Questions from pre and post test assessing student knowledge of financial ratios. Correct answers are highlighted.
1. In which financial statement will you find the “assets” category?
A. Cash Flow Statement
B. Balance Sheet
C. Income Statement
D. Don’t Know
2. What does EBIT stand for?
A. Earnings Before Interest and Taxes
B. Equity Backed Investments and Trusts
C. Earnings Before Insurance and Taxes
D. Don’t Know
3. The ________ of a business is a function of its ability to have cash available when needed to meet its financial obligations.
A. profitability
B. liquidity
C. leverage
D. Don’t Know
4. As a general rule, which is larger: operating profit margin or net profit margin?
A. Operating Profit Margin
B. Net Profit Margin
C. Don’t Know
5. A firm reported the cost of goods sold (COGS) of $100,000 last year. If the firm had an average inventory of $10,000, what was the inventory turnover ratio?
A. 10
B. 1
C. 100
D. Don’t Know
6. Firm A has a capital structure of $75M debt and $25M in equity. This year, the company reported a net income of $20M. What is Firm A’s return on equity?
A. 26.6%
B. 80%
C. 125%
D. Don’t Know
7. What is the current ratio if cash is 5,000, accounts receivable are $15,000, inventories are $20,000, accounts payable are $20,000, and accrued payroll is $5,000?
A. .625
B. 1.60
C. 2.00
D. Don’t Know
8. What is a firm's debt ratio if its total assets are $125,000 and total liabilities are $105,000?
A. 16%
B. 84%
C. 119%
D. Don’t Know
9. Buff Enterprise has 150 employees with seven board members. There are four women on the board of directors. What is the percentage of women on the board? (Round to nearest percent)
A. 3%
B. 27%
C. 57%
D. Don’t Know
10. Which financial statement(s) would you use to calculate operating return on assets (OROA)?
A. Income Statement
B. Balance Sheet
C. Both Income Statement and Balance Sheet
D. Don’t Know