Unlock a deeper understanding of essential financial metrics with this comprehensive Financial Ratios and Metrics Quiz. Designed for business and management students, this quiz covers key formulas used to analyze a company’s financial health, including the Acid-Test Ratio, Payout Ratio, Debt-to-A...
Circle the letter of the Answer that corresponds to the displayed Formula Name.
1. Acid-Test Ratio or Quick Ratio
a) Total Liabilities/ Total Assets
b) Cash + Short-term Investments + Net Receivables/ Current Liabilities
c) Current Assets/ Current Liabilities
d) Net Sales/ Average Total Assets
Correct Answer: Cash + Short-term Investments + Net Receivables/ Current Liabilities
Explanation: The Acid-Test Ratio or Quick Ratio is calculated using cash, short-term investments, and
net receivables divided by current liabilities.
2. Payout Ratio
a) Common Stockholders Equity/ Outstanding Shares
b) Total Liabilities/ Total Assets
c) Current Assets/ Current Liabilities
d) Cash Dividends/ Net Income - Preferred Dividends
Correct Answer: Cash Dividends/ Net Income - Preferred Dividends
Explanation: The Payout Ratio is the portion of net income distributed as dividends, calculated by
dividing cash dividends by net income minus preferred dividends.
3. Debt-to-Asset Ratio
a) Net Income/ Total Sales
b) Net Income/ Average Total Assets
c) Total Liabilities/ Total Assets
d) Net Sales/ Average Total Assets
Correct Answer: Total Liabilities/ Total Assets
Explanation: The Debt-to-Asset Ratio measures the percentage of a company's assets that are financed
by liabilities, calculated by dividing total liabilities by total assets.
4. Book Value Per Share
a) Common Stockholders Equity/ Outstanding Shares
b) Net Income + Interest Expense + Income Tax Expense/ Interest Expense
c) Current Assets/ Current Liabilities
d) Net Income- Preferred Dividends/ Average Common Stockholders Equity
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