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1.
A company's debt/equity ratio measures _______.
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.
2.
Liquidity ratios attempt to measure _______.
How likely a company will be able to meet its near-term obligations.
3.
Efficiency ratios measure _______.
How effectively a company manages its assets and liabilities. Inventory turnover, for example, measures how well a company manages its inventory.
4.
What is the best way to use financial ratios?
Both of the above. Looked at by themselves, many financial ratios don't tell much. The best way to use them is to compare them with similar companies and to compare them for the same company over time to identify trends.
5.
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.
