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Stocks 304: Interpreting the Numbers

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1.
Efficiency ratios measure _______.
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How effectively a company manages its assets and liabilities. Inventory turnover, for example, measures how well a company manages its inventory.
2.
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.
3.
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.
4.
The amount of each dollar of sales that a company keeps in the form of gross profit is measured by _______.
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Gross margin. It is calculated by dividing gross profit by sales.
5.
A company's financial ratios are typically analyzed _______.
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Over time and against other companies. Using them in this manner provides important information about trends and management quality in the company.