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Stocks 304: Interpreting the Numbers

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1.
Which ratio simply measures the ability of a company's cash and any investments that are easily converted into cash to pay its short-term obligations?
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Cash ratio. Cash ratio is the most conservative of the liquidity ratios.
2.
What does accounts receivable turnover measure?
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How effective the company's credit policies are. For example, if the ratio is too low, the company may be having trouble collecting what it is owed.
3.
Financial ratios typically provide the most benefit when they are _______.
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Compared with other identical ratios. Used comparatively, they can provide information about improvements or troubles at a company.
4.
What ratio measures a company's return on its investment by shareholders?
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Return on equity. The key word here is "equity."
5.
A company's debt/equity ratio measures _______.
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How much of the company is financed by its debt holders compared with its equity holders. The higher the ratio, the more debt is being used.