What are ratios which seek to assess the ability of a firm to meet short-term obligations called?
Profitability ratios
Efficiency ratios
Liquidity ratios
Current ratios
Typically, one would like their firm's to range between 1.5-2, and their firm's to be at least 1.
Quick ratio, current ratio
ROCE, net profit margin
Current ratio, gearing ratio
Current ratio, acid test ratio
Which of the following statements about ratio analysis is invalid?
Historical performance is not indicative of future performance
Interfirm comparisons may not be valid due to accounting differences
Only qualitative factors are considered
Organization objectives may differ, making inter-firm comparisonsinappropria
How is the current ratio calculated?
Current assets ÷ Current liabilities
Gross profit ÷ Total costs
Fixed assets ÷ Current liabilities
Current assets ÷ Trade creditors
How does the acid test ratio differ from the current ratio?
It excludes the value of stocks which cannot be quickly turned into cash
It excludes the value of debtors
It is concerned with future cash flows rather than historical cash flows
It excludes the value of creditors
The current ratios for four companies are shown below. Which company has the most money tied up in liquid resources?
1:1
0.2:1
1.6:1
2.8:1