EXAM preparation - Financial management - Ratios
10 important questions on EXAM preparation - Financial management - Ratios
What does liquidity measure?
Current ratio ( Shows if the business can cover short-term debts with short-term asset)
What does solvency measure?
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Debt- to - equity ratio:
debt-to-equity ratio= total liabilities / total owners equity
Debt service coverage ratio (DSCR):
> how many times can your cash cover your debts?
DSCR= (net operating income - cash transfers to replacement reserves)- debt service payment
What does profitability measure?
Measures management's ability to generate sales and control expenses.
ROE ( return on investment)
= Net Income / Average Owners' Equity.
What does a activity ratio meassures?
· Property & Equipment Turnover (Fixed Assets)
Total Revenue / Average Property & Equipment
Asset Turnover Ratio
Total Revenue / Average Total Assets
The question on the page originate from the summary of the following study material:
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