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1.
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.
2.
A company's leverage refers to how much _______ it has on its balance sheet.
Debt. Leverage is all about debt.
3.
What ratio measures a company's return on its investment by shareholders?
Return on equity. The key word here is "equity."
4.
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.
5.
Company Z has a current ratio of 1.5. This means that _______.
Its current assets should be able to satisfy its short-term obligations. Since current ratio is current assets divided by current liabilities, any ratio over one is a good sign.
