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D076 Module 7 AQA 100%
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5 major types of financial ratios - liquidity, activity, leverage, profitability, and market A firm has paid off its short-term loans more quickly in the past couple of years. What might this trend indicate about the firm's financial ratios? - Its liquidity ratio is increasing. Accounts Receivab...

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  • February 3, 2024
  • 3
  • 2023/2024
  • Exam (elaborations)
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  • d076 module 7 aqa 100

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  • AQA
  • WGU
  • WGU D076
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D076 Module 7 AQA 100%
5 major types of financial ratios - ✔✔✔liquidity, activity, leverage, profitability, and market



A firm has paid off its short-term loans more quickly in the past couple of years. What might this trend
indicate about the firm's financial ratios? - ✔✔✔Its liquidity ratio is increasing.



Accounts Receivable turnover, average collection period, inventory turnover, total asset turnover, and
operating income return on investment. - ✔✔✔Activity ratios



Activity Ratios - ✔✔✔measure how well a company uses its assets to generate sales or cash



Activity ratios such as inventory turnover, accounts receivable (AR) turnover, and average collection
period (ACP) are used to - ✔✔✔check short-term operating asset management efficiency, while total
asset turnover (TAT), fixed asset turnover (FAT), and operating income return on investment (OIROI)
assess how well a firm is using its assets to generate sales.



Both the market-to-book (M/B) and price-to-earnings (P/E) ratios are used to - ✔✔✔Both the market-
to-book (M/B) and price-to-earnings (P/E) ratios are used to



Current and quick ratios - ✔✔✔Liquidity ratios



Current and quick ratios are different because - ✔✔✔of potential illiquidity of inventory, and they are
compared with liquidity ratios to assess how well a firm can meet short-term obligations.



Debt ratio, debt to equity ratio, times interest earned - ✔✔✔Leverage Ratios



DuPont framework - ✔✔✔helps analyze where changes in return on equity come from.

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