBites generated a total revenue of $125,000 with $500,000 of total assets on the company's financial statements. The total overall expense for the fiscal year was recorded as $88,500. What was the asset turnover for this firm?

A

0.015

B

0.073

C

0.22

D

0.25

Financial Ratios Question 11

In 2011, Utility Queen recorded an EBIT (Earning before Income Tax) of $505,000; accounts receivables balance of $500,000; $25,000 in interest expenses; and $315,000 in long‑term debt. What was the company's interest coverage ratio for 2011?

A

0.05

B

12.6

C

14.6

D

20.2

Financial Ratios Question 12

Toys‑A‑Bunch's 2012 financial statements were recently released to the public. Revenues totaled $14.8 million, current assets totaled $21.89 million, current liabilities totaled $3.45 million, and long‑term liabilities remained unchanged at $5.35 million. Toys‑A‑Bunch's ______________ ratio was found to be 6.34.

A

quick

B

current

C

working

D

gross profit

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Course Designer: Llacey Simmons