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1.
Financial ratios typically provide the most benefit when they are _______.
Compared with other identical ratios. Used comparatively, they can provide information about improvements or troubles at a company.
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.
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.
4.
The amount of each dollar of sales that a company keeps in the form of gross profit is measured by _______.
Gross margin. It is calculated by dividing gross profit by sales.
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.
