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1.
As a rule, the more debt a company has, the riskier its stock is. Why?
Debtholders have first claim to a company's assets in the event of bankruptcy. In bad cases, there may be nothing left for stockholders to claim after a bankruptcy.
2.
What does accounts receivable turnover measure?
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.
A company's financial ratios are typically analyzed _______.
Over time and against other companies. Using them in this manner provides important information about trends and management quality in the company.
4.
What ratio measures a company's return on its investment by shareholders?
Return on equity. The key word here is "equity."
5.
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?
Cash ratio. Cash ratio is the most conservative of the liquidity ratios.
