12.5 Compute various financial ratios
1) Working capital is defined as total assets divided by total liabilities.
2) The quick ratio is the most widely used liquidity ratio.
3) A profitability ratio is defined as a measure of a company's ability to generate net income.
4) A solvency ratio is defined as a way to evaluate a company's stock performance.
5) A liquidity ratio is defined as the ability to meet short-term obligations with current assets.
6) A solvency ratio is defined as the ability for a company to meet long-term obligations or take on more debt.
7) Asset management ratios measure how efficiently a company utilizes its operating assets.
8) To determine the ability of a company to service debt, you would calculate the debt ratio.
9) According to the Risk Management Association, the debt ratio for most companies ranges from 0.57 - 0.67.
10) Inventory turnover would be highest for which of the following?
A) Home builder
B) Grocery store
C) Car dealership
D) Heavy equipment dealer
E) Plane manufacturer