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Financial Ratios Practice Questions

The document contains a series of practice questions focused on financial ratios, including current ratio, profitability ratios, and liquidity ratios. Each question tests knowledge on definitions, formulas, and implications of various financial metrics. The questions are repeated multiple times, emphasizing key concepts in financial analysis.

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bellazanehidalgo
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19 views11 pages

Financial Ratios Practice Questions

The document contains a series of practice questions focused on financial ratios, including current ratio, profitability ratios, and liquidity ratios. Each question tests knowledge on definitions, formulas, and implications of various financial metrics. The questions are repeated multiple times, emphasizing key concepts in financial analysis.

Uploaded by

bellazanehidalgo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Financial Ratios Practice Questions

1. What does a current ratio measure?

A) Profitability

B) Liquidity

C) Leverage

D) Efficiency

2. Which of the following is a profitability ratio?

A) Debt-to-equity ratio

B) Return on equity

C) Quick ratio

D) Current ratio

3. A high debt-to-equity ratio indicates:

A) Low risk

B) High liquidity

C) High financial leverage

D) High profitability

4. What is the formula for return on assets (ROA)?

A) Net income / Sales

B) Net income / Total assets

C) Gross profit / Sales

D) EBIT / Sales

5. Which ratio indicates how efficiently a company uses its assets to generate sales?

A) Inventory turnover

B) Asset turnover
C) Current ratio

D) Debt ratio

6. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

7. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

8. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

9. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity

10. A very high current ratio might indicate:

A) Good liquidity
B) Excess inventory

C) High risk

D) Low efficiency

11. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

12. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

13. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

14. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity

15. A very high current ratio might indicate:


A) Good liquidity

B) Excess inventory

C) High risk

D) Low efficiency

16. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

17. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

18. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

19. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity
20. A very high current ratio might indicate:

A) Good liquidity

B) Excess inventory

C) High risk

D) Low efficiency

21. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

22. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

23. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

24. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity
25. A very high current ratio might indicate:

A) Good liquidity

B) Excess inventory

C) High risk

D) Low efficiency

26. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

27. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

28. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

29. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity
30. A very high current ratio might indicate:

A) Good liquidity

B) Excess inventory

C) High risk

D) Low efficiency

31. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

32. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

33. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

34. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity
35. A very high current ratio might indicate:

A) Good liquidity

B) Excess inventory

C) High risk

D) Low efficiency

36. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

37. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

38. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

39. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity
40. A very high current ratio might indicate:

A) Good liquidity

B) Excess inventory

C) High risk

D) Low efficiency

41. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

42. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

43. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

44. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity
45. A very high current ratio might indicate:

A) Good liquidity

B) Excess inventory

C) High risk

D) Low efficiency

46. Which ratio shows how quickly inventory is sold?

A) Inventory turnover

B) Current ratio

C) Debt ratio

D) Profit margin

47. The quick ratio is also known as:

A) Liquidity ratio

B) Acid-test ratio

C) Leverage ratio

D) Efficiency ratio

48. What does the gross profit margin indicate?

A) Total expenses

B) Operating income

C) Profitability of core operations

D) Net income

49. Which of the following is not a liquidity ratio?

A) Current ratio

B) Quick ratio

C) Cash ratio

D) Return on equity
50. A very high current ratio might indicate:

A) Good liquidity

B) Excess inventory

C) High risk

D) Low efficiency

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